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interpreting similar policy language, noting split, and holding on matter of first impression that "an insurer is required to show prejudice when it asserts an insured has breached the voluntary payments clause"
Summary of this case from TSL Transp. Sols. v. CruzOpinion
Case No. 117,677
04-28-2020
HILAND PARTNERS HOLDINGS, LLC, as successor-in-interest to Hiland Partners, LP, Hiland Operating LLC, and Hiland Partners GP Holdings, LLC, Plaintiffs/Appellants, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA and AIG Claims, Inc., Defendants/Appellees.
Rachel C. Mathis, John A.L. Campbell, Roger Gassett, ASTON MATHIS CAMPBELL CLARKE & TIGER, PLLC, Tulsa, Oklahoma, for Plaintiffs/Appellants William D. Perrine, Catherine C. Taylor, Reagan Madison Fort, PERRINE, REDEMANN, BERRY, TAYLOR & FRETTE, P.L.L.C., Tulsa, Oklahoma, for Defendants/Appellees
Rachel C. Mathis, John A.L. Campbell, Roger Gassett, ASTON MATHIS CAMPBELL CLARKE & TIGER, PLLC, Tulsa, Oklahoma, for Plaintiffs/Appellants
William D. Perrine, Catherine C. Taylor, Reagan Madison Fort, PERRINE, REDEMANN, BERRY, TAYLOR & FRETTE, P.L.L.C., Tulsa, Oklahoma, for Defendants/Appellees
OPINION BY JANE P. WISEMAN, CHIEF JUDGE:
¶1 Hiland Partners Holdings, LLC, as successor-in-interest to Hiland Partners, LP, Hiland Operating, LLC, and Hiland Partners GP Holdings, LLC (collectively, Hiland) appeal a December 13, 2018, order granting the motion for summary judgment of National Union Fire Insurance Company of Pittsburgh, PA and AIG Claims, Inc. (collectively, Defendants). Based on our review of the record and applicable law, we reverse and remand for further proceedings.
BACKGROUND
¶2 On October 19, 2011, an explosion occurred at a natural gas processing facility in North Dakota owned and operated by Hiland. Lenny Chapman was removing water from condensate tanks at the facility when the explosion occurred, and he sustained burns to his face and body. Hiland reported the explosion to Zurich American Insurance Company, its primary general liability insurer. Hiland's policy had a per occurrence limit of $1 million and a general aggregate limit of $2 million. Hiland also had a commercial umbrella liability policy issued by National with a per occurrence limit of $25 million and a general aggregate limit of $25 million. Finally, Hiland held a commercial excess liability policy issued by RSUI which provided $10 million in limits of liability in excess of the National policy.
¶3 On April 26, 2013, Chapman and his wife filed a negligence and public nuisance suit against Hiland Partners GP Holdings, LLC, in the United States District Court for the District of North Dakota, Southwestern Division. The Chapmans reserved the right to assert claims for punitive damages.
A second and third amended complaint were filed adding other Hiland entities.
¶4 Zurich retained attorney Patrick Durick to represent Hiland in the lawsuit, and Hiland retained Margaret Clarke and Michael C. Holmes to assist in the representation. National exercised its right to participate in the defense and brought in attorneys John Fitzpatrick and Stephen Oertle to take the lead in Hiland's defense.
Because all evaluations of the Chapman suit exceeded Zurich's $1 million policy limit, Zurich tendered policy limits to National for use in negotiating a settlement.
¶5 Before scheduled mediation, Durick evaluated the case at $3 to $7 million, noting Hiland had little to present to defeat liability as it had permitted the tanks to overflow. But he did not believe the evidence supported a finding of injuries rendering Chapman completely disabled. Similarly, Fitzpatrick evaluated the case at $3 to $5 million, stating Chapman's injuries were largely lawyer-driven. Hiland's mediation statement said, "Hiland [would] neither entertain nor pay any settlement that ha[d] 8 figures."
¶6 On May 29, 2014, the Chapmans filed a motion to amend, seeking punitive damages. The motion contained allegations of direct liability against Hiland on theories of design defect and allegations of vicarious liability based on its employees' conduct. Hiland requested Defendants' position on its insurance coverage for punitive damages.
¶7 At mediation on June 4, 2014, Defendants' settlement value was $4 to $6 million, inclusive of Zurich's $1 million. Mediation was unsuccessful and ended with Defendants' offer of $4 million and the Chapmans' demand of $32 million.
¶8 AIG's claims adjuster, Stephanie Holzback, subsequently received a coverage opinion on punitive damages which provided vicarious punitive damages would be covered losses but direct punitive damages would be barred by public policy. The opinion recommended a reservation of rights as to direct punitive damages. After being repeatedly asked for its coverage position, Holzback informed Hiland on August 12, 2014, that a reservation of rights was premature and that it was Defendants' position that Oklahoma and North Dakota law prevented an insurer from insuring against direct punitive damages.
¶9 At a second mediation on August 15, 2014, Defendants' settlement authority was $7.5 million, inclusive of Zurich's $1 million. The Chapmans began at $25.9 million. Late in the evening, Fitzpatrick suggested a bracket of $8 to $12 million. The parties dispute what occurred next. Hiland asked Holzback to offer $8 million. Holzback refused, stating that was not Defendants' value of the case. Holzback offered $7 million, inclusive of Zurich's $1 million. The Chapmans ultimately accepted the $8 to $12 million bracket. After Holzback refused additional requests to offer further funds, Hiland agreed to the bracket and informed Holzback it was reserving the right to sue Defendants for bad faith. Although Hiland asserts Holzback threatened to withdraw the $7 million if Hiland insisted on retaining this right, she ultimately made the offer with no conditions. Hiland eventually offered $10 million, which the Chapmans accepted. Thus, Zurich paid $1 million, National $6 million, and Hiland $3 million of the final settlement.
¶10 Hiland subsequently met with AIG regarding its handling of the claim and asked Defendants to pay Hiland's contribution. Defendants denied Hiland's request.
¶11 On August 15, 2016, Hiland filed suit against Defendants in the District Court of Garfield County, Oklahoma, asserting breach of insurance contract, breach of the duty of good faith and fair dealing (bad faith), and punitive damages.
Hiland's principal place of business is in Enid, Oklahoma.
¶12 On September 21, 2018, Defendants filed a joint motion for summary judgment, asserting the undisputed facts showed Hiland voluntarily contributed funds to effect a settlement in breach of the policy's clause prohibiting voluntary payments. Defendants also asserted Hiland could not prove the elements of a bad faith claim, because its actions in handling the claim were reasonable.
¶13 Hiland responded, asserting material questions of fact existed. Hiland maintained it did not voluntarily contribute toward settlement but was coerced to pay because of Defendants' bad faith conduct.
¶14 By order filed on December 13, 2018, the district court granted Defendants' motion for summary judgment, and Hiland appeals.
STANDARD OF REVIEW
¶15 "A moving party is entitled to summary judgment as a matter of law when the pleadings, affidavits, depositions, admission or other evidentiary materials establish that no genuine issue of material fact exists." Smith v. City of Stillwater , 2014 OK 42, ¶ 21, 328 P.3d 1192. "In reviewing the grant or denial of summary judgment, this Court views all inferences and conclusions to be drawn from the evidentiary materials in a light most favorable to the nonmoving party." Id .
¶16 "The standard for appellate review of a summary judgment is de novo " by which "an appellate court makes an independent and nondeferential review of that judgment without deference to the decision or reasoning of the trial court." McIntosh v. Watkins, 2019 OK 6, ¶ 3, 441 P.3d 1094. ANALYSIS
¶17 The dispositive issue before us is whether the district court erred in sustaining Defendants' summary judgment motion.
1. Bad Faith
¶18 An insurer has an implied duty to deal fairly and act in good faith with its insured so as not to deprive the insured of the benefits of the policy. See Christian v. American Home Assurance Co. , 1977 OK 141, 577 P.2d 899. The essence of the tort is the unreasonable, bad faith conduct of the insurer. Badillo v. Mid Century Ins. Co., 2005 OK 48, ¶ 28, 121 P.3d 1080. The duty "applies to activities after the establishment of the insurer-insured relationship, and includes the claims handling process." Wathor v. Mutual Assurance Adm'rs, Inc. , 2004 OK 2, ¶ 7, 87 P.3d 559. The central issue is gauging whether Defendants "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 , 2005 OK 48, ¶ 28, 121 P.3d 1080. " ‘[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.’ " Id. ¶ 28 (quoting McCorkle v. Great Atl. Ins. Co. , 1981 OK 128, ¶ 21, 637 P.2d 583 ).
¶19 Hiland asserts Defendants acted in bad faith in handling the Chapman claim, coercing it into offering and paying $3 million to settle. Hiland contends Defendants continually withheld a punitive damages coverage opinion and, when finally provided, intentionally misled Hiland, leaving it without the necessary information to make an informed decision on potential exposure and whether to contribute towards settlement. Hiland further asserts Holzback suggested and encouraged Hiland to contribute while refusing to contribute her full settlement authority.
Hiland also contends AIG's refusal to mediate two days, attempt to secure a waiver of its bad faith claim, and deletion of any reference to coverage for punitive damages from a major loss report constitute bad faith conduct.
¶20 Defendants dispute this, contending that because the Chapman claim was within the limits and coverage of Hiland's policies, it was accorded absolute control of the claim and had the right to elect to compromise and settle or to defend in Hiland's name. Defendants further assert punitive damages were simply not an issue in the case and that Hiland usurped its right to control settlement negotiations by voluntarily approving a settlement above case evaluations.
¶21 We conclude conflicting inferences could be drawn from the evidence regarding the reasonableness of Defendants' conduct. The record shows Hiland was particularly concerned that an award of uninsured punitive damages could trigger loan covenants with a devastating impact on the company. The Chapmans' motion seeking punitive damages contained allegations of direct liability against Hiland and vicarious liability based on the conduct of its employees. Although the district court had not yet ruled on the motion, Hiland repeatedly requested Defendants' coverage position. AIG admits Hiland doggedly pursued a coverage position and that AIG told them it was premature.
¶22 During this time, however, AIG actively pursued a coverage opinion from outside counsel, stating the issue was a rush. This coverage opinion advised that punitive damages assessed against Hiland for its employees' wrongdoing would be covered losses but punitive damages for Hiland's direct wrongdoing were barred by public policy. The opinion recommended a reservation of rights as to a potential award of direct punitive damages. Although a reservation of rights was drafted, AIG refused Hiland's requests for Defendants' position, stating the issue was not ripe. However, internal AIG documentation finds punitive damages were an issue. Holzback drafted a major loss report (MLR) in preparation for the second mediation that provided "[p]unitive damages capped twice compensatory. Direct punitive damages not insurable/vicarious is insurable." Further, during a July 17, 2014 meeting, Holzback and her supervisors engaged in a roundtable discussion and analysis of the Chapman claim. Notes from the meeting state: "Direct — Non Insurable Vicarious — Insurabil ... Will ROR." Finally, Fitzpatrick gave his worst-case scenario, stating if punitive damages were awarded, their exposure could be $20 million.
Under Oklahoma law, if coverage is questionable, the insurer may defend the insured under a reservation of rights. See First Bank of Turley v. Fidelity and Deposit Ins. Co. of Maryland , 1996 OK 105, ¶ 14, 928 P.2d 298.
The writing here is partly illegible.
In a memo to Defendants, Fitzpatrick stated "the ND statute has punitive damages capped at 2 x the compensatory damages. Our comps were — ‘all in’ - $6 million so punitives would be capped at $12 million. 10-20% of $10 million — made a potential settlement number of something between $1-2 million for purposes of settlement at the mediation."
¶23 On August 12, 2014, three days before mediation, Holzback responded to another Hiland request, stating a reservation of rights was premature. However, for the first time she provided Defendants' position, stating Oklahoma and North Dakota law prevented an insurer from insuring against direct punitive damages. Holzback's correspondence lacked any reference to potential coverage for vicarious punitive damages. Holzback also acknowledged she knew before mediation that punitive damages were of significant importance to Hiland. But despite repeated requests and discussions about punitive damages during mediation, Holzback did not inform Hiland there could be coverage. Holzback admitted that although Hiland wanted to know what was covered, she told them what was not covered.
¶24 During mediation, Fitzpatrick suggested a bracket of $8 to $12 million knowing Hiland desperately wanted the case settled and was willing to contribute, though the parties dispute whether this was voluntary. The parties further dispute exactly what occurred at mediation. Hiland asserts it asked Holzback to offer $8 million. Holzback refused, stating she did not have it and would offer $7 million, inclusive of Zurich's $1 million. After Hiland and the Chapmans agreed to the bracket, Hiland again asked Holzback to offer $8 million. She again refused. Fitzpatrick noted Hiland begged Holzback to pay an additional $500,000. Holzback testified it never came up. She stated, however, she did not offer the additional $500,000 because it would not settle the case, negotiations were out of her control, and she was not feeling well. Hiland also contends Holzback threatened to withhold the $7 million if Hiland insisted on retaining the right to sue for bad faith. However, after speaking with her supervisor, Holzback offered the money with no conditions. Holzback, conversely, asserts she informed Hiland she could not settle the case because it would not be a complete settlement. Later, she also testified she spoke with her supervisor who told her to let Hiland reserve its right.
¶25 The record is replete with considerable conflict between Hiland and Holzback. Fitzpatrick noted Holzback was "rough around the edges" and had made it clear she was in charge. We note that one of the principal "reasons a consumer purchases any type of insurance ... is for the peace of mind and security that it provides in the event of loss." McCorkle , 1981 OK 128, ¶ 26, 637 P.2d 583. Thus, an insurer, "in dealing with a third-party claim against its insured, is acting in a fiduciary capacity toward its insured." Badillo v. Mid Century Ins. Co. , 2005 OK 48, ¶ 27, 121 P.3d 1080. " ‘An insurer may not treat its own insured in the manner in which an insurer may treat third-party claimants to whom no duty of good faith and fair dealing is owed.’ " Id. ¶ 26 (quoting Newport v. USAA, 2000 OK 59, ¶ 15, 11 P.3d 190 ). The insurer's duty is to act in the insured's best interest. An "insured's interests must be given faithful consideration and the insurer must treat a claim being made by a third party against its insured's liability policy ‘as if the insurer alone were liable for the entire amount’ of the claim." Badillo , 2005 OK 48, ¶ 26, 121 P.3d 1080 (quoted citation omitted).
¶26 Although Defendants claim punitive damages were simply not an issue, one could reasonably infer otherwise. A motion to add vicarious and direct punitive damages was pending. Hiland continually requested Defendants' coverage position due to the potentially devastating financial implications of a punitive damages award without insurance coverage. Though AIG promptly sought and received a coverage opinion and reservation of rights, and internal documentation shows it would issue Hiland a reservation of rights, it did not. When it did provide Hiland with its position, it provided, at best, an incomplete answer and, at worst, an intentionally misleading or disingenuous answer. Hiland wanted and needed to know what was covered, but Holzback only advised what was not covered.
¶27 Defendants had the duty of good faith and fair dealing to act reasonably for the protection of its insured, whose financial survival could be hanging in the balance. See id. ¶ 30. The evidence submitted is sufficient to support a reasonable finding that Defendants did not approach the matter or make decisions concerning its insured as if it alone were responsible for the entire amount of the claim. Accordingly, based on the specific facts of this case, we find conflicting evidence from which different inferences may be drawn regarding the reasonableness of AIG's handling of the Chapman claim.
¶28 We also conclude reasonable persons could reach different conclusions about whether Defendants had a good faith belief that a justifiable reason existed for withholding the additional $500,000 at mediation. An insurer has a duty to "promptly settle the claim for the value or within the range of value assigned to the claim as a result of its investigation." Newport , 2000 OK 59, ¶ 16, 11 P.3d 190. Its "failure to do so may subject it to a claim for bad faith." Id . "This is not to say an insurer may not negotiate or litigate the value of the claim. The duty of good faith and fair dealing merely prevents an insurer from offering less than what its own investigation reveals to be the claim's value." Id . "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." Duensing v. State Farm Fire & Cas. Co. , 2006 OK CIV APP 15, ¶ 38, 131 P.3d 127 (emphasis omitted).
¶29 According to the record, Hiland asked Defendants to settle the claim between $10 and $12 million. However, defense counsel consistently valued the case between $3 and $7 million. In its roundtable analysis of the Chapman case before the second mediation, AIG considered the law, the facts, damages, their experience, advice of counsel, Holzback's suggested reserve of $9 million (plus Zurich's $1 million), and defense counsels' evaluations. AIG thought the Chapmans' attorney tended to overvalue his cases and mediated multiple times before settling close to trial. AIG authorized $7.5 million, inclusive of Zurich's $1 million, if it settled the case. However, during mediation Holzback refused to offer more than $7 million. Although the evidence in the record is conflicting, Holzback testified she did not offer the additional $500,000 because it would not settle the case, negotiations were out of her control, and she was not feeling well. Based on the record before us, a jury could reasonably conclude AIG was not negotiating in good faith and that its offer at mediation fell below the value it had assigned to the Chapman claim.
Hiland asserts the claim was uniformly valued at $10 million, noting AIG's initial claims adjuster stated it would pay $10 million to settle, a statement the adjuster denies. Hiland also asserts the first mediator believed he could settle the case for $10 million and Fitzpatrick and the second mediator indicated that $10 million was reasonable. However, Fitzpatrick testified he did not recommend paying over $7 million. Finally, Hiland asserts AIG valued the case at $10 million in a draft MLR. However, the record shows AIG rejected this figure before mediation.
Fitzpatrick's memo to Defendants further states "[the attorney had] a reputation of being impossible to deal with ... he will invariably add a count for punitive damages to exert more pressure on the defendant to settle; and that he will either go through about 3 mediations before settlement or approach the trial date before settling the case. ... He also would generally ‘cave’ from his outrageous demand — but only on the eve of trial. So the defendant would get his best settlement on the eve of trial — not in mediation months before trial ...."
¶30 Accordingly, viewing the inferences and conclusions to be drawn from the evidentiary materials in the light most favorable to Hiland, we conclude that reasonable persons could differ on the reasonableness of AIG's conduct under the circumstances presented. The summary judgment granted to Defendants on Hiland's bad faith claim must be reversed as improper as a matter of law.
2. Breach of Insurance Contract
¶31 "[A]n insurance policy is a contract." American Econ. Ins. Co. v. Bogdahn , 2004 OK 9, ¶ 8, 89 P.3d 1051. "To recover under a claim for breach of contract in Oklahoma, a plaintiff must show: 1) formation of a contract; 2) breach of the contract; and 3) damages as a direct result of the breach." OPYI, L.L.C. v. First American Title Ins. Co., Inc. , 2015 OK CIV APP 49, n. 3, 350 P.3d 163 (citing Digital Design Grp., Inc. v. Information Builders, Inc. , 2001 OK 21, ¶ 33, 24 P.3d 834 ).
¶32 Hiland asserts the existence of a valid insurance contract, Defendants' breach of the contract by failing to indemnify it for the full amount of the Chapman settlement, and damages it sustained in being coerced and pressured into paying a portion of the settlement through Defendants' bad faith conduct.
¶33 Defendants disagree, asserting Hiland breached the policy's voluntary payments clause. On this point, the policy provides: "No Insured will, except at that Insured's own cost, voluntarily make a payment, assume any obligation or incur any expense, other than for first aid, without our consent."
¶34 Liability policies typically include this type of clause. See 1 Insurance Claims and Disputes § 3:9 (6th ed.). If an insured breaches this provision, an insurer's obligation to indemnify the insured under the policy may be deemed waived or relieved, as the payment is designated as voluntary. See 1 Practical Tools for Handling Insurance Cases § 2:30 (June 2019). Courts around the country differ on the question of whether a showing of prejudice is required before an insurer is relieved of its obligation to indemnify the insured. Courts that impose a prejudice requirement note the purpose of a voluntary payment clause is similar to notice, consent-to-settle, and cooperation clauses: to ensure an insurer has an opportunity to protect its interests by permitting it to investigate and participate in any resulting litigation or settlement discussions. Rent-A-Roofer, Inc. v. Farm Bureau Prop. & Cas. Insurance. Co. , 291 Neb. 786, 869 N.W.2d 99 (2015). In Bond/Tec, Inc. v. Scottsdale Insurance Co. , 174 N.C.App. 820, 622 S.E.2d 165, 168 (2005), the Court noted that in North Carolina, "an insurer may not rely upon the breach of consent-to-settle, notice, or cooperation provisions" to waive liability unless the insurer "demonstrates prejudice to its ability to investigate or defend the claim." By analogy, the Court concluded an insurer must show prejudice if the insured has breached the voluntary payments clause, noting " ‘[a]n insurer will not be relieved of its obligation because of an immaterial or mere technical failure to comply with the policy provisions. The failure must be material and prejudicial.’ " Id . (quoting Henderson v. Rochester American Ins. Co., 254 N.C. 329, 118 S.E.2d 885, 887 (1961) ).
Some courts have held an insured's failure to comply with a voluntary payment clause gives rise to a presumption of prejudice that is rebuttable. See Roberts Oil Co. v. Transamerica Ins. Co., 113 N.M. 745, 833 P.2d 222, 231 (1992).
¶35 Conversely, courts that do not impose a prejudice requirement note the clause is a fundamental term defining the limits or extent of coverage, and requiring a showing of prejudice ignores competing interests and risks of collusion or fraud and denies insurers the ability to contract for the right to defend or negotiate settlements. See e.g., Travelers Ins. Cos. v. Maplehurst Farms, Inc. , 953 N.E.2d 1153 (Ind. Ct. App. 2011). In Travelers Property Casualty Co. of America v. Stresscon Corp. , 370 P.3d 140, 144 (Colo. 2016), the Court noted a voluntary payments clause was a fundamental term defining the limits or extent of coverage.
"[W]hether the insured acts out of ignorance of the coverage or by design in an attempt to deprive the insurer of its contractually-granted choice to provide a defense or settle the claim, ... the enforcement of such a provision according to its terms can hardly be characterized as
‘reap[ing] a windfall’ by invoking a technicality to deny coverage."
Id . (quoted citations omitted). Conversely, violations of timely notice provisions, "in the absence of any resulting prejudice, [are] technicalities from which insurers ‘reap a windfall.’ " Id . at 143.
¶36 Oklahoma has not addressed whether a showing of prejudice is required before an insurer is relieved of its obligation to indemnify on a breach of the voluntary payments clause. However, in First Bank of Turley v. Fidelity and Deposit Insurance Co. of Maryland , 1996 OK 105, ¶ 16, 928 P.2d 298, the Oklahoma Supreme Court addressed an insured's notice and cooperation duties, noting a breach of which could "modify, excuse, or defeat the insurer's performance under the [policy]." (Emphasis omitted.) The insurer's defense to liability depended on the impact of the insured's actions on the insurer's opportunity to meet its contractual obligations. Id . ¶ 25. As a result, the insurer was required to show its interests were prejudiced by the insured's actions.
¶37 We conclude an insurer is required to show prejudice when it asserts an insured has breached the voluntary payments clause. As in Turley , the insurer's defense to liability depends on the impact of the insured's actions on its ability to meet its contractual obligations. Immaterial or mere technical failures to comply with the clause are insufficient to waive or relieve an insurer of liability.
¶38 Hiland asserts, however, that the voluntary payments clause is inapplicable because Defendants breached the policy by its bad faith conduct. Despite the testimony of Hiland's CEO and President Joseph Griffin that Hiland's contribution was "voluntary," it contends it was coerced to pay to settle the claim or risk a devastating uninsured punitive damages award and its payment was therefore not voluntary.
¶39 Oklahoma recognizes "in certain instances, an insurer is estopped from insisting on the forfeiture of benefits." See Buzzard v. Farmers Ins. Co., Inc. , 1991 OK 127, ¶ 39, 824 P.2d 1105. For example, in Old Surety Life Insurance Co. v. Miller , 1958 OK 291, 333 P.2d 504, the Supreme Court stated:
"Any agreement, declaration, or course of action on the part of the insurance company, which leads a party insured honestly to believe that, by conforming thereto, a forfeiture of his policy will not be incurred, followed by due conformity on his part, will estop the company from insisting upon the forfeiture, although it might be claimed under the express letter of the contract."
Id . ¶ 15 (quoted citations omitted). And, in Sexton v. Continental Casualty Co. , 1991 OK 84, 816 P.2d 1135, the Court noted a denial of coverage under an uninsured motorist policy estopped the insurer from raising the uninsured's settlement and the defense of loss of subrogation rights. See also St. Louis Dressed Beef & Provision Co. v. Maryland Cas. Co., 201 U.S. 173, 181, 26 S. Ct. 400, 402, 50 L. Ed. 712 (1906) (by denying benefits or failing to defend in breach of the contract, the insurer "cut at the very root of the mutual obligation, and put an end to its right to demand further compliance with the supposed term of the contract on the other side").
¶40 Courts have held that if an insurer breaches its duty of good faith and fair dealing, it may not enforce the voluntary payments or settlement clause and an insured may settle and enforce the settlement against the insurer. In Traders & General Insurance Co. v. Rudco Oil & Gas Co. , 129 F.2d 621, 628 (10th Cir. 1942), the Tenth Circuit, applying Oklahoma law, stated "before [an insurer] may interpose the voluntary settlement [by insured] as a bar to recovery upon the policy, it must be shown that it acted, not alone in furtherance of its own interest, but it must also appear that it acted in good faith and dealt fairly with the assured." See also Insurance Claims and Disputes § 3:11 at 227 (6th ed. 2020) (insured is not bound by contractual obligations if the insurer breaches its duty to act reasonably and diligently to safeguard the insured's interests during settlement of a dispute in which the insured is or could be sued); Weber v. Indemnity Ins. Co. of N. Am. , 345 F. SupP.2d 1139, 1146 (D. Haw. 2004) (insured excused from its duties if insurer commits bad faith); Crawford v. Infinity Ins. Co. , 139 F. Supp.2d 1226, 1230 (D. Wyo. 2001), aff'd , 64 F. App'x 146 (10th Cir. 2003) (insured may enter into a reasonable settlement when insurer acts with bad faith in failing to settle a claim); Hyatt Corp. v. Occidental Fire & Cas. Co. of N.C. , 801 S.W.2d 382, 389 (Mo. Ct. App. 1990) (if insurer breaches its good faith duty to consider offers of settlement, insured may enforce reasonable good faith settlements against insurer); and Isadore Rosen & Sons, Inc. v. Security Mut. Ins. Co., 31 N.Y.2d 342, 339 N.Y.S.2d 97, 291 N.E.2d 380, 382 (N.Y. App. Div. 1972) (insurer's duty of good faith "may be breached by neglect and failure to act protectively when the insured is compelled to make settlement at his peril").
¶41 We find these cases persuasive. Hiland claims Defendants acted in bad faith in their handling and settling of the Chapman claim and that Hiland was coerced into contributing money to get the case settled. In the previous section, we concluded there is conflicting evidence from which different inferences could be drawn regarding the reasonableness of Defendants' conduct. If Defendants violated their duty of good faith and fair dealing, they would be estopped from raising Hiland's violation of the voluntary payments clause. And, if Hiland did not have full knowledge of all material facts and it was coerced or pressured into contributing, its payment may not be voluntary. These disputed questions of fact remain for resolution by the trier of fact. Summary judgment on such disputed fact issues cannot withstand appellate scrutiny and must be reversed.
CONCLUSION
¶42 After de novo review, we conclude that the facts elicited by the evidentiary materials presented to the trial court and all reasonable inferences from those facts, considered in a light most favorable to Hiland, do not lead inexorably to the conclusion that Defendants are entitled to summary judgment as a matter of law. Because disputed material facts remain to be resolved and fall outside the aegis of summary disposition, the district court's judgment is reversed and the case is remanded for further proceedings.
¶43 REVERSED AND REMANDED FOR FURTHER PROCEEDINGS.
THORNBRUGH, P.J., and FISCHER, J. (sitting by designation), concur.