FALCONE v. LIBERTY MUTUAL INSURANCE CO.
2017 OK 11
| Okla. | 2017Background
- On October 5, 2013 Malinda Falcone, a passenger in her mother’s car, was injured when an uninsured driver ran a stop sign; she was transported by ambulance to OU Medical Center ER and transferred to its Level 2 (L2) trauma unit.
- OU Medical Center billed $47,203 for the ER visit, including $24,420.25 for the L2 trauma designation; total medical bills submitted were $67,098.23.
- Falcone submitted the bills under her mother’s uninsured/underinsured motorist (UM) coverage (policy limits $100,000); Liberty Mutual retained outside reviewers who concluded L2 care and some CT scans were unnecessary.
- Liberty Mutual made several offers (ranging roughly $37,855–$55,678) and eventually sent an unconditional payment of the $100,000 UM limit after suit was filed; Falcone refused earlier checks and sued for breach of contract and bad faith refusal to pay compensatory damages.
- The trial court granted summary judgment for Liberty Mutual, ruling an insurer may question reasonableness of medical charges without committing bad faith; the Oklahoma Supreme Court reversed and remanded, holding bad-faith is a fact question for the jury.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer committed tort of bad faith by withholding payment of ER/L2 trauma charges under UM coverage | Falcone: UM provision requires payment of compensatory damages caused by accident; OU bill is part of compensatory damages and insurer had no contractual right to discount based on utilization review | Liberty Mutual: Insurer may reasonably investigate and question necessity/reasonableness of medical charges; doing so is not bad faith as a matter of law | Reversed summary judgment — whether conduct was unreasonable/bad faith is for the jury |
| Whether insurer may treat UM medical charges like med-pay (i.e., adjust for "reasonable and necessary" expenses) | Falcone: UM language is distinct from med-pay; UM promises to pay compensatory damages owed from tortfeasor, so insurer may not unilaterally reduce those bills | Liberty Mutual: Reasonableness review is proper and consistent with assessing compensatory damages under jury instructions | Court: Distinguished policy language; emphasized fact question whether insurer’s conduct in contesting bill was justified |
| Whether undisputed evidence warranted summary judgment for insurer | Falcone: Offers, timing, use of reviewers and delay support a finding of bad faith | Liberty Mutual: Offered substantial evaluations and ultimately paid policy limits; its investigation and offers were reasonable | Court: Material facts and the significance of negotiation history create issues for the trier of fact; summary judgment premature |
| Remedies available if bad faith found | Falcone: Entitled to compensatory and punitive damages for bad faith | Liberty Mutual: Liability limited to damages properly owed; punitive only if statutory standards met | Court: Remanded for jury to determine actual and, if warranted, punitive damages under Oklahoma law |
Key Cases Cited
- Christian v. American Home Assurance Co., 577 P.2d 899 (Okla. 1977) (recognizes insurer's implied duty of good faith; tort for unjustified withholding of payment)
- McCorkle v. Great Atlantic Insurance Co., 637 P.2d 583 (Okla. 1981) (bad-faith action requires insurer unreasonably and in bad faith withhold payment)
- Buzzard v. Farmers Ins. Co., 824 P.2d 1105 (Okla. 1991) (insurer may litigate but must have reasonable belief in denial; focus on insurer's knowledge/belief during claim review)
- Newport v. USAA, 11 P.3d 190 (Okla. 2000) (medical expenses may constitute compensatory damages; factual issues for jury)
- Southwestern Greyhound Lines, Inc. v. Rogers, 267 P.2d 572 (Okla. 1954) (recognizes medical expenses as compensatory damages)
- Haberman v. The Hartford Ins. Group, 443 F.3d 1257 (10th Cir. 2006) (evidence insurer ignored its own policy or controlling law can support bad-faith finding)