Wathor v. Mutual Assurance Administrators, Inc.

individually Doug WATHOR, and Shannon Wathor, parents

and as of Nicholas child, individually and on behalf

minor similarly

of themselves and all others

situated, Plaintiffs/Appellants,

MUTUAL ASSURANCE ADMINISTRA

TORS, INC., corpora a domestic

tion, Defendant/Appellee. 97,696.

No.

Supreme Court of Oklahoma.

Jan.

As Corrected Jan.

Rehearing Denied March Mansell, Engel, Mark A. Steven S.

Steven Oklahoma, Ashmore, City, Oklahoma S. Plaintiffs/Appellants. Turner, Voegeli, R. G.

Elaine Susanna Oklahoma, Defen- City, Oklahoma dant/Appellee.

BOUDREAU, J. alleged to suit based on its bad faith actions in administering plan. an insurance employ offered its T1 Oklahoma Wathor, ees, plaintiff Doug like access to its I. STANDARD OF REVIEW program health insurance called self-funded Health and Dental Oklahoma Summary T4 judgment appropri is (Plan}. County Plan Oklahoma hired defen only ate where there are no material facts in Administrators, Inc. dant Mutual Assurance dispute moving party and the is entitled to (MAA) party as its third administrator judgment as a matter of law. v. Oliver (TPA).1 MAA's Administrative Service Con Cos., Group Farmers Ins. 1997OK 941 (Contract) tract with Oklahoma obli purely P.2d 985. As this decision involves provide gated MAA to the ministerial and determinations, legal our standard of review required by in clerical services the Plan con grant summary judgment of a trial court's operation. nection with its Under the Con Kirkpatrick Chrysler is de movo. v. Corp., tract, initially any MAA determines whether We review all pay particular qualifies claim for benefits for inferences and conclusions to be drawn from ment under the Plan. The Oklahoma underlying evidentiary facts contained ma (Oklahoma County) Budget Board handles all light terials in a party most favorable to the appeals of denied claims and has final author Oliver, opposing supra. the motion. If the ity approve deny to claims. The Contract legitimate support uncontroverted facts in provides compensated for MAA to be favoring well-pleaded theory ferences of the solely partici flat fee based on the number of party against judgment sought whom the is day any pants the Plan on the first judgment contrary or if the to substantive given any month. MAA assumes no risk for law, judgment will be reversed. Har claims filed under the Plan. grave Valley v. Co-op., Canadian Elect. (Wathors), 43, 792 T2 Mr. and Mrs. Wathor indi- P.2d 50. Nicholas, vidually parents and as filed a petition alleging that MAA is insurer who II. BAD FAITH CLAIM breached its contract with them and acted 15 The Wathors contend the trial porta- bad faith when violated Oklahoma's they in concluding court erred could not statute, 4509.2, bility 86 0.8.2001 which party maintain a tort action a third prohibits excluding pre-exist- from insurers administrator for breach of insurer's ing coverage conditions from if the insured Every good faith. contract in Oklahoma previous plan. had been covered under a implied good contains an faith and partial The Wathors filed motion for dealing. Doyle Kelly, fair v. summary judgment on the issue of whether ordinary In commercial they coverage could be denied on the basis of contracts, duty merely a breach of that re pre-existing condition. MAA filed a re- contract, damages sults for breach of not sponse summary and its own motion for lability. tort Christian motion, asserted,

judgment. In its MAA American Home Assur. TPA, among things, other that because it is a 577 P.2d 899. insurer, both of the Wathors' claims contracts, however, fail as a matter of law. The trial court 16 Insurance agreed. ordinary It denied the Wathors' motion and are not commercial contracts. Id. granted MAA's motion. The Court of Civil A relationship" "special exists between an Appeals granted stemming affirmed. certiorari to and its We insurer insured determine, issues, insurance, among quasi-public unequal other the first im- nature of pression power bargaining issue whether a third adminis- between the insurer and insured, subject potential trator who is not an insurer and the for an insurer TPA, subject Party adjuster 1. As a MAA is whose settles claims for an Third trust or Act, 0.$.2001 §§ seq. Administrator's 1441 et trust, insurer or in connection with life health § Pursuant an administrator coverage any per- insurance or annuities in this State. premiums son who collects for an insurer or (10th Cir.1995), America, 50 F.3d 793 a time power at exert unserupulously Appeals considered vulnerable. Tenth Cireuit Court particularly insured when the under self- relationship ere- of whether an insured special the issue Id. at 902-04. plan faith and could sue duty of funded health benefits ates a faith re for its own bad plan administrator Id. of the insurer. dealing part on the fair duty gives rise pay of this for treatment. An insurer's breach fusal sounding in tort. of action separate cause had Wolf, plan administrator at 904. Id. control over benefit determinations primary appeals). As (including some intermediate faith and T7 The administering plan, plan payment after applies to activities dealing fair insurer-ingured percentage of the received administrator relation establishment coverage. paid participant premiums handling pro claims ship, includes the in Group Health Services percentage plan administrator's v. cess. Kincade The of addition, if In as losses decreased. Oklahoma, Inc., P.2d creased 1997 945 level, plan the to a certain duty nondelegable so that losses increased is n. 18. The 489 risk with the by delegating tasks had to share the escape it administrator insurers cannot board; plan got higher, if even the Farm losses parties. Barnes Oklahoma to third ¶ 9 Co., the entire had to underwrite administrator Mut. Ins. Bureau 167n. 5.2 risk. ¶ 11 plan ad determining In whether the only Normally, the insurer owes T8 duty good of the insured a ministrator owed dealing to its duty good faith and fair the of faith, decide the Tenth Cireuit refused to the agents Agents of the insurer-even insured. by simply concluding plan the adminis issue material to a acts have been whose con stranger a to the insurance trator was duty-do normally owe the not breach of Rather, emphasized that the tract. duty good since are of faith insured question analysis on the factual should focus contract. Tim parties not to the insurance acted suffi plan administrator whether Co., Royal Ins. mons v. Globe that there was a ciently like an insurer such attempt (rejecting P.2d 912-13 653 plan ad relationship" between the "special of agent lable for breach hold an insurance comp give that would ministrator and the insured duty good faith the insurance of duty at 797. good to the of faith. Id. rise any).3 predicted the Oklahoma The Tenth Cireuit typical case the insured 9 duty impose a Supreme Court would nondelegable protected by the adequately entity position plan in faith on an duty imposes law on the insurer. that Wolf, in for the same reasons administrator However, imposition of a duty in imposed that on "true" insurers we necessarily pre duty not on the insurer does Wolf, at 798. 50 F.3d Christian. plan clude an action an insured analysis agree with the duty We of an insurer's administrator for breach good faith. In presented v. Prudential Ins. Co. under the facts the Tenth Circuit Wolf dealing duty delegable faith and fair years ago [in Tim "We ruled over seventeen relationship" Royal "special mons v. Globe Ins. created arises from undisputed avoid an insurance contract. It 907] that an insurer could not good faith and fair breach of the stranger contract was a to the insurance MAA by delegating responsibility dealing its to an in Doug County Wathor. between Oklahoma Barnes, dependent contractor." Accordingly, be characterized MAA, whether 167 n. 5. contractor, agent no owed or an acted suffi- Wathors unless it such argues summary judgment 3. The dissent ciently there was a like an insurer such that granted the trial not have been because should Wa- "special relationship" it and the between record before determine, could not on the court undisputed duty. give thors to rise to such administrator) it, (the party whether MAA third summary judgment facts in MAA's motion for agent or as an for Oklahoma served as sufficiently like an it did not act establish that the facts of this contractor. Under case, insurer. inquiry legally non- irrelevant. The this ("A § plan adminis see also 15 O.S.2001 In a situation where Wolf. contract, many expressly the tasks of an performs made the benefit of trator company, compensation person, may any has him third be enforced at insurance it."). contingent approval parties on the package that is time before the thereto rescind claims, of the finan and bears some denial Assuming, deciding, without claims, the adminis cial risk of loss for the Wathors are third beneficiaries of the good faith and fair trator has a Contract, Administrative Service that status dealing to the insured. merely step entitles them to into the shoes of ¶ 13 Applying analysis to the this Oklahoma to enforce Oklahoma case, following. facts of this we observe the County's rights against contractual MAA. plan MAA Like the administrator Wolf The Administrative Service Contract obli performed tasks unquestionably some gates provide handling MAA to claims ser company in claims han of an insurance County. vice for It Oklahoma does not obli However, dling process. in contrast gate pay MAA to covered claims on behalf of compensation package facts MAA's Wolf County. sought by Oklahoma The relief approval tied to the or denial of was handling Wathors from MAA is not claims claims but was instead a flat fee based on the service, payment but under the Plan for what Likewise, participants number of the Plan. Thus, they contend is covered treatment. MAA did not share the risk of loss with the assuming party even the Wathors are third level, and Plan if losses increased to certain Contract, beneficiaries of the that status does if did not underwrite the entire risk losses not entitle them to maintain a breach of words, got higher. under the even other against action contract MAA for failure to case, presented facts in this MAA had nei pay affirm their claim. We the trial court's motive, power, opportu ther the the nor the judgment in favor MAA on the Wathors' of Christian, nity unserupulously. act See breach of contract claim.5 Accordingly, 577 P.2d at 902. we affirm the judgment in trial court's favor of MAA on the IV. CONCLUSION faith claim.4 Wathors' bad ¶ 16 special Because of the relation III. BREACH OF CONTRACT CLAIM insureds, ship between insurers and their imposes duty good The Wathors also contend the Oklahoma of faith and ¶ 14 dismissing dealing gives trial court erred in their claim for fair on insurers which to an rise Normally action tort. we do against breach of contract MAA. While the strangers impose duty party Wathors are to the Administrative not such a on third admin County plans of Service Contract between Oklahoma istrators health insurance because MAA, party parties and is well settled that third the administrators are not to the may beneficiaries of a contract maintain an insurance contract between the insurer and Royal action on contract. the Keel v. Titan Constr. the insured. See Timmons v. Globe Corp., Ins. P.2d 907.6 O.S. 1982OK 653 Howev 0.$.2001 statute, Although proposes portability the dissent to offer a differ- Oklahoma's 4509.2, adopted prohibiting excluding ent test from that v. Prudential insurers Wolf America, (10th Cir.1995), pre-existing coverage Ins. Co. 50 F.3d the conditions from if in- Circuit, essentially coverage previous plan. the two Tenth tests are sured had However, under case, inquire they The dissent would as to facts of identical. under the this were party required pursue coverage against whether the tasks of the third administra- issue "integral employer, County, tor are to the functions of an insurer self-irisured Oklahoma rather administrator, encompass legal duty making and a well-defined than the third MAA. gua inquire MAAliable insurer." would Wolf 6. The dissent would extend direct sufficiently to whether the administrator acted agents (e.g., adjusters, bad faith to the insurer's "special like an insurer such that there is a representatives, investigators employed by claims relationship" between MAA that and the insured insurer, perhaps attorneys employed by and give duty would rise to the faith. insurer), despite the fact that these are strangers 5. We also and are convinced that the Wathors were not insurers are to the insurance expenses pursuant gives covered for their medical contract which rise to the WINCHESTER, JJ., HARGRAVE, plan may imposed on a er, be such where, specific facts under in Result. Concur administrator case, plan ad cireumstances WATT, C.J., OPALA, V.C.J., Dissent. sufficiently like an insurer acts ministrator "special relationship" that there is such OPALA, V.C.J., dissenting. the in administrator plan between the ¶ 1 duty. opinion. It gives rise I dissent from the court's sured Administrators, Assurance concludes Mutual case, ¶ 17 in this plan administrator (MAA) power, the mo Inc. had "neither the . MAA, sufficiently like an insurer not act does tive, unserupulously." 1 act opportunity nor the not have a tort therefor does summary judg I would reverse the dealing fair toward the Wa- good faith and given ment below to MAA and remand affirm the trial Accordingly, we thors. thorough explo cause to the trial court for on the judgment in favor of MAA court's occupied %18 We also af vis-a-vis faith claim. ration of the status MAA Wathors' bad entry judgment (the court's County County). Summary firm the trial Oklahoma breach favor of MAA on Wathors' judgment appropriate not for this case. strangers are claim. The Wathors contract completely devoid of evidentia- The record is Contract be Service the Administrative ry regarding relationship to material MAA's Assum and MAA. tween Oklahoma County. with re The status MAA held deciding, that are ing, Wathors without determining critical to spect to the third-party of the Administra beneficiaries held liable in tort for whether MAA Contract, that status does not tive Service handling appellants' faith insur bad of contract to maintain a breach entitle them ance claims. pay a against MAA for failure to cov action (and prius analysis Because the nisi the Administrative Ser ered claim because Appeals-the the Court Civil obligate pay MAA to vice Contract does COCA) with Oklahoma's com is inconsistent of Oklahoma Coun covered claims on behalf law, mon I would direct that on remand the ty. inquiry to trial court conduct a fact-based THE COURT OF CIVIL OPINION OF MAA functioned as the determine whether VACATED; OF JUDGMENT APPEALS independent County's non-employee agent an or as AFFIRMED. THE TRIAL COURT agency actor.2 If an relation contr County, ship MAA and the LAVENDER, KAUGER, did exist between HODGES, EDMONDSON, JJ., BOUDREAU, may tort. Concur. the former be liable bad-faith contrary based in part 1. The court comes to this conclusion the of the insurer. This is faith on agents holding part premise agent that of the the that an a disclosed to our in Timmons on for may agents have been principal whose acts insurer-even is not liable in an action for breach of duty-do (Second) a breach of the not normal- Agency material to of contract. Restatement duty good ly of faith since owe the insured § 320. A cause of action for breach of an insur- agents parties contract. are not to the insurance good duty It was first er's of faith is ex delicto. argues that the insurer recognized The dissent also v. American Home As- in Christian independent "stands exonerated" if its Co., where it is stated: surance contractors) liability for a bad faith tort. bear no is a distinct tort based an [TJhis upon implied simply An insurer has a non- This is not so. duty good to act in faith and deal of the insurer good performing delegable duty while of faith fairly duty This is not con- with its insured. adjustment management, and functions of claims sensual, imposed by law. Breach it is of duty requires the insurer to settlement. This tort, notwithstanding duty that it also sounds in investigate, positive steps adequately eval- take contract, plaintiff constitutes a breach of and An insureds' claims. uate, and its respond and, may consequential recover in a insured independent may employ agent an insurer an or case, damages. proper punitive essence of The functions, perform but this contractor these cause of action is bad faith. of its own non- [emphasis does not absolve the insurer supplied] agent delegable duty. con- If the or functions, adequately perform the % 577 P.2d tractor fails to liable, the doctrine of the insurer is not under relies here on 2. For MAA's exoneration the court respondeat superior, but because of its own fail- Ap- duty decision the United States Court comply non-delegable ure to with its peals the Tenth Circuit in v. Prudential good faith. Wolf I premise that a liability is rested on the Its agent may upon never bestow principal

immunity from tort the latter commits while ANATOMY OF LITIGATION hand, if the other acting for the former.3 On Wathor, Appellants, Doug and Sharon prius found at nisi that MAA is it should be MAA, brought against appellee, alleging suit contractor, inquiry must an breach of contract and breach of an insurer's go further to determine whether then duty dealing in failing faith and fair County (qua delegated to MAA tasks to settle their claim for certain medical ex insurer) 1) are: those which principal and penses pre-existing incident to a condition. nondelegable an insurer or are either summary prius judgment At nisi went 2) encompass a integral to its functions and affirmed, holding MAA. The that COCA so, duty legal well-defined of an insurer. MAA, administrator, third-party as a is may found liable for its own tortious MAA subject to an insurer's which the would also be acts for Appellants sought faith.4 certiorari to de under the rule that one's breach answerable third-party termine whether a administrator nondelegable another's makes both an insurer be liable in tort bad- and the holder of a the actor duty responsible ex delicto. denial a claim. faith agent Cir.1995), is not (10th The rule of law that excused America, Co. 50 F.3d 793

Ins. exception general committing was made to the rule where when tortious or criminal conduct is agent always is liable in tort. is widely recognized. early In an Oklahoma case it Wolf judicial declaration of Oklahoma's neither expressed thusly: recognized nor a source of state common law agent principal apply and does not The law law. agent, pursuit purpose, when the of a lawful suggest a different test from that announced in engages aside, sets and in the commission of a injury property wrong, person- of the There, the federal court focused on Wolf, supra. sufficiently plan whether the administrator "acts rights ... al of another Instead of relation principal agent existing and the law [so] like an insurer ... there of the 'special relationship' and the between the administrator being relating applicable, thereto the transac- plainly Id. at 797. view is insured." conspiracy between tion resolves itself into Wolf with Oklahoma's law. inconsistent common among parties engaged the commis- analysis must focus on The correct whether wrong, every party and each and sion of specific, well-defined the administrator accepting knowledge with benefits alleged integral have violated to the busi- is so engaging wrong, wrong, aiding in the as to make it ness of insurer-hirer nondele- tortfeasors, are and the law will hold each Esau, gable. Coe party jointly severally damages liable in 815, principle 819. For a discussion of the P.2d injury by wronged person. for the suffered III(D) nondelegable duty, Part TY13- of see infra Rogers Brummeit, 711, 13, v. 1923 OK 220 P. text. 16 of the 362, 365. Supreme Court took a similar The United States expressed agency 3. Theheart of is in the ancient position "[Nleither stated that a state nor when it gu? per per maxim alium common-law facit facit agent authority upon an can confer individual an (the agent act of the se act of the or servant is the perpetrator." to commit a tort so as to excuse the master). principal Transport, Sisk v. J.B. Hunt or Hopkins Agric. College Car- v. Clemson South of 17 ex. Inc., 69, 15, 55; 2003 OK n. 81 P.3d State olina, 636, 643, 654, 656-57, U.S. 31 S.Ct. 221 35, Bar Ass'n v. 2000 OK rel. Oklahoma Taylor, (1911). 55 890 31, 1242, 1251; Pollay, 4 v. 119 n. P.3d Nelson L.Ed. 142, 23, 1369, 1374; OK 17 n. 916 P.2d 1996 holding specific 4. The COCA limited its to the County Bank v. Board Com'rs North Side State case, stating not act like "[MAA] facts of this does 894 Tulsa 1994 OK 114 n. County, special that there a relation- an insurer such Eichner, P.2d 1051 n. Anderson v. give ship between it and Plaintiff that could rise T 890 P.2d 1337. As the duty For faith." its conclusion (Second) Agency Restatement 343 states represents that it has relied this court's COCA on agent who does an act otherwise tort is [aln liability by not from the fact that he find no relieved Christian, in note 1. I decision supra quoted support COCA's state- principal in Christian for at or on acted the command of the pertinent rule. principal ment of the account of the ..." I supportive only facts of inferences that favor movant, is error to decide the case NOT APPRO- JUDGMENT IS SUMMARY summary process. Disputed issues of fact PRIATE FOR THIS CASE BECAUSE trial, very must be resolved the law's THE PRIUS COURT MUST NISI summary decision-making. antithesis THE DETERMINE STATUS FIRST principal/agent relationship Whether a exists MAA HELD OKLAHOMA VIS-A-VIS presents generally question fact to be COUNTY,THE INSURER prius.9 resolved at nisi analysis gua non to be made The sine principal/agent of a begin T6 Existence relation determining first wheth here must er MAA stood towards the ship by considering is determined the actual non-employee agent language or of an status of intent and effect of the contract's independent light parties' day-to-day contractor.5 The MAA's status actual 1) if MAA acted as an conduct vis-a-vis one another.10 The label is material because: agent, imposed liability here because contracting parties used to define agent, acting principal, an while for the can relationship their does not alone determine 2) not insulate from tort if itself they in whether fact stand vis-a-vis one an contractor, MAA served as an principal-agent other relation.11 The liability may if MAA nonetheless be visited determining central factor whether performing was a core agency function relationship principal's exists is the duty and its well-defined as an insurer.7 to, of, right as well as its exercise control agent.12 princi over the The essence of a only Summary judgment permissible

1 5 pal/agent principal's controversy any power status is the if no exists as to substantial give agent's duty obey material fact.8 the record is devoid of directions and the When right present, them.13 If a of control is evidentiary undisputed that shows material governed by principles. Agency common-law MAA, if it were the insurer. as an independent (Second) contractor, Agency. (of discharges paying See Restatement claims) settling qua in bad faith MAA is liable 6. Based on the common-law that all individ- Any contrary insurer. other result would be acting uals must act or from in manner refrain principles liability. of common-law tort others, brings agent harm to cannot acting short, MAA, or other when any entity, liability. acting itself tort Whether insulate insurer, for an must be held to the same principal, on his behalf or on behalf of his own dealing standard of faith and fair as an agent the conse- will not be relieved from insurer itself. she) quences merely he of his tort because agency relationship stood in an when the tort Cameron, 49, ¶ 5, 8. Hinson v. occurred. 3 at 31 S.Ct. note Hopkins, citing 549, 551, Flanders v. Crane (Second) Agency § 343, 654; Restatement su- pra note 3. Carpet finding Cleaning Employ 7. A that MAAserved as con- A-Plus Janitorial & analysis. complete required tractor does Ass'n, ers' Workers' Compensation The trial court must next determine whether the ¶ 32, County delegated to MAA a well-defined integral to its business as an insurer. If MAA Consultants, Enterprise Management 10. Inc. performed obligations integral to those of the State Oklahoma ex rel. the Oklahoma Tax involving insurer and the latter's well-defined Comm'n, 91, 359, 16 n. 12, 768 insured, legal duty may que it be liable 12. n. insurer. example, For each insurer has a non- Oklahoma Management Consultants, Inc., 11. su- Enterprise delegable duty good claims in faith. to settle 10, 12, note at 16 n. 362 n. 12. pra Settling paying claims is the most basic Christian, 1, function of an insurer. note supra Management Consultants, Inc., su ¶ 25, Enterprise ("We approve adopt at 577 P.2d at 10, 13, 13; Coe, note at 16 n. 362 n. pra supra implied duty the rule that an insurer has an ¶ note at 377 P.2d at 818. fairly deal with and act in faith its in sured"); ¶¶ at Coe, 12-15, note at Taylor Casualty v. State Farm Fire and Management Consultants, Inc., su Enterprise ¶ 9 ¶ 6 n. n. note at 362 n. 13. See also pra (Second) exactly Agency § MAAcarries it acts as 1 which de When out this Restatement III may relationship be found principal/agent respondeat superior the tort doctrine DESIGN, BYACCIDENTOR WHETHER hand, if the other liability invoked. On PRONOUNCEMENT TODAY'S absent, relationship right of control be THE BAD FAITH EMASCULATES independent contracto likely to be that of an AND IT TORT SENDS CHRISTIAN this, finding like In a case r.14 A PATH TO VIRTUAL ON CHAOTIC County independent EXTINCTION MAA served the by MAA will not itself absolve contractor A. legal responsibility. If the of its Today's Mandatory Re- Refinement Of duty inte delegated to MAA a well-defined lationship Insured-plain- Between the insurer, may gral to its business as MAA Policy-writing tiff and the Insurer gua nonetheless stand liable insurer. Failed, Directly Through Oth- Who ers, evidentiary no ma to Settle the Claim Good Faith The record contains Imposes Actionability Require- Newa critical fact issue terial for resolution of the ment That Is Inconsistent With County as its of whether MAA acted for the Proge- Teachings of and its Christian independent agent or as an contractor. ny latter, MAA's what were MAA's duties? T8 Christian15 fashioned new delictual must be resolved status vis-a-vis of an insurer who refuses settle determined whether liabili before Later good faith a claim for a covered loss. ty imposable failing to settle on MAA parameters of jurisprudence fine-tuned the faith. the claim suit by requiring standing the new tort press a Christian claim vindication be who, persons vis-a-vis the insur confined to er, occupythe status of an insured.16 Third- policy- of an insured's beneficiaries today's standing.17 By loss are without covered further refines note18 foot mandatory relationship of the insured- by plaintiff the insurer-defendant vis-a-vis requiring that actionable harm henceforth by in a who also stood be inflicted one plaintiff. contractual status vis-a-vis aggrieved par deprive This will doubtless standing all of insurer's ties of contractually-engaged (non-employee) con insurer-hired ¶¶ fiduciary principal/agent status as "a fines 14- Amick, Ins. Co. v. Allstate from the manifestation of 364-65. Amick limited relation which results person only the other consent one to another that outer the Christian tort's benefit reach of control, subject act on his behalf and to his shall the defendant-insurer those who stood vis-a-vis [Emphasis so to act." and consent the other relationship circum of insured. Amick's in a added.] plaintiffs scription standing does zone for require must be in that recoverable harm 2(3) (Second) Agency § 14. The Restatement acting who also one for the insurer flicted person contractor as ""a defines an rela the insured in a contractual stands vis-a-vis something for who contracts with another to do requirement the latter tion. The addition of nor him but who is not controlled the other today's ipse dixit. right subject re- to the other's to control with performance spect physical to his conduct in the 17. See authorities note infra undertaking." of the opinion. Supra 18. See %8 n. 3 of the court's note 568 perform may pressed against

tractors who for the insurer able claim the actor management, adjustment duties of claims allegation independent and there is no of an settlement). obligor.21 tort liable To vicariously day's pronouncement is final and releases the accident, by design 19 or this Whether liability. Administrator of its bad-faith Relit- relationship quo new sine non of the in igation very of the same issue every sured bad-faith defendant will gua principal obligor theory insurer on a far-reaching impact have a on the future liability vicarious is barred Corporate complexion of that tort. insurers doctrine preclusion.22 issue only through do business others-human If, agents corporate contractors. as the B. appears today,

court to declare insurer's (or contractors) agents independent bear no Progeny Requires Christian's AOf Plain- liability for a bad-faith while in tort tiff No More Than An Re- Insured/Insurer surers rather themselves but on mission Policy-issuing lation with The Insurer insurer, for the the insurer itself stands by operation cavalierly exonerated of law and 10 The court declares the Ad preclusion.19 issue This is so because the ministrator's status vis-a-vis the recognize responsi law "legally will no vicarious irrelevant." This is so because the bility for plaintiffs non-tortious acts of contractu court concludes the harmed lacked ally engaged (non-employee) agent "special or for relationship" contract-based vis-a- independent very contractor's pronounce non-tortious vis the Administrator. This discharge duties.20 Put nothing ment infuses the tort with Christian ting principle simpler language, legal schizophrenia. "special vieari short of liability imposable ous is not no relationship" jurisprudence requires where action our is 206, (where legal paradox (Mo.App.1995) 19. The court creates a when it S.W.2d 208 an em ployee respondeat superior strains to hold that an insurer's and all of is exonerated of lia exonerated); bility employer contractors are not liable in tort. also must stand liability 294, This would make the insurer's exclusive. Company, Fish v. Southern 173 Or. Pacific corporate 294, (1943), But insurers are bodies act and cannot P.2d 143 917 reh. den. 173 Or. 145 agents. immunizing (1944) (where without human non-em- By 991 vicarious is liability ployee agents from bad-faith torts committed for solely wrongful agent, based on the act of an principal, today setting is insurers' agent princi exoneration of the exonerates the liability-free controlled instrumentalities on a pal). bad-faith frolic. voluntary 21. A affirmative act which an actor liability imposed by respondeat superior setting 20. Vicarious law when one in the is released also Sisk, 3, person liability. is made answerable for the actionable releases the master's note ('The Hendricks, conduct of another. Braden v. 1985 at 17 common-law doctrine [of vicarious lability] teaches that an effective release of the 14, ¶ 18, 24, 1343, n. n. 24. 1351, (Third) (Vicarious Restatement of Torts 13 Lia master."). servant to release the operates bility), a: contexts, Comment "In number of responsibility legally imputed of one actor is See, Pierce, eg., Hedquist Lynch, v. Merrill another, liability imposed. and vicarious Smith, Inc., Fenner & 272 Ga. 209, 528 S.E.2d example respondeat superi- The most familiar (2000); 508, 510 Harris v. St. Medical Mary's principal or-the of a for the tortious (Tenn.1987); Center, Inc., 902, 726 S.W.2d 905 agent acts of an and that of a master for tortious Co., Inc., Neely Gibson Lumber Co. v. Coble 651 Second, acts aof servant. See Restatement 232, (Tenn.App.1983); S.W.2d 234 Kirk v. Mi 219, Agency §§ 243-245. In some circum chael Reese Medical Center, & 117 Ill.2d Hospital stances [hirer] of an employer (Ill. 507, 944, 111 IIl.Dec. 513 387, 399 N.E.2d negligence contractor be held liable for the 1987); 113, Towns v. Yellow Cab 22 73 Ill.2d [independent] contractor. See Restate (1978). Ill.Dec. 382 Is N.E.2d §§ Second, ment Torts 416-429." preclusion prevents relitigation sue of facts and actually litigated necessarily principal It is axiomatic other that a cannot be made issues de by application superior respondeat proceeding liable if the termined in an earlier between the agent's actions are not actionable. Cnota v. Pa same their others if the privies parties Ass'n, Ill.App.3d fully fairly litigated). latine Area Football issues were Underside (1992); 169 Ill.Dec. 592 N.E.2d v. Lathrop, Ill.App.3d 1026, Lloyd, Dumas v. ¶ 286 N.E.2d Armstrong, 517 n. Veiser v. 8 n. (Ill.App.1972); Peoples Conway, 688 P.2d 796, 800 n. 9. an inde policy-writing masquerading or the lawsuit as insurer that between entity. successful, third-party pendent If and not that between and its insured to transfer function insurers will hasten (non-employee) the insurer's insured and settling managing, adjusting and claims to (or hired its contractors escape re party, a third all an effort claims). adjust It manage, or settle refusal to settle cov sponsibility for bad-faith liability's imposition to show sufficient losses. If this is what the court desires ered princi the defendant's the insurer that spawn, pronouncement crisply its should (for pal hirer claims settlement not, say If the Administrator's status so. tasks).23 extant of Oklahoma No source fully ex indeed matter. It must be does requires in that bad-faith harm be law plored and settled before exoneration directly by {without in the insurer flicted be effected. terposition instrumentali of controlled ¶ court has cast 12 The ominous cloud the ties) every bad-faith defendant liability should be over the insurer's bad-faith plaintiff policy- in a vis-a-vis stand industry's allowed neither to disturb the relationship. The law contractual based minds of the plant business nor doubt merely an Christian tort confines insurer's Delphic no than revo insureds. oracles less liability stand in the status to those who lutionary legal changes the law and the rob the insurer of the of an insured vis-a-vis public marketplace badly oppor of a needed loss.24 orderly growth in at tunity for business Uncertainty stability. mosphere of calm and C. judicial generated by shifting climates tends Every Requirement-That Today's Added day-to-day disruptive effect on to have a Defendant Vis-a-vis Bad-faith Stand adversely quality activity and to affect the the Plaintiff in the Relation Insur- legal-advice deliverable services. Predictably Have A Destruc- er-Will D Impact Future tive on the Course Tort Christian Nondelegable Duty Principle Oper- ¶11 Today's summary (County's) exoneration ates To Extend the Hirer's Liability But Does Not Exonerate assuredly crafts tomor Administrator most (Administrator) of its Individual Actor ready-made liability-defeating defens row's Liability; The Latter Is Second- Tort (and acting all for them es. Insurers those arily Liable for the Bad-faith Tort possibly employees) will except their direct Indemnity Equitable Would Have the immuniza invoke these defenses because Primarily Against Liable Claim effectively their actors will exonerate tion of Actor[Hirer liability they will the hirers.25 The shield court has fashioned raise is that which the in Timmons v. 113 From a statement They will doubtless focus Royal for them here.26 (that an insurer has a nondele- Globe27 faith), immunity Hability on quest gable duty from to settle in their conclusion relationship utterly between unwarranted draws want insurer/insured harm-dealing actor clad plaintiff pronouncement and the is broad its Timmons 432-33; ¶ 6, 431, Co., relationship 828 P.2d Ins. 1992 OK there was an insurer-insured entity plaintiffs and the insurance between ¶¶ 14-15, at at 364-65. note Amick, supra, its hired inde for whom Administrator contractor) acting pendent was when harm stood at 364-65. 14-15, note at 1h! Amick, supra, that Chris inflicted, the "special relationship" progeny requires stands satisfied. See tian's Aerospace Technologies, Kuykendall at 7. v. Gulfstream Sisk, note 374, 382; ¶ 19, 66 P.3d First Bank Mary Turley Fidelity Deposit Ins. Co. of today exonerates the insurer 26. The court land, 928 P.2d (b) (a) liability liability respondeat superior 306-07; Gianfillippo v. Cas. Northland the insurer's of those who breach for the acts ¶¶ 8-10, (an injured nondelegable duties. passenger covered the driver's auto bring policy may action a bad-faith insurance 97, 22, insurer); Republic v. Old 27. 1982 OK Goodwin 570 ordinarily negligence liable for the every

enough non-employee to exonerate every agent independent independent contractor nondelegable- and of contractor. The doing so, liability. operates In duty concept its individual the to extend the hirer's principle magnifies liability. court the of nondele- liability This is so because that duty beyond legal by gable limit indepen extends to the torts of the hirer's immunity stretching contractors, it into from tort lia dent but it does not relieve the bility-a concept independent not included in the con contractors of individual tort liability.30 teachings clearly recovery against struct. The Timmons If there is an independent contractor,31 will, the latter extending do not include exoneration that equitable indemnity, based on have a claim far. against nondelegable duty.32 28 the hirer with a nondelegable 14 principle duty T The 29 exception general is an to the rule that the Indemnity right 15 is a which inures to independent him, hirer of an contractor discharges duty by is not one who owed but 429, nondelegable duty Except employ- §§ 28. One who owes a to anoth as stated in 410 to escape liability performance by er cannot for its independent subject er of an contractor is not engaging independent contractor. In such liability bodily harm caused to another cases, the rule the hirer is not liable for by a tortious act or omission of the contractor independent actionable conduct of an contractor or his servants. Hendricks, applied. will not be Braden v. 1985 14, ¶ 19, 1343, 1352, 26; 695 P.2d n. Shell Sisk, note 3, at 17. Line v. Curtis, 212, ¶ 13, 1955 OK 287 Pipe Corp. 681, 685; Hotels, Barden, P.2d Allied Limited v. Inc., Copeland Lodge Enterprises, In v. The 16, ¶ 15, 968, 1964 OK P.2d Okla 36, 112, 2000 OK 25, 695, n. homa Co. v. OK 82, 157, 282 P. Ry. Boyd, states: 162, 45, said, 140 Okl. it is "Where one owes a nondelegable duty persons, to third he cannot person "The rule in Oklahoma is that a who obligation escape performing duty by such performs through independent work con- performance engaging through by for its damages per- tractor is not liable for to third contractor, and in such cases the rule that an negligence sons caused contractor employer negligence is not liable for the of an except inherently dangerous where the work is independent application." contractor has no See employer or unlawful or where the owes a Inc., Copeland Lodge Enterprises, v. The 2000 OK legal duty injured contractual or defined to the 36, ¶12, quoting 4 P.3d Great party performance (em- in the of the work." Indemnity Deatherage, American Co. v. 1935 OK added). phasis Toyota, Williamson v. Fowler 827, 830-31, ("... 52 P.2d 175 Okl. 28 Inc., 14, T7, 858, 860, 1998 OK 956 P.2d general nonliability rule of of the contractee is quoting Hudgens v. Cook Industries, Inc., imposes positive that one on whom the law 145, T11, 1973 OK 815. See public escape or an individual cannot also, Clampitt, Huckins Hotel Co. v. 1924 OK responsibility seeing duty performed 945, 946-947, 101 Ok 224 P. contractor, by delegating independent it to an Minnetonka Oil Co. v. Haviland, 1916 OK injuries resulting and will be liable for from the Page 55 OkL. 155 P. 217, 219; W. Keeton ef negligence performance contractor's in the anp Kegton al, § Prosser on tHELaw or Torts thereof"); Security Corp. U.S. Services v. Ramada (5th Ed.1984). at 511-512 Inn, Inc., (Fla.App.1995). 665 So.2d Copeland innkeeper may teaches that while an nondelegable duty For a discussion of owed independent perform hire an contractor public utility, see et al. v. Elec. Bouziden Alfalfa 450, (or she) nondelegable duty, former's he Inc., Co-op., 462-63 pass off to an contractor the ulti- J., (Opala, dissenting). legal responsibility proper perform- mate for the Nondelegable duties are addressed in the Re duty. Deatherage, supra ance of that Id. at (Second) §§ statement of Torts 416-425. The nondelegable duty note 28 at 830-31. Under the rule, theory duties is also dealt with innkeeper may vicariously be held liable (Second) § Agency, 214 of the Restatement for an contractor's failure to exer- principal which states: "A master or other who innkeeper cise reasonable care even if the has provide protection under for or to itself exercised due care. protect property have care used to others or their performance and who confides the of such 32. Porter v. Norton Stuart Pontiac-Cadillac person subject to a servant or other Enid, 18, ¶ 0, 405 P.2d 109, 110 syl., to such others for caused harm to them ('Where parties jointly two are liable to a third agent perform duty." failure of such tort, primarily ... [for] one of them general nonliability 29. For the rule see Re- wrongdoer, that he reason is the actual (Second) secondarily constructively statement of Torts Its the other terms under are: respondeat superior any the rule of but without alone, indemnity another, have an sued would but was which, himself as between County. By immunizing other.33 claim discharged have been should pronouncement today's indemnity appropriate the Administrator remedy of The liability greater for nondele- primary or make the so-called party has will one where him to bear This is so because requires gable duty unenforceable. liability which or as the burden between whole of vicariously liable for the acts of no one can be concept transfers indemnity actionable.37 The another which are not parties.34 compelled who has been liability from one the entire another where damages to

pay E. by a third have been borne loss should Immunizing from Bad-Faith The Notion short, parties are party.35 where two In Acting Liability Third Parties As Tort party for a bad- to a third separately liable Agents Indepen and _(Non-employee) (because primarily it tort, one of them faith Managing, Adjust Contractors dent duty), the other and has ing Settling An Insurer's Claims and secondarily, recovery against if there is Symmetry the Procedural offends have an secondary obligor, the latter would By § Art. Okl. Const.38 Mandated pri indemnity against the claim equitable obligor. mary {17 intends to let the Assuming the court painful death to tort die a slow and Christian bear and Administrator The standing lack of by inflicted the insured's liability the latter's bad-faith separately for in- proceed against the insurer-controlled covered losses. refusal to settle strumentalities-ie, corporate human or it has a non- obligor because primary is the insurer) claims duty (gua to settle insurer-hired inde delegable non-employee agents jurisprudence runs liability pendent operators)-its escape its and cannot faith interdie afoul of constitutional contractor. The Oklahoma's by engaging Today's pro special.39 tion of law that is Administrator, obligor secondary who is a * liability nondelega- preserved the insurer's third having with the a causal connection fault illusory. ble becomes party's injuries, latter recover from compelled pay he has been the amount former damages injury"). Restatement See as § pertinent terms of Art. 5 38. The who, ("A (First) person § of Restitution Const., are: discharged which is part, has whole or in not, except legislature as otherwise shall ''The by which as between himself him but owed Constitution, pass any provided local or in this discharged by the oth have been another should authorizing: special law other, unless entitled to er, is indemnity &oge ok wrongful nature of his payor is barred jurisdiction ... Regulating practice or conduct."). inquiry judicial proceedings or before ..." tribunals.. courts ... or other note 32 at 113. Porter, 33. supra Const., supra § Okl. the terms of Art. 5 See Id. single out Special laws are those which note 38. similarly affected entire class of less than an Id. persons things treatment. If or for different absolutely special, § un- rule lawof indemnity may equitable 36. Noncontractual Reyn prohibits passage . law. equivocally its par legal relationship between the arise from ¶¶ 13-21, Porter, 760 P.2d olds v. (National A.A.R. W. Fire Ins. Co. v. ties. Union held that mak In Porter 816, 821-24. Inc., 1989 OK Skyways, applicable ing to one of limitations a statute Serv., Inc., Co. v. L.V. French Truck Travelers Ins. tort-fie., singling tort for a different out one (Okla. 555 n. 16 applicable to other from that which is limitation 1988)). secondarily obligated only who is One Art. 5 of the same rubric-violates torts indemnity pay damages have an claim would Const., pro provides it disuniform Okl. because obligor primary a nondele- who owes By today's Porter, a tort like attributes. cedures for duty. supra gable note 32 at 113. tortfeasors, except pronouncement insurers all cases, under re- would remain liable bad-faith note at 17. Sisk teaches Sisk, agents superior of their spondeat -for the torts vicarious for another's there can be no independent contrac jointly those for the torts of By today's exoneration acts that are immunized. imposed. obligation actor, upon can be tors whom that it has the court's declaration special is indeed intention, nouncement law. It state so. ought that is not its changes common-law time-honored tort la- not leave the hopelessly bad-faith tort in a bility principles by making non-employee explanation chaotic aftermath. An is due on operators and other immune from may proceed how an insured when the bad- They liability. delictual stand exonerated faith refusal directly settle is occasioned want of a direct contractual insurance-an (non-employee) the insurer's human or plaintiff. chored nexus with the corporate agency hiree

assigned management, adjust- the task of IV ment and settlement of losses. ¶ 21 I would reverse trial court's sum

SUMMARY mary exoneration of MAA and remand the ¶18 incorrectly This case was decided cause for proceedings further to be conduct summary process. process That inap was fully ed in a manner piere- consistent with a propriately applied. inquiry Full-scale into ing analytical inquiry urged by this dissent MAA's status vis-a-vis is re post-remand proceedings. quired may to determine whether MAA held liable bad-faith tort. No court can

decide, record, on this whether MAA served non-employee agent

as a for the

as an insurer-hired contractor

performing well-defined core functions of an

insurer. Because the conduct of the con (MAA tracting parties County), and the one 2004 OK 12 other, into, inquired toward the has not been Oklahoma, Appellee, STATE of Plaintiff/ may no stage conclusion be drawn at this Hability. to the Administrator's 1 19 If non-employee agent, MAA was a TORRES, Defendant, Pablo

may be liable tort to the same extent as its (the principal County). MAA was fact insurer-hired per- contractor

forming a well-defined core function of the Ranger Company, Insurance (County), insurer MAA also be declared Intervenor/Appellant. gua liable insurer. 96,996. No. 1 20 jurisprudence There is no extant state supporting today the notion foisted here Supreme Court of Oklahoma. for imposition liability, of bad-faith if the Feb. management insurer's claims function is han- party, dled third the third must

also stand vis-a-vis the insured in an insur- relationship. precedent Extant

erfinsured

requires no more than insurer/in- solely

sured relation subsist between the

plaintiff policy-issuing entity and the

the covered claim. If the court intends to

now abrogate abandon or prog- its Christian

eny, opinion clearly should explicitly Creating single exemption respondeat from the Quik, Town Mister 138, 15, 1996 OK a. Tony's

superior liability similarly class would fall under 357-58; Haynes 915 P.2d v. Tulsa Pub special-law the axe of a condemnation. Transit, 86, 15, lic Schools jurisprudence, Legisla Our own no less than the J., (Opala, concurring); Great Plains enactments, faithfully ture's must conform Federal & L S Assn. v. 4, T2, Dabney, state fundamental law's interdiction of disuni- J., (Opala, concurring). 1095-96 prohibited subjects. form laws on Johnson v.

Case Details

Case Name: Wathor v. Mutual Assurance Administrators, Inc.

Court Name: Supreme Court of Oklahoma

Date Published: Jan 22, 2004

Citation: 87 P.3d 559

Docket Number: 97,696

Court Abbreviation: Okla.