Porter v. Oklahoma Farm Bureau Mutual Insurance Co.
2014 OK 50
| Okla. | 2014Background
- On Nov. 14, 2009 raw sewage entered and damaged Justin and Brandy Porter’s home insured by Oklahoma Farm Bureau (OFB). OFB denied coverage in a November 18, 2009 denial letter, citing policy exclusions.
- Plaintiffs sued in Rogers County district court for breach of contract, bad faith, and fraud, individually and as a putative class.
- Plaintiffs relied on Andres v. Okla. Farm Bureau (a Court of Civil Appeals opinion) to argue the policy is ambiguous because it both names “accidental discharge or overflow” of water from plumbing as a covered peril for personal property and separately excludes loss from “water which backs up through sewers or drains.”
- The district court dismissed all claims; the Court of Civil Appeals affirmed treating the dismissal as summary judgment. The Oklahoma Supreme Court granted certiorari.
- The Supreme Court held the policy provisions are not ambiguous as written, reversed dismissal of the breach-of-contract claim (remanding to determine source of the loss — plumbing system vs. sewer line), affirmed dismissal of the bad-faith claim premised on OFB’s refusal to follow Andres, and affirmed dismissal of fraud and any claim for personal-property loss (plaintiffs had not properly alleged it).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether policy language is ambiguous because it (1) covers accidental discharge/overflow for personal property and (2) excludes loss from sewer/drain backups | Porter: The accidental-discharge provision and the sewer-or-drain exclusion conflict and thus create an ambiguity that must be resolved for coverage | OFB: Policy separately treats real and personal property; the exclusion plainly bars loss from sewer/drain backups and the accidental-discharge clause is limited to personal-property perils and off-premises language | No ambiguity; provisions read together show distinct coverage schemes for dwelling vs. personal property; court declines to follow Andres |
| Whether the doctrine of reasonable expectations requires construing any ambiguity in favor of coverage | Porter: If ambiguous, insureds’ reasonable expectations would favor coverage for sewage overflow | OFB: No ambiguity exists so doctrine need not apply | Not reached — court found no ambiguity and thus did not apply reasonable expectations |
| Whether Porter stated a viable breach-of-contract claim | Porter: The complaint alleges sewage overflow from plaintiffs’ plumbing system (covered unless excluded) | OFB: Loss resulted from off-premises/sewer backup and is excluded | Breach-of-contract claim reinstated as to the individual; remanded to determine factual source (plumbing system v. external sewer) |
| Whether denial of coverage based on refusal to follow Andres constitutes bad faith | Porter: OFB acted in bad faith by refusing to follow Andres, which interpreted similar language in favor of coverage | OFB: Andres is a COCA opinion not binding precedent; insurer had legitimate basis to deny | Dismissal affirmed — reliance on Andres (non-precedential COCA opinion) cannot alone show bad faith |
Key Cases Cited
- Andres v. Oklahoma Farm Bureau Mut. Ins. Co., 227 P.3d 1102 (Okla. Ct. Civ. App. 2009) (COCA opinion finding similar policy language ambiguous and interpreting coverage to include sewage overflow)
- Buzzard v. McDanel, 736 P.2d 157 (Okla. 1987) (bad-faith standard: insurer’s good-faith belief in a justifiable reason to withhold payment defeats bad-faith claim)
- Skinner v. John Deere Ins. Co., 998 P.2d 1219 (Okla. 2000) (a COCA opinion not published by the Supreme Court is persuasive only and not binding precedent for bad-faith analysis)
- Dodson v. St. Paul Ins. Co., 812 P.2d 372 (Okla. 1991) (rules for determining ambiguity and not construing provisions strainedly to create coverage)
- Christian v. American Home Assurance Co., 577 P.2d 899 (Okla. 1977) (recognition of tort of bad-faith breach of contract arising from insurer’s duty of good faith)