FALCONE v. LIBERTY MUTUAL INSURANCE CO.
2017 OK 11
| Okla. | 2017Background
- On Oct. 5, 2013 Malinda Falcone, a passenger in her mother’s car, was injured when an uninsured driver ran a stop sign; she was taken by ambulance to OU Medical Center and transferred to its Level 2 (L2) trauma center.
- OU billed $47,203 for the ER visit, including $24,420.25 for the L2 trauma designation; total medical bills submitted under the mother’s UM policy were $67,098.23.
- Liberty Mutual (and affiliated LM General) sent records to two out‑of‑state reviewers who concluded L2 trauma care (and some CT scans) was unnecessary; Liberty Mutual refused to pay the L2 trauma charge and made a series of settlement offers below the full billed amount.
- After months of negotiations and a rejected check, Falcone sued for breach of contract (UM benefits) and tortious breach of the duty of good faith and fair dealing (bad faith).
- The district court granted summary judgment for Liberty Mutual, ruling an insurer may question the reasonableness of emergency charges as a matter of law; the Oklahoma Supreme Court reversed, holding bad‑faith is a fact question for the jury and summary judgment was premature.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether emergency room/L2 trauma charges are recoverable as UM "compensatory damages" | Falcone: ER/L2 charges are part of compensatory damages caused by the accident and thus payable under UM coverage | Liberty: Insurer may investigate and contest the reasonableness/necessity of medical charges and therefore withholding payment pending review is not bad faith | Court: Whether withholding the L2 charges was unreasonable/bad faith is a jury question; medical bills can be compensatory damages |
| Whether an insurer may, as a matter of law, send claims to utilization reviewers and deny contested charges without committing bad faith | Falcone: Using reviewers as a pretext to deny UM compensatory damages violates the policy and can be bad faith | Liberty: Referral to reviewers and questioning reasonableness is a legitimate investigation and defense to payment | Court: Investigation is permitted, but the insurer’s conduct and belief during review determine bad faith; fact issue for jury |
| Whether Liberty Mutual’s settlement offers and negotiation conduct defeated a bad faith claim | Falcone: Low/arbitrary offers over a year and ultimate payment only after suit show lack of good faith | Liberty: Offers and eventual payment of UM limits show reasonable handling and willingness to settle | Court: The sequence and amounts of offers are probative of good faith and must be assessed by a fact‑finder |
| Whether summary judgment was appropriate on the bad faith tort claim | Falcone: Material facts about insurer’s state of mind and conduct preclude summary judgment | Liberty: No binding Oklahoma precedent requires treating all ER charges as compensatory damages; questioning charges is lawful as matter of law | Court: Summary judgment was premature; reversed and remanded for jury determination |
Key Cases Cited
- Christian v. American Home Assurance Co., 577 P.2d 899 (Okla. 1977) (recognizing insurer’s implied duty of good faith and tort for its breach)
- McCorkle v. Great Atlantic Insurance Co., 637 P.2d 583 (Okla. 1981) (bad‑faith defined as insurer unreasonably withholding payment)
- Buzzard v. Farmers Ins. Co., 824 P.2d 1105 (Okla. 1991) (insurer may litigate claims but must investigate reasonably and have bona fide belief to deny)
- Newport v. USAA, 11 P.3d 190 (Okla. 2000) (bad‑faith standards and fact‑issue guidance)
- Southwestern Greyhound Lines, Inc. v. Rogers, 267 P.2d 572 (Okla. 1954) (medical expenses can be compensatory damages)
- Denco Bus Lines, Inc. v. Hargis, 229 P.2d 560 (Okla. 1951) (recognizing medical expenses as damages)
- Kratz v. Kratz, 905 P.2d 753 (Okla. 1995) (UM coverage is first‑party promise to insured; recovery based on policy terms)
- Chicago, R.I. & P.R. Co. v. Wright, 278 P.2d 830 (Okla. 1954) (measure of compensatory damages for wrongful injury)