Oklahoma insurance law recognizes that insurance companies have a good faith duty to their customers. Merlin Law Group attorneys in Oklahoma work on what are called “bad faith” cases all the time. These cases should be called “lack of good faith” cases because there is no proof requirement that somebody was bad–just that they were not acting in the utmost of good faith and fair dealing.
One insurance company claims handling expert, Steve Strzelec, has this to say about an insurance company’s good faith obligation:
The duties of good faith and fair dealing are embedded within the industry and are taught and accepted as claim handling industry standards. These require an insurer to do nothing to injure the rights of the insured to receive benefits under the policy. Knowing and following the underlying precepts of claims work is crucial to fair claim practices. For example, an insurer must:
1. Adopt and implement reasonable standards for handling claims;
2. Assist the insured in presenting the claim;
3. Adequately and promptly investigate a claim;
4. Respond timely to letters and phone calls;
5. Adjust the claim (either pay it or deny it) within a reasonably prompt time;
6. Attempt in good faith to effectuate prompt, fair and equitable settlement of
claims, where liability is reasonably clear;
7. Attempt to find a basis to pay the claim rather than find reasons to deny;
8. Timely pay all undisputed amounts owed under the policy;
9. Disclose all relevant coverages, conditions and restrictions under the policy;
10. Provide in writing a detailed reason for denying the claim specifying each contract
term or provision upon which it relies.
In Oklahoma the Unfair Claims Settlement Practices Act (UCSPA) governs all claims arising under an insurance policy or insurance contract issued by any insurance company.1 The provisions of the UCSPA are important in defining adjuster conduct and responsibilities during the investigation and settlement of a claim. The UCSPA provides specific time limitations for insurance claims adjusting. For example, parties must adequately respond to communications eliciting a response within (30) days.2 Moreover, insurers have (30) days to acknowledge receipt of a claim, and once notified an insurer must “promptly” provide the claimant with necessary claims forms, instruction, and reasonable assistance so that first party claimants can comply with the policy conditions and compliance with this section constitute compliance with section A.3 Additionally, acceptance or denial of the claim must be communicated to a first party claimant within (60) days of a properly executed proof of loss, or if further investigation is required, claimant must be informed of the need within the same timeframe.4 Furthermore, except for an investigation of possible fraud or arson which is supported by specific information giving a reasonable basis for the investigation, the time for investigation shall not exceed one hundred twenty (120) days after receipt of proof of loss.
Although violations of the UCSPA do not provide Plaintiffs with a private right of action, the violations can be used as evidence in a bad faith case. The Oklahoma Supreme Court held bad faith is a stand-alone tort in its seminal bad faith case, Christian v. American Home Assurance Company.5 The court reasoned that disagreements between insurer and insured on a variety of matters can occur and resort to a judicial forum is not per se bad faith or unfair dealing on the part of the insurer regardless of the outcome of the suit. Rather, tort liability may be imposed only where there is a clear showing that the insurer unreasonably, and in bad faith, withholds payment of the claim of its insured.
Plaintiffs in Oklahoma must prove the following elements to succeed on a bad faith claim:
- Plaintiff was covered by the insurance policy and was entitled to recover;
- the insurer’s actions were unreasonable;
- the insurer failed to deal fairly and act in good faith when handling the claim; and
- the breach of the duty of good faith and fair dealing was the direct cause of Plaintiff’s injury.6
“Ignorance is not bad faith. But persistence in ignorance is.” Joanna Russ (1983)
1 OKLA.STAT. tit. 36, § 1250.1.
2 OKLA.STAT. tit. 36, § 1250.4.
3 OKLA.STAT. tit. 36, § 1250.6.
4 OKLA.STAT. tit. 36, § 1250.7.
5 Christian v. American Home Assurance Co., 577 P.2d 899 (Okla. 1977).
6 Badillo v. Mid-Century Ins. Co., 121 P.3d 1080, 1093 (Okla. 2005).