Opinion
Case No. 19-CV-677-GKF-JFJ
2020-12-11
UNITED STATES LIABILITY INSURANCE COMPANY, Plaintiff, v. Troy PAUL, Defendant.
Brian Eugene Dittrich, Dittrich Law Firm PLLC, Tulsa, OK, for Plaintiff. Jonathan Everett Shook, Steven Kent Balman, Shook & Johnson PLLC, Tulsa, OK, Matthew C. Goodin, Matthew C. Goodin, PLLC, Moore, OK, for Defendant.
Brian Eugene Dittrich, Dittrich Law Firm PLLC, Tulsa, OK, for Plaintiff.
Jonathan Everett Shook, Steven Kent Balman, Shook & Johnson PLLC, Tulsa, OK, Matthew C. Goodin, Matthew C. Goodin, PLLC, Moore, OK, for Defendant.
ORDER
Gregory K. Frizzell, United States District Judge
Before the court is the Motion for Summary Judgment [Doc. 25] of plaintiff United States Liability Insurance Company (USLIC). For the reasons set forth below, the motion is granted.
I. Background
USLIC brings this declaratory judgment action to determine its rights and responsibilities under a personal umbrella liability insurance policy issued to defendant Troy Paul with respect to two underlying lawsuits involving Mr. Paul. USLIC contends the claims in those lawsuits are not covered by the policy. Mr. Paul asserts counterclaims for breach of contract and breach of the duty of good faith and fair dealing against USLIC. USLIC moves for summary judgment on the issue of coverage and on Paul's counterclaims. II. Legal Standard
Pursuant to Federal Rule of Civil Procedure 56(a), "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A fact is "material" if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is "genuine" "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. "Factual disputes that are irrelevant or unnecessary will not be counted." Id. Further, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). However, "at the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson , 477 U.S. at 249, 106 S.Ct. 2505.
A court must examine the factual record in the light most favorable to the party opposing summary judgment. Wolf v. Prudential Ins. Co. of Am. , 50 F.3d 793, 796 (10th Cir. 1995). Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Id. (quoting Fed. R. Civ. P. 56(c) ).
III. Undisputed Material Facts
Mr. Paul is the named insured on a personal umbrella liability policy of insurance issued by USLIC, policy number PCL1635925. [Doc. 25, p. 5, ¶ 1; Doc. 36, p. 13, ¶ 1]. The USLIC policy was issued on June 2, 2015 with an effective date of May 29, 2015 and a policy period of May 29, 2015 to May 29, 2016. [Doc. 25, p. 5, ¶ 2; Doc. 36, p. 13, ¶ 2]. The USLIC policy provides certain liability coverage for bodily injury, property damage or offenses resulting in personal injury caused by the insured. The Personal Umbrella Liability Coverage Form provides, in pertinent part:
II. INSURANCE COVERAGE
Insuring Agreement – Coverage A – Personal Umbrella Liability
If you are legally liable to pay damages for a loss to which this insurance applies, we will pay your net loss in excess of the retained limit .
[Doc. 25, p. 6, ¶ 3; Doc. 36, p. 14, ¶ 3]. The USLIC policy contains the following pertinent definitions:
I. Definitions
...
C. Bodily injury means bodily harm, sickness or disease, including required care, loss of services and death of a person that results. Bodily injury also means mental injury, mental anguish, humiliation or shock if directly resulting from bodily harm, sickness or disease of that person.
...
H. Loss means:
1. An accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the POLICY PERIOD, in bodily injury and/or property damage ; or
2. An offense, including a series of related offenses which first occurs during the POLICY PERIOD, and which results, during the POLICY PERIOD, in personal injury .
...
K. Personal Injury means:
1. False arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution or humiliation.
2. Libel, slander, defamation of character or invasion of rights of privacy.
L. Property Damage means:
1. Physical injury or destruction of tangible property. This includes the loss of use caused by the injury or destruction. It does not include the loss of money, notes, stocks, bonds or similar instruments, or computer data.
2. Loss of use of tangible property which has not been physically injured or destroyed.
[Doc. 25, pp. 6-7, ¶ 4; Doc. 36, p. 14, ¶ 4].
On September 16, 2015, Destiny Spillers filed an Answer and Counter Petition for divorce against Paul in a domestic proceeding in the District Court of Johnson County Texas styled In the Interest of an Unborn Child , Case No. DC-D201500617 (the Spillers Litigation). Spillers claimed that a common law marriage existed between them and that Paul was the father of her child. [Doc. 25, p. 8, ¶ 13; Doc. 36, p. 15, ¶ 13].
On November 15, 2015, Wesley Alan Partin filed suit against Paul in a proceeding in the Circuit Court of Harrison County, Mississippi styled Wesley Alan Partin v. Troy Eugene Paul, et. al , Case No. A242-15-163 (the Partin Litigation). [Doc. 25, p. 9, ¶ 17; Doc. 36, pp. 15-16, ¶ 17]. Therein, Partin asserted claims for alienation of affection, negligent infliction of emotional distress, and intentional infliction of emotional distress. [Id. ].
On April 7, 2016, Paul, acting through his attorney, Matthew Goodin, submitted claims related to the Spillers Litigation and Partin Litigation to USLIC. [Doc. 25, p. 9, ¶ 18; Doc. 36, p. 16, ¶ 18].
IV. Analysis
As noted above, USLIC moves for summary judgment on the issue of coverage and on both Paul's counterclaims.
A. Coverage
The parties agree that Oklahoma law governs the interpretation of the insurance policy here. "In Oklahoma, interpretation of an insurance contract is a matter of law." Boggs v. Great Northern Ins. Co. , 659 F. Supp. 2d 1199, 1204 (N.D. Okla. 2009) (citing Max True Plastering Co. v. U.S. Fidelity and Guar. Co. , 912 P.2d 861, 869 (Okla. 1996) ). "The insured has the burden of showing that its claim is covered under the policy.... Therefore, summary judgment in favor of the insurer is proper when the undisputed facts show that the insured has failed to establish a covered claim under its insurance policy." Id. at 1204-05 (internal quotation marks and citations omitted).
Oklahoma's general principles of contract interpretation govern the construction of an insurance policy. Dodson v. St. Paul Ins. Co. , 812 P.2d 372, 376 (Okla. 1991). The terms of a contract are construed according to their plain meaning and any ambiguities will be "construed liberally in favor of an insured and strictly against the insurer." Cont'l Cas. Co. v. Beaty , 455 P.2d 684, 688 (Okla. 1969). However, courts should not create an ambiguity in the policy by "using a forced or strained construction, by taking a provision out of context, or by narrowly focusing on a provision." Wynn v. Avemco Ins. Co. , 963 P.2d 572, 575 (Okla. 1998). A policy term will be considered ambiguous only if it is susceptible to more than one reasonable interpretation. Max True , 912 P.2d at 869. Oklahoma courts "will not impose coverage where the policy language clearly does not intend that a particular individual or risk should be covered," and neither a "split in authority over whether a certain term is ambiguous," nor "the fact that the parties disagree" alone is sufficient to establish an ambiguity. BP America, Inc. v. State Auto Prop. & Cas. Ins. Co. , 148 P.3d 832, 835-36 (Okla. 2005). "When policy provisions are unambiguous and clear, the employed language is accorded its ordinary, plain meaning; and the contract is enforced carrying out the parties' intentions." Id. at 835. "The general declaration of insurance coverage, as established by the insurance policy and limited by its provisions, normally determines the insurance carrier's liability, and the insured's respective rights under the contract by identifying what risks are covered and excluded by the policy." Boggs , 659 F. Supp. 2d at 1205 (quoting Dodson , 812 P.2d at 377 ).
USLIC argues that neither the claims made by Spillers nor the claims made by Partin involve a "loss" as defined by the USLIC policy. Paul disagrees, arguing the Partin and Spillers claims are covered by the USLIC policy.
The Partin Litigation involves the following allegations. Plaintiff Wesley Partin and his wife Lezlie Partin were "very happily married until Paul came into their lives and alienated the affection that Mrs. Partin had for her husband Wesley." [Doc. 25-18, p. 4, ¶ 10]. Paul allegedly ordered his employee Crystal McCallum "to recruit attractive, young, beautiful women to entertain Paul clients and Paul employees and to service [Paul] and other Paul employees sexually," including Mrs. Partin. [Id. , ¶¶ 11-12]. Ms. McCallum did as directed and, on May 28, 2015, Paul, Mrs. Partin, and Ms. McCallum "had a ménage a trois. " [Id. , p. 5, ¶ 14]. Subsequently, Paul pursued Mrs. Partin and his "efforts were successful." [Id. , ¶ 15]. Mrs. Partin moved out of Wesley Partin's home and filed for divorce. [Id. , p. 6, ¶ 16]. Partin asserted claims of alienation of affection, negligent infliction of emotional distress, and intentional infliction of emotional distress under Mississippi law. [Id. , pp. 6-8].
In the Spillers Litigation, Destiny Spillers filed a counter petition for divorce and sought to enjoin Paul from "[m]aking disparaging remarks regarding [Spillers]." [Doc. 25-4, p. 4]. She also "pray[ed] for general relief as allowed under law and equity." [Id. , p. 7]. Ms. Spillers alleged, amongst other things, that Paul "went on numerous vacations with women other than [Spillers] and paid for these lavish vacations with community funds," purchased expensive vehicles and a home for one or more of his mistresses, and paid for "breast augmentations for [his] mistresses" [Doc. 25-11, pp. 7-8].
The USLIC policy defines "loss" as either (1) "[a]n accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the POLICY PERIOD, in bodily injury and/or property damage ;" or (2) "[a]n offense, including a series of related offenses which first occurs during the POLICY PERIOD, and which results, during the POLICY PERIOD, in personal injury ." [Doc. 25-1, p. 9 (emphasis original)]. The court considers whether the USLIC policy covers the claims asserted in the Partin and Spillers Litigations as a matter of law.
1. Accident Clause
The plain language of the accident clause requires "the incident at issue must have been ‘an accident.’ " Farmers Alliance Mut. Ins. Co. v. Salazar , 77 F.3d 1291, 1297 (10th Cir. 1996) (applying Oklahoma law). "Under well-settled Oklahoma law, the term ‘accident’ when used in an insurance contract, has no technical legal meaning but instead should be construed ‘according to common speech and common usage of people generally.’ " United Specialty Ins. Co. v. Homeco, LLC , 325 F. Supp. 3d 1231, 1235 (W.D. Okla. 2018) (quoting United States Fid. & Guar. Co. v. Briscoe , 205 Okla. 618, 239 P.2d 754, 756 (1951) ). "The term ‘accident’ implies that an event was unintentional or was an ‘unexpected happening.’ " Id. (quoting Briscoe , 239 P.2d at 756-57 ).
Partin Litigation. Paul argues his "pattern of conduct, as described by Partin, continuously and repeatedly exposed Partin to ‘substantially the same general harmful conditions’—i.e. sure and certain knowledge of his wife's infidelity and her comparative lack of affection for him. This ‘continuous and repeated exposure’ to ‘harmful conditions’ constituted an ‘accident’ under the Policy." [Doc. 36, p. 28]. He further argues that "his conduct vis-à-vis Partin was not intentional" because, while his alleged conduct was voluntary, "he did not intend to harm Partin." [Doc. 49, p. 4]. But, Mr. Paul's voluntary conduct does not fit the definition of "accident" under Oklahoma law, i.e. "an event from an unknown cause, or an unexpected event from a known cause." Farmers Alliance , 77 F.3d at 1297. This conclusion is consistent with other cases applying the Oklahoma Supreme Court's definition of "accident" and rejecting the argument that unintended consequences of intentional acts can be considered accidents under Oklahoma law. See United Specialty Ins. Co. , 325 F. Supp. 3d at 1236-37 (collecting cases "which have rejected the argument made by [the insured] that" an intentional act can constitute an accident where it "neither expected nor intended the injuries sustained"). Paul's alleged conduct does not constitute an accident under the policy.
Because there was no "accident," the court need not consider Paul's argument that Partin experienced "bodily injury." [See Doc. 36, pp. 28-29].
Spillers Litigation. Similarly, Paul argues that his "pattern of conduct, as described by Spillers, continuously and repeatedly exposed Spillers to ‘the same general harmful conditions’—a pattern of infidelity, trips with mistresses, [and] purchases for mistresses," and that continuous and repeated exposure to those "harmful conditions" constituted "an ‘accident’ for the purposes of the Policy." [Doc. 36, p. 33]. He also argues that his "pattern of conduct" as described by Spillers in her constructive fraud and misappropriation of community property claims exposed Spillers to " ‘the same general harmful conditions’—i.e. misappropriation of community property—a form of ‘property damage’ covered by the Policy." [Id. ]. With respect to his intentions, Paul explains that he "did not engage in that conduct with other women (i.e. , women other than Spillers) in order to hurt Spillers. He did not intend to hurt—or humiliate—Spillers." [Doc. 49, p. 5]. Importantly though, he does not dispute that the conduct which caused Spillers' injuries (i.e. , his alleged infidelity and spending on mistresses) was intentional. As a result, Paul's conduct as described in the Spillers Litigation does not constitute an accident under the policy.
2. Offense Clause
The USLIC policy also covers an "offense" which results in "personal injury." [Doc. 25-1, p. 9]. The policy defines "personal injury" as (1) "[f]alse arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution or humiliation" or (2) "[l]ibel, slander, defamation of character or invasion of rights of privacy." [Doc. 25-1, p. 10]. Paul contends that though "[t]he Partin claims are styled as claims for ‘alienation of affection’ and ‘negligent infliction of emotional distress,’ " they are "in lay terms ... claims for ‘humiliation.’ " [Doc. 36, p. 27]. Paul also argues "the Spillers claims are claims for ‘humiliation.’ " [Id. , p. 32].
In Hanover American Ins. Co. v. Balfour , 594 F. App'x 526 (10th Cir. 2015) (unpublished), the Tenth Circuit considered an insurance policy governed by Oklahoma law that provided coverage for "personal and advertising injury" caused by an "offense." Id. at 533. The policy defined "personal and advertising injury" to include a list of enumerated offenses including false arrest, malicious prosecution, and "discrimination or humiliation." Id. Similarly here, the policy defines "personal injury" as a list of distinct torts. The Tenth Circuit explained, "[i]n light of this, it would be a ‘forced or strained’ construction to read ‘humiliation’ as a general, catch-all term that includes any and all conduct one might consider ‘humiliating.’ " Id. at 537. Instead, "humiliation" as used in the policy's definition of "personal injury" means a distinct cause of action for humiliation. See id. at 538 (The term " ‘humiliation’ covers character and reputation torts which may have at their cores humiliating conduct."). The question before the court then, with respect to the offense clause, is whether Partin and/or Spillers asserted offenses of humiliation, not whether they alleged conduct that one might consider humiliating.
"Unpublished decisions are not precedential, but may be cited for their persuasive value." 10th Cir. R. 32.1. The similarities between the policies at issue here and in Hanover lead the court to find Hanover especially persuasive.
Partin's Claim for Negligent Infliction of Emotional Distress. In Hanover , the Tenth Circuit explained that "it seems highly unlikely that the parties to the contract intended the term ‘humiliation’ to include negligence causes of action when the word ‘negligence’ is conspicuously omitted from a list of recognized torts." Hanover , 594 F. App'x at 537. Similarly here, the definition of "personal injury" omits negligence causes of actions. "Humiliation," as used in the policy's definition of personal injury, does not encompass Partin's claim for negligent infliction of emotional distress.
Partin's Claim for Alienation of Affections. In Mississippi, the tort of alienation of affections exists to protect marriages; it cannot be accurately characterized as an offense of humiliation. As the Supreme Court of Mississippi has explained: "[t]he purpose of a cause of action for alienation of affection is the protection of the love, society, companionship, and comfort that form the foundation of a marriage." Bland v. Hill , 735 So. 2d 414, 417 (Miss. 1999) (quoting Saunders v. Alford , 607 So. 2d 1214, 1215 (Miss. 1992) ). The court went on: "It is significant that ... this Court refused to extend its abolition of ‘heart balm’ torts to include the tort of alienation of affections." Id. at 418. "We believe that the marital relationship is an important element in the foundation of our society. To abolish the tort of alienation of affections would, in essence, send the message that we are devaluing the marriage relationship." Id. In a more recent case, the Supreme Court of Mississippi has said "[t]he right sought to be protected is that of consortium." Fitch v. Valentine , 959 So. 2d 1012, 1019 (Miss. 2007). "The wrongful conduct necessary to maintain an action for alienation of affections is the direct and intentional interference with the marriage relationship by the defendant." Lyon v. McGee , 249 So. 3d 436, 441 (Miss. Ct. App. 2018).
Neither party identifies any case law addressing whether Mississippi's intentional tort of alienation of affections is an offense of humiliation. At the hearing conducted on December 8, 2020, the court alerted the parties to Smith v. St. Paul Guardian Ins. Co. , 622 F. Supp. 867 (W.D. Ark. 1985). In that case, the court held "injuries sustained by the alienation of affections plaintiff" are "capable of reasonable categorization as ‘humiliation’ within the definition of ‘personal injuries’ " of an umbrella insurance policy. Id. at 873. However, that case is distinguishable because it involved Arkansas's tort of alienation of affections and applied Arkansas law to interpret the insurance policy. The court, as a result, does not find Smith persuasive.
Based on the foregoing, the court concludes that Mississippi's intentional tort of alienation of affections is not an offense of humiliation for purposes of the USLIC policy. See Hanover , 594 F. App'x at 538 ("[F]or coverage to exist for ‘personal and advertising injury’ based on an offense of humiliation, the gravamen of the third-party suit must be humiliating conduct."). Partin's claim for alienation of affection under Mississippi law, then, does not constitute an "offense" resulting in "personal injury" as those terms are defined in the USLIC policy.
Spiller's Counter Petition for Divorce and Request for General Relief. In the Spillers Litigation, Spillers filed a counter petition for divorce and "pray[ed] for general relief as allowed under law and equity." [Doc. 25-4, pp. 4, 7]. Paul points to Spillers's allegations that he "went on numerous vacations with women other than [Spillers] and paid for these lavish vacations with community funds," purchased expensive vehicles and a home for one or more of his mistresses, and paid for "breast augmentations for [his] mistresses" as a "series of related offenses" that caused Spillers to suffer "personal injury" in the form of "humiliation." [Doc. 36, pp. 32-33 (quoting Doc. 25-11, pp. 7-8)]. But, while Spillers's counter petition for divorce and request for general relief includes allegations of conduct that may be considered humiliating to an aggrieved spouse, Spillers's divorce claim is something other than a "character and reputation tort" the gravamen of which is humiliating conduct. See Hanover , 594 F. App'x at 538. As a result, Spillers's counter petition for divorce and request for injunctive relief are not offenses of humiliation, constituting personal injuries under the policy.
Spillers's Injunctive Request. Paul argues that Spillers's request to enjoin Paul from "[m]aking disparaging remarks regarding [her]" is a claim for defamation, constituting a "personal injury" under the policy. [Doc. 36, p. 34]. But, as USLIC observes, "Spillers was not alleging that Paul did defame her. Rather, Spillers was requesting equitable relief from the court in the form of an order prohibiting Paul from defaming her." [Doc. 41, p. 4 (emphasis original)]. It would be a "forced or strained" construction to read the policy's inclusion of "defamation" as a "personal injury" to encompass more than actual claims for defamation. Spillers did not plead defamation in the Spillers litigation, and her injunctive request does not amount to an "offense" resulting in "personal injury," which includes "defamation" under the policy.
3. Ambiguity
Alternatively, Paul argues the policy is ambiguous in two ways. [Doc. 36, pp. 30-31]. First, Paul argues that because both the accident and offense clauses defining "loss" include patterns of misconduct, an ambiguity exists. In Paul's view, "the expanded notion of ‘accident’ in the Policy—‘continuous or repeated exposure to substantially the same general harmful conditions’—is substantially the same as the expanded notion of ‘offense’ in the Policy—‘a series of related offenses.’ " [Doc. 36, p. 31]. However, the accident and offense clauses are separate and distinct. The accident clause pertains to accidents that result during the policy period in bodily injury and/or property damage. The offense clause pertains to offenses, which occur and result during the policy period in personal injury. Bodily injury and personal injury are separately defined under the policy. The two meanings cannot be resolved into one, and no ambiguity exists.
Second, Paul argues that an ambiguity exists because "humiliation" appears in the definitions of both personal injury and bodily injury. But, no ambiguity exists because "humiliation," as it appears in the definition of personal injury, which lists a series of distinct torts, connotes the tort of humiliation. In contrast, where the word "humiliation" appears in the definition of bodily injury, which lists types of injuries, it connotes a type of injury. Based on the context in which the terms appear, there is no ambiguity.
In sum, Paul does not meet his burden of showing that the claims in the Partin Litigation or the Spillers Litigation are covered by the USLIC policy as a matter of law. Accordingly, USLIC is entitled to summary judgment on the issue of coverage.
Given this determination, the court need not consider USLIC's exclusion arguments raised for the first time in reply and Paul's surreply addressing that issue.
B. Breach of Contract
Under Oklahoma law, the elements of a breach of contract claim are: "(1) the formation of a contract, (2) breach of the contract, and (3) damages as a result of that breach." Cates v. Integris Health, Inc. , 412 P.3d 98, 103 (Okla. 2018). Because the USLIC policy does not provide coverage for the claims in either the Spillers Litigation or the Partin Litigation, USLIC did not breach the parties' contract by denying coverage. See Boggs , 659 F. Supp. 2d at 1216 (granting summary judgment to insurance company on insured's breach of contract claim where there was no coverage). USLIC is therefore entitled to summary judgment on Paul's counterclaim for breach of contract.
C. Breach of the Duty of Good Faith and Fair Dealing
Under Oklahoma law, "an insurer has an implied duty to deal fairly and act in good faith with its insured and ... the violation of this duty gives rise to an action in tort." Christian v. Am. Home Assurance Co. , 577 P.2d 899, 904 (Okla. 1977). The essential elements of a bad faith claim are as follows: "(1) claimant was entitled to coverage under the insurance policy at issue; (2) the insurer had no reasonable basis for delaying payment; (3) the insurer did not deal fairly and in good faith with the claimant; and (4) the insurer's violation of its duty of good faith and fair dealing was the direct cause of the claimant's injury." Ball v. Wilshire Ins. Co. , 221 P.3d 717, 724 (Okla. 2009). The minimum level of culpability necessary for liability to attach against an insurer is more than simple negligence. Badillo v. Mid Century Ins. Co. , 121 P.3d 1080, 1094 (Okla. 2005).
The Oklahoma Supreme Court has stated "a claim must be paid promptly unless the insurer has a reasonable belief that the claim is legally or factually insufficient. The decisive question is whether the insurer had a ‘good faith belief, at the time its performance was requested , that it had justifiable reason for withholding payment under the policy.’ " Buzzard v. Farmers Ins. Co. , 824 P.2d 1105, 1109 (Okla. 1991) (emphasis in original) (quoting Buzzard v. McDanel , 736 P.2d 157, 159 (Okla. 1987) ). Thus, "[a] central issue in any analysis to determine whether breach has occurred is gauging whether the insurer had a good faith belief in some justifiable reason for the actions it took or omitted to take that are claimed violative of the duty of good faith and fair dealing." Badillo , 121 P.3d at 1093-94. "[B]ad faith cannot exist if an insurer's conduct was reasonable under the circumstances." Barnes v. Okla. Farm Bureau Mut. Ins. Co. , 11 P.3d 162, 170-71 (Okla. 2000) ; see also Shotts v. GEICO Gen. Ins. Co. , 943 F.3d 1304, 1314 (10th Cir. 2019) ("To succeed on a bad faith claim, ‘the insured must present evidence from which a reasonable jury could conclude that the insurer did not have a reasonable good faith belief for withholding payment of the insured's claim."). The insurer's conduct must be assessed based on the facts known and knowable to the insurer concerning the claim at the time the insurer's performance was requested. Buzzard v. McDanel , 736 P.2d 157, 159 (Okla. 1987) ; see also Oulds v. Principal Mut. Life Ins. Co. , 6 F.3d 1431, 1439 (10th Cir. 1993).
"The mere allegation that an insurer breached the duty of good faith and fair dealing does not automatically entitle a litigant to submit the issue to a jury for determination." Oulds , 6 F.3d at 1436. "Until the facts, when construed most favorably against the insurer, have established what might reasonably be perceived as tortious conduct on the part of the insurer, the legal gate to submission of the issue to the jury remains closed." Id. at 1437 ; see also Garnett v. Gov't Emps. Ins. Co. , 186 P.3d 935, 944 (Okla. 2008) ("Before the issue of an insurer's alleged bad faith may be submitted to the jury, the trial court must first determine as a matter of law, under the facts most favorably construed against the insurer, whether the insurer's conduct may be reasonably perceived as tortious.").
USLIC argues that the existence of a legitimate dispute as to coverage precludes bad faith liability. Under Oklahoma law, "[a] [bad faith] cause of action will not lie where there is a legitimate dispute." Newport v. USAA , 11 P.3d 190, 195 (Okla. 2000) (quoting Manis v. Hartford Fire Ins. Co. , 681 P.2d 760, 762 (Okla. 1984) ).
However, the Tenth Circuit, applying Oklahoma law, has recognized that "a legitimate dispute as to coverage will not act as an impenetrable shield against a valid claim of bad faith." Timberlake Constr. Co. v. U.S. Fid. & Guar. Co. , 71 F.3d 335, 343 (10th Cir. 1995). Rather, even where a legitimate dispute exists, a jury must still determine the existence of bad faith when the insured "produce[s] additional evidence of bad faith." Bannister v. State Farm Mut. Auto. Ins. Co. , 692 F.3d 1117, 1128 (10th Cir. 2012) (quoting Timberlake , 71 F.3d at 344 ); see also Shotts , 943 F.3d at 1315. The Tenth Circuit has recognized that the additional evidence may take several forms, including "evidence that the insurer did not actually rely on th[e] legitimate [dispute] to deny coverage, denied the claim for an illegitimate reason, or otherwise failed to treat the insured fairly." Shotts , 943 F.3d at 1315 (internal quotations and citations omitted) (emphasis in original). Additional evidence of bad faith may also include evidence "that the insurer performed an inadequate investigation of the claim." See Shotts , 943 F.3d at 1315 ; Bannister , 692 F.3d at 1128 (quoting Timberlake Constr. Co. , 71 F.3d at 345 ) ("Another instance in which the jury may decide the issue is if there is evidence that the insurer ‘failed to adequately investigate [the] claim.’ ").
Under Oklahoma law, "[t]he duty to defend is separate from, and broader than, the duty to indemnify, but the insurer's obligation is not unlimited." First Bank of Turley v. Fid. & Deposit Ins. Co. of Md. , 928 P.2d 298, 303 (Okla. 1996). The duty to defend is triggered whenever the insurer "ascertains the presence of facts that give rise to the potential of liability under the policy." Id. (emphasis in original). This determination is made by looking to information "gleaned from the petition (and other pleadings), from the insured and from other sources available to the insurer at the time the defense is demanded." Id. at 303-04. "The insurer has the duty to look behind the third party's allegations to analyze whether coverage is possible." Id. at 303 n.15.
It is undisputed that, on April 7, 2016, Paul submitted claims related to the Spillers Litigation and Partin Litigation to USLIC. [Doc. 25, p. 9, ¶ 18; Doc. 36, p. 16, ¶ 18]. In a letter dated April 13, 2016, USLIC explained there was no coverage for the Partin Litigation because "[t]he complaint does not allege bodily harm or property damage resulting from an accident" nor "an offense resulting in personal injury." [Doc. 25-22, pp. 2-3]. In a second letter dated the same day, USLIC explained that "[n]one of the remedies sought in the [Spillers] Complaint involve a loss as defined by the policy and, therefore, there is no coverage for the claims. There is no coverage because the Cross-Complaint does not allege an accident resulting in bodily injury or property damage nor does it allege an offense resulting in personal injury." [Doc. 25-7, p. 2]. Additionally, USLIC explained that "[t]o the extent Destiny Spillers qualifies as your spouse, she is an insured under the policy and Exclusion K applies to preclude coverage for her claimed loss." [Id. , p. 3]. However, as Paul points out, USLIC had a duty to look beyond the allegations to analyze whether coverage was possible. And, according to Paul, he "was never married to Destiny Spillers." [Doc. 35-1, p. 2, ¶ 5].
Viewing the evidence in the light most favorable to Paul and drawing all reasonable inferences in his favor, as the court must, the court concludes that Paul has not submitted evidence from which a reasonable juror could conclude that USLIC's handling of Paul's insurance claim was tortious. While the court infers that USLIC did not look beyond the pleadings to analyze whether coverage was possible, "when a bad faith claim is premised on inadequate investigation, the insured must make a showing that material facts were overlooked or that a more thorough investigation would have produced relevant information." Timberlake Constr. Co. , 71 F.3d at 345. Paul makes no such showing here. USLIC denied coverage based on its view that neither the Partin Litigation nor the Spillers Litigation involved losses covered by the policy. Paul's marital status was not material or relevant to that determination. Accordingly, USLIC's failure to interview Paul and, as a result, failure to learn that Paul was never married to Destiny Spillers, is not evidence that USLIC overlooked material facts or failed to garner relevant information. USLIC's motion for summary judgment as to Paul's fair dealing claim is granted.
In USLIC's Motion for Summary Judgment, USLIC also argues Paul's bad faith counterclaim is time-barred. However, the parties now agree the counterclaim is timely by application of 20 Okla. Stat. § 2013(C). See Federal Deposit Ins. Corp. v. Palermo , 815 F.2d 1329, 1340 (10th Cir. 1987) ("Fed. R. Civ. P. 13(a), governing compulsory counterclaims, reflects no federal policy on this issue; we therefore regard Oklahoma law as controlling.").
V. CONCLUSION
WHEREFORE, USLIC's Motion for Summary Judgment [Doc. 25] is granted.
IT IS SO ORDERED this 11th day of December, 2020.