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Bad Faith Law

Bad Faith Law

For a little over 20 years, the Oklahoma Courts have allowed a civil action to be brought against an insurance company by an insured for a tort claim that is commonly referred to as “bad faith.” In some respects, the cause of action is extremely broad and encompassing. In other ways, the legal theory is somewhat restrictive and actually provides the insurance company with certain protections. Probably the best summary of Oklahoma law was provided in the decision of Newport v. USAA, 2000 OK 59, 11 P.3d 190. The Oklahoma Supreme Court said:

An insurer has an “implied-in-law duty to act in good faith and deal fairly with the insured to ensure that the policy benefits are received.” Christian v. American Home Assurance Co., 1977 OK 141, 577 P.2d 899. The essence of bad-faith action “is the insurer’s unreasonable, bad-faith conduct, including the unjustified withholding of payment due under a policy.”  McCorkle v. Great Atl. Ins. Co., 1981 OK 128, 637 P.2d 583.

The tort of bad faith does not foreclose the insurer’s right to deny a claim, resist payment, or litigate any claim “to which the insurer has a legitimate defense.” Buzzard v. Farmers Ins. Co., 1991 OK 127, ¶ 13, 824 P.2d 1105, 1109 (Buzzard II). “A [bad faith] cause of action will not lie where there is a legitimate dispute.” Manis v. Hartford Fire Ins. Co., 1984 OK 25, ¶ 12, 681 P.2d 760, 762.  However, when presented with a claim by its insured, an insurer “must conduct an investigation reasonably appropriate under the circumstances” and “the claim must be paid promptly unless the insurer has a reasonable belief that the claim is legally or factually insufficient.” Id. “The decisive question is whether the insurer had a “good faith belief at the time its performance was requested, that it had a justifiable reason for withholding payment under the policy.” Id. (quoting Buzzard v. McDanel, 1987 OK 28, ¶ 10, 736 P.2d 157, 159)(Buzzard I)). “The knowledge and belief of the insurer during the time period the claim is being reviewed is the focus of a bad-faith claim.” Id. (citing Buzzard I, 987 OK 28, 736 P.2d at 159).

An insurer is entitled to have any dispute regarding the reasonableness of its actions settled by a jury. “[I]f there is conflicting evidence from which different inferences may be drawn regarding the reasonableness of insurer’s conduct, then what is reasonable is always a question to be determined by the trier of fact by a consideration of the circumstances in each case.” McCorkle, 1981 OK 128, 637 P.2d at 587.

Buckman Law Firm, A Professional Corporation, has extensive experience in “bad faith” litigation.