Bad Faith Claim
August 5, 2013
The insured appealed from an order denying her motion for partial summary judgment as to a breach of contract and bad faith claims against the insurer. This case is Tran v. Nationwide Mutual Insurance Company, 2013 WL 363489.
Tran was involved in an auto accident with an uninsured motorist. Her vehicle was insured under an auto policy issued by Nationwide to Tran's father and contained a $25,000 limit for uninsured motorist (UM) coverage. Not long after the June 2009 accident, Tran submitted a claim to Nationwide and the insurer acknowledged the claim in July. In December 2009, Nationwide wrote to an attorney who had been retained by Tran asking for medical records and lost wage information. There was no response. In March, 2010, the insurer again asked for the medical records and again, there was no response.
In August 2010, the lawyer sent Nationwide relevant medical records and itemized billing for Tran and requested a tender of policy limits within thirty days of receipt of the letter. There ensued a series of exchanges between Tran's attorney and Nationwide to try to resolve the claim. In September, Nationwide telephoned the lawyer and made a settlement offer and in October, memorialized the offer in writing. In December 2010, Nationwide wrote the lawyer a letter informing him that a new adjuster had been assigned to the case. The lawyer then phoned the new adjuster and said that Oklahoma law required the insurer to pay the undisputed amount of bodily injury claim. The adjuster wrote a letter in late December confirming the insurer's original settlement offer.
In February 2011, Nationwide sent another letter to the attorney to confirm the settlement offer and offered a reevaluation if the insured would send further medical documents. There was no response. The insurer followed up with letters in March and April. The response from Tran was to file a lawsuit against Nationwide for breach of contract and breach of the duty of good faith and fair dealing. Nationwide tendered a check to Tran for its settlement amount and then filed a motion for summary judgment. The district court granted the motion and this appeal followed.
Tran's argument on appeal was two-fold. She claimed that Nationwide breached the implied covenant of good faith and fair dealing because it failed to tender the undisputed amount of her medical expenses until after the lawsuit had been filed. Her second argument was that Nationwide is in breach of contract because it has failed to tender the remaining contractual benefits to which Tran is entitled.
The U.S. Court of Appeals noted that under Oklahoma law the elements of a bad faith claim are: the claimant was entitled to coverage under the policy; the insurer had no reasonable basis for delaying payment; the insurer did not deal fairly and in good faith with the claimant; and, the insurer's violation of its duty of good faith and fair dealing was the direct cause of the claimant's injury. The absence of any one of these elements defeats a bad faith claim.
The court went on to point out that in a bad faith tort action, the critical question is whether the insurer had a good faith belief, at the time its performance was requested, that it had a justifiable reason for withholding or delaying payment under the policy. In this instance, the court said that Tran was arguing that the delay in paying her was unreasonable. However, the facts showed that, within a week of receiving Tran's demand for the policy limits, Nationwide made a settlement offer and that within one week after the initial offer, the insurer made a second offer, and these offers were rejected. Moreover, Nationwide sent Tran's lawyer eight letters confirming its offer and stated that it would be willing to reevaluate the offer if there was additional information. Based on this, the appeals court found that the district court's ruling was proper and the ruling was affirmed.
Editor's Note: The Circuit Court found that the facts in this instance showed quite clearly that no reasonable jury would conclude that Nationwide acted unreasonably in withholding its payment. There was no genuine dispute as to any material fact that the insurer's delay in payment was based on a legitimate dispute as to the value of the claim by the insured. Therefore, since it is not a breach of the duty of good faith for an insurer to resort to a judicial forum to settle legitimate disputes as to the validity or amount of an insurance claim, the court ruled that Nationwide did not act in bad faith.