Barnes v. Oklahoma Farm Bureau Mut. Ins. Co.

• Decision Date: 26 October 1993
• Docket Number: No. 80189,No. 1,80189,1
• Citation: 1993 OK CIV APP 168,869 P.2d 852
• Parties: 1993 OK CIV APP 168 Julie BARNES and Michael Barnes, By and Through his mother and next friend Julie Barnes, Appellees, v. OKLAHOMA FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant, Shun Cory Donaldson; and State Farm Mutual Insurance Company, Defendants. Court of Appeals of Oklahoma, Division
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

Page 852

869 P.2d 852

1993 OK CIV APP 168

Julie BARNES and Michael Barnes, By and Through his mother and next friend Julie Barnes, Appellees, v. OKLAHOMA FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant,

Shun Cory Donaldson; and State Farm Mutual Insurance

Company, Defendants.

No. 80189.

Released for Publication by Order of the Court

of Appeals of Oklahoma, Division No. 1.

Court of Appeals of Oklahoma,

Division No. 1.

Oct. 26, 1993.

Rehearing Denied Nov. 30, 1993.

Certiorari Denied Feb. 15, 1994.

Appeal from the District Court of Oklahoma County; James L. Gullett, Judge.

AFFIRMED.

Robert B. Mills, Kent R. McGuire, Oklahoma City, for appellant.

Jack S. Dawson, James A. Scimeca, Kelly A. George, Oklahoma City, for appellees.

MEMORANDUM OPINION

HANSEN, Chief Judge:

Appellant, Oklahoma Farm Bureau Mutual Insurance Company, (Farm Bureau), seeks review of the trial court's order denying its Motion to Reconsider. The trial court granted Appellees' motion for partial summary judgment against Farm Bureau in the amount of $15,000.00, the amount of uninsured motorist coverage provided in an insurance policy between Appellee Julie Barnes, (Barnes), and Farm Bureau. The trial court further found Farm Bureau, by its actions, waived any subrogation rights it may have had pursuant to 36 O.S. 1991, § 3636(E) and that Barnes is free to accept Defendant Donaldson's settlement offer of $10,000.00. Farm Bureau's motion for summary judgment on Barnes' claim Farm Bureau breached the insurance contract in bad faith, has been stayed pending resolution of this appeal. ¹

On January 29, 1991, Appellee Barnes and her son were injured in a head-on automobile accident. ² Defendant Donaldson was the driver of the other car which was driving left of the center line. Donaldson is covered by a policy of automobile liability insurance with per person limits of $10,000.00. Barnes is covered by two separate policies of insurance which provide her with underinsured motorist (UIM) coverage. The primary policy is with Farm Bureau for $15,000.00 and the second policy is with State Farm, which provides Barnes $25,000.00 in UIM benefits. Donaldson's liability carrier offered to settle with Barnes for its $10,000.00 policy limits. State Farm paid its $25,000.00 policy limits to Barnes and was dismissed.

The uncontroverted facts show Barnes' claim exceeds $50,000.00, which is the amount of all available insurance. By letter dated November 19, 1991, Farm Bureau advised Barnes it would tender the $15,000.00 UIM benefits for the injuries she received in the accident, and retained its right of subrogation against the tortfeasor, Donaldson. The letter further provided:

Should you desire to provide us with the proper statutory notice requirements as set forth in 36 O.S. § 3636(E), Farm Bureau stands willing to substitute its payment to your client in place of the alleged tortfeasor's liability limits. If you elect this procedure, Farm Bureau shall be entitled to {Barnes'} right of recovery to the extent of such payment from the alleged tortfeasor, Donaldson, all as set forth in 36 O.S. § 3636(E)(2).

By letter dated December 11, 1991, Barnes advised Farm Bureau, pursuant to 36 O.S. 1990 Supp., § 3636(E), that Donaldson's insurance carrier was ready to pay its $10,000.00 policy limits to Barnes if it could obtain subrogation waivers from Farm Bureau. In response, on February 10, 1992, Farm Bureau sent a $10,000.00 draft and a "Receipt and Partial Release Under Uninsured Motorist Coverage Subrogation Agreement" to Barnes. The letter accompanying these items stated:

This $10,000.00 payment is being made in substitution of Shun Donaldson's liability limits of $10,000.00. Oklahoma Farm Bureau does retain its subrogation right against the alleged tortfeasor, Donaldson, and is entitled to any right of recovery against the defendant Donaldson to the extent of our substituted payment.

The "Receipt and Partial Release" which Farm Bureau wanted Barnes to execute provides:

1. In consideration of the payment of $10,000.00 by Oklahoma Farm Bureau Mutual Insurance Company, the receipt of which is hereby acknowledged, the undersigned hereby partially releases Oklahoma Farm Bureau Mutual Insurance Company to the extent of this $10,000 payment from its under-insured motorist obligations under the coverage designated above of Policy No. 0041636-101, issued to Allen D. and/or Julie Lynn Barnes by Oklahoma Farm Bureau Mutual Insurance Company, and arising out of bodily injuries sustained by Julie Barnes due to an accident on or about the 29th day of January, 1991.

(Underline added).

By letter dated February 13, 1992, Barnes responded to this purported "substitution", maintaining the submitted Release was inaccurate in that it provides it was partial payment of Farm Bureau's underinsured motorist obligation. Barnes submitted an alternative Release and Subrogation Agreement without the language above-underlined. Additionally, Barnes renewed its demand for the entire $15,000.00 in underinsured motorist benefits. On February 24, 1992, Barnes returned Farm Bureau's "substituted" $10,000.00 draft because it insisted she sign the release with the language which stated the $10,000.00 is a partial payment of the $15,000.00 underinsured benefits. Barnes again demanded $15,000.00 in underinsurance benefits and again demanded Farm Bureau either waive subrogation and allow her to take the $10,000.00 offered by the liability carrier or substitute its $10,000 payment for the liability coverage.

On appeal, Farm Bureau does not contest the trial court's finding that it owes $15,000.00 in UIM coverage to Barnes. The sole issue is whether the trial court erroneously determined Farm Bureau waived any subrogation rights it may have had pursuant to 36 O.S. 1991, § 3636(E).

Section 3636 of Title 36 of the Oklahoma Statutes requires that uninsured motorist coverage be offered in every policy insuring a vehicle unless it is waived by the insured. In Subsection C of that Section, "uninsured motor vehicle" includes underinsured motor vehicles, that is, where the liability limits are less than the amount of the claim of the person or persons making such claim, regardless of the amount of coverage of either of the parties in relation to each other. In 1989, the Oklahoma Legislature amended Section 36 by specifying procedures regarding the preservation of insurers' subrogation rights. ³ Subsection E, 1989 amendments underlined, provides:

E. In the event of payment to any person under the coverage required by this section and subject to the terms and conditions of such coverage, the insurer making such payment shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury for which such payment is made, including the proceeds recoverable from the assets of the insolvent insurer. Provided, however, with respect to payments made by reason of the coverage described in subsection C of this section, the insurer making such payment shall not be entitled to any right of recovery against such tort-feasor in excess of the proceeds recovered from the assets of the insolvent insurer of said tortfeasor. Provided further, that any payment made by the insured tort-feasor shall not reduce or be a credit against the total liability limits as provided in the insured's own uninsured motorist coverage. Provided further, that if a tentative agreement to settle for liability limits has been reached with an insured tort-feasor, written notice shall be given by certified mail to the uninsured motorist coverage insurer by its...