Opinion:Bd. of Cty. Comm’rs. of Harmon Cty. v. Assoc. of Cty. Comm’rs. of Okla., 2022 OK CIV APP 36
Subject matter:Contract Law
Date Decided:February 16, 2022
Trial Court:District Court of Oklahoma County; Judge Ogden
Route to this Court:The Board of County Commissioners of Harmon County (the Board), a political subdivision of the State, appealed from an order of the district court sustaining the motion for summary judgment of Association of County Commissioners of Oklahoma Self-Insured Group (ACCO-SIG), an association of political subdivisions in the State.
Facts:In 2014 a civil lawsuit against Harmon County led to a jury verdict of $6,500,000 as well as $530,000 in attorney fees, to plaintiff. Harmon County was insured through ACCO-SIG under a policy with a coverage limit of $2,000,000 per occurrence for law enforcement liability. After the verdict, ACCO-SIG completed payment of the full amount of the policy coverage limit.
The Board initiated the present action against ACCO-SIG on the basis of failing to make a reasonable offers of settlement in the 2014 case, for assigning only nuisance value to the claims, for breach of defense and negotiation provisions of the policy, as well as the implied covenant of good faith and fair dealing. Following a hearing, the district court sustained ACCO-SIG’s motion for summary judgment. The trial court held the statute of limitations for the tort claim had run, and only the contract claim was relevant to the case. Thus, the trial court ruled that ACCO-SIG had no obligation to pay contractual damages beyond the policy limits and that the damages alleged were available under a tort cause of action for bad faith breach of contract, but that ACCO-SIG was immune from such an action.
Standard of Review:“Issues in summary process stand before us for de novo review. . . . If no material fact or inference derived from the evidentiary materials stands in dispute and if the law favors the moving party’s claim or liability-defeating defense, summary judgment is [that] party’s due.” Morales v. City of Okla. City ex rel. Okla. City Police Dep’t, 2010 OK 9, ¶ 8. 
Analysis:The Court determined that the dispositive issue was whether the Board could pursue a breach of contract claim against ACCO-SIG for damages in excess of the policy limits. The Court pointed to Oklahoma case law that has highlighted that tort claims for bad faith and contract claims are separate bases for recovery and that only under the tort claim of bad faith can the recovery exceed the policy limits. Christian v. Am. Home Assurance Co., 1977 OK 141, ¶ 6. Relying also on Taylor v. State Farm Fire & Casualty Company, 1999 OK 44, the Court pointed out that when an action is brought for bad faith refusal to settle, the plaintiff may seek damages for the loss payable under the policy together with other items recovery consistent with harm from a bad faith breach. Thus, absent a valid tort claim for bad faith, the ACCO-SIG policy obligations were the standard and ACCO-SIG was not liable for damages in excess of the policy.
The Board also put up a public policy argument that under the trial court’s ruling, ACCO-SIG would be able to handle claims as poorly as it wants and not suffer any consequences. In response, the Court emphasized that the remedy for such immunity were available under bad faith claims. However, the Oklahoma Supreme Court has confirmed that legislative intent of the GTCA was to protect governmental insurance agencies like ACCO-SIG. Therefore, given the nature of the contracting parties in a governmental cooperative insurance plan and their equality and freedom to contract, the concern to protect insured in these circumstances was not compelling.
Vote:3-0. Hixon, J. Barnes, P.J. (author) concur. Fischer, C.J. concurs in the result.
Other: Chief Judge Fischer filed an opinion concurring in the result reached by the majority. The opinion emphasized that the Board’s only source of damages in excess of the policy limit would be to establish a public policy reason to hold ACCO-SIG liable for more than it agreed to cover. ACCO-SIG could not be held to have been negligent while in the ordinary course of business, in that it breached the duty to deal fairly and act in good faith. ACCO-SIG could not be held liable for this, so the Board needed to find another tort theory of liability. Fischer determined that the Board failed to recognize a separate tort theory for, first, because case law states that the insurer is in bad faith when withholding payment for claims and the bad faith claimed here was the bad faith tort in Christian v. American Homes Assurance Co., 1977 OK 141. Second, the Board was wrong in showing tortious good faith and fair dealing were breached because neglect or lack of diligence simply shows breach of the duty to deal fairly and in good faith. Thus, this breach of ordinary good faith and fair dealing bring damages for breach of contract, not independent tort liability. Chief Judge Fischer concluded that the Board failed to provide authority for its claim against ACCO-SIG for damages in excess of the policy limit based on a tort theory separate from bad faith recognized in Christian, from which ACCO-SIG is already protected.