Bd. of Cnty. Comm'rs of Harmon Cnty. v. Ass'n of Cnty. Comm'rs of Okla. Self-Insured Grp. (ACCO-SIG)

• Decision Date: 16 February 2022
• Docket Number: Case No. 119,397
• Citation: 521 P.3d 142
• Parties: The BOARD OF COUNTY COMMISSIONERS OF HARMON COUNTY, a Political Subdivision of the State of Oklahoma, Plaintiff/Appellant, v. ASSOCIATION OF COUNTY COMMISSIONERS OF OKLAHOMA SELF-INSURED GROUP (ACCO-SIG), an Association of Political Subdivisions of the State of Oklahoma, Defendant/Appellee.
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

521 P.3d 142

The BOARD OF COUNTY COMMISSIONERS OF HARMON COUNTY, a Political Subdivision of the State of Oklahoma, Plaintiff/Appellant,

v.ASSOCIATION OF COUNTY COMMISSIONERS OF OKLAHOMA SELF-INSURED GROUP (ACCO-SIG), an Association of Political Subdivisions of the State of Oklahoma, Defendant/Appellee.

Case No. 119,397

Court of Civil Appeals of Oklahoma, Division No. 4.

Filed February 16, 2022

Mandate Issued: November 2, 2022

Julia C. Rieman, GUNGOLL, JACKSON, BOX & DEVOLL, P.C., Enid, Oklahoma, For Plaintiff/Appellant.

J. Mark McAlester, FENTON, FENTON, SMITH, RENEAU & MOON, Oklahoma City, Oklahoma, For Defendant/Appellee.

OPINION BY DEBORAH B. BARNES, PRESIDING JUDGE:

¶1 The Board of County Commissioners of Harmon County, a political subdivision of the State of Oklahoma, (the Board) appeals from an order of the district court sustaining the motion for summary judgment of Association of County Commissioners of Oklahoma Self-Insured Group, an association of political subdivisions of the State of Oklahoma (ACCO-SIG). We affirm.

BACKGROUND

¶2 In 2014, Tiffany Glover filed a civil lawsuit in federal court alleging she was sexually assaulted while in the custody of the Harmon County jail. Ms. Glover named several defendants in the 2014 case, including the Sheriff of Harmon County. She alleged the Sheriff failed in his duty to protect her at the jail. A jury ultimately returned a verdict in Ms. Glover's favor in the amount of $6,500,000. In addition, Ms. Glover was awarded attorney fees and costs totaling approximately $530,000.

¶3 At all times relevant to the 2014 case, 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 jury verdict in the 2014 case, ACCO-SIG completed payment of the full amount of the coverage limit.¹

¶4 The Board initiated the present action against ACCO-SIG² on the basis that ACCO-SIG, in failing to make any reasonable offers of settlement to Ms. Glover in the 2014 case, and in assigning only nuisance value to Ms. Glover's claims, breached certain defense and negotiation provisions of the policy, as well as the implied covenant of good faith and fair dealing. The Board alleged, for example, that Ms. Glover offered to settle her claim several weeks before trial for $750,000, but that ACCO-SIG counter-offered to settle for only $25,000. The Board further alleged that Ms. Glover subsequently offered to settle her claim for $735,000, and that this offer was also rejected, with no counter-offer being made by ACCO-SIG. The Board alleged

ACCO-SIG's breach of its contractual obligations under the [policy], in failing to settle the Lawsuit, despite requiring that [the Board] cede to ACCO-SIG total control and authority over the defense of the Lawsuit and all settlement negotiations with Glover, has caused Harmon County and its citizens to suffer damages in excess of $5,000,000.00 plus interest[.]

The Board alleged ACCO-SIG failed to perform with ordinary skill and competence the services it contracted to provide.

¶5 In February 2020, ACCO-SIG filed a motion for summary judgment. ACCO-SIG asserts it "is immune from liability under the Governmental Tort Claims Act (GTCA) for the tort of bad faith and [the Board] cannot recover damages under a breach of contract theory beyond the limits of liability in the insuring agreement[.]" The parties agree ACCO-SIG "is an agency of State of Oklahoma political subdivisions created ... to pool self-insured reserves, claims and losses of its member counties and provide property and liability protection plans to participating counties in Oklahoma," and ACCO-SIG points out in its motion that in Board of County Commissioners of Delaware County v. Association of County Commissioners of Oklahoma Self-Insurance Group , 2014 OK 87, 339 P.3d 866, the Oklahoma Supreme Court concluded ACCO-SIG is protected as a governmental entity from tort liability. Furthermore, the parties agree the insurance policy in question provides that once the total limit of liability is exhausted, ACCO-SIG's "obligations under [the policy] with respect to any claim, including the duty to defend, shall terminate immediately."³ ACCO-SIG asserts that because it is undisputed it has paid the $2,000,000 contractual limit of liability, and because ACCO-SIG is immune from tort liability, including for bad faith conduct, it is entitled to summary judgment as a matter of law.

¶6 Following a hearing, the district court, in an Order filed in February 2021, sustained ACCO-SIG's motion for summary judgment. The court noted that "[t]his action is one for breach of contract only, [and] the tort claim of bad faith breach of contract has not been pled by [the Board]." The court noted that, moreover, "[t]he statute of limitations for pleading a tort claim has run." The court stated it was thus "presented with the question of law of whether, in Oklahoma, there can be a breach of contract claim against ACCO-SIG for contractual damages that exceed the policy limits of a liability protection agreement issued by ACCO-SIG to [the Board]." The court stated that, in general, "[c]onsequential damages are recognized under the statutes of Oklahoma with regard to remedies for breach of contract," but concluded that "ACCO-SIG has no duty to pay contractual damages beyond the policy limits[.]" The court reasoned that such damages may be available under "the tort cause of action for bad faith breach of contract," but that "ACCO-SIG is immune from suit for the tort cause of action for bad faith breach of contract."

¶7 From the district court's Order sustaining ACCO-SIG's motion for summary judgment, the Board appeals.

STANDARD OF REVIEW

¶8 "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, 230 P.3d 869 (footnote omitted). See also Finnell v. Seismic , 2003 OK 35, ¶ 7, 67 P.3d 339 (Issues of law are reviewed de novo and "[t]he [appellate] court has plenary, independent, and non-deferential authority to reexamine a trial court's legal rulings." (footnote omitted)); Carmichael v. Beller , 1996 OK 48, ¶ 2, 914 P.2d 1051 (In summary process, "the ultimate decision turns on purely legal determinations, i.e. whether one party is entitled to judgment as a matter of law because there are no material disputed factual questions. Therefore, ... the appellate standard of review of a trial court's grant of summary judgment is de novo." (citation omitted)).

ANALYSIS

¶9 We agree with the trial court that the dispositive issue is whether the Board can pursue a breach of contract claim against ACCO-SIG for contractual damages in excess of the policy limits. As noted by the trial court, and as the Board acknowledges in its response to the motion for summary judgment, the Board has not attempted to assert a tort claim and, instead, seeks to recover damages in excess of the policy limits based solely on a claim of breach of contract.⁴ Regardless, the Oklahoma Supreme Court, as indicated above, has concluded ACCO-SIG is protected as a governmental entity from tort liability. Bd. of Cnty. Comm'rs of Del. Cnty. v. Ass'n of Cnty. Comm'rs of Okla. Self-Ins. Grp. , 2014 OK 87, 339 P.3d 866.

¶10 The inability of the Board to assert a tort claim of bad faith against ACCO-SIG is not without significance in terms of potential recovery. Our review of Oklahoma jurisprudence, as well as of the policy in question, leads to the conclusion that the Board's recovery under a breach of contract claim cannot exceed the policy limits. "Under Oklahoma law, a tort claim for bad faith and a claim for breach of contract are separate and independent bases for recovery," Ball v. Wilshire Ins. Co. , 2009 OK 38, ¶ 21 n.40, 221 P.3d 717 (citation omitted), and "it is well-established that a bad-faith claim presents a tort" rather than a breach of contract claim, Martin v. Gray , 2016 OK 114, ¶ 9, 385 P.3d 64. Moreover, the Oklahoma Supreme Court has determined that only to the extent the "[b]reach of the duty sounds in tort" may an insured recover "consequential and, in a proper case, punitive damages" beyond the policy limits. Christian v. Am. Home Assurance Co. , 1977 OK 141, ¶ 6, 577 P.2d 899. "The essence of the cause of action" allowing recovery of such damages "is bad faith." Id. ¶¶ 6 & 25.

¶11 In Carney v. State Farm Mutual Automobile Insurance Company , 1994 OK 72, 877 P.2d 1113, the Oklahoma Supreme Court again stated it "has imposed liability on insurers in excess of policy limits," but only "[u]nder certain conditions" involving bad faith conduct. Id. ¶ 4. The Carney Court set forth, as one example, a breach of "the duty to act in good faith toward the insured by accepting reasonable settlements," stating: "For the breach of this duty, this Court imposed liability in excess of policy limits." Id. (citing, inter alia, Nat'l Mut. Cas. Co. v. Britt , 1948 OK 256, 203 Okla. 175, 200 P.2d 407 (involving issue of whether "the [insurer] was guilty of bad faith")).

¶12 The Carney Court stated that because, "in the case at bar, there is no evidence before this Court that [the insurer's] conduct in litigating the [insured's] claim constituted bad faith," 1994 OK 72, ¶ 6, 877 P.2d 1113, "uninsured motorist carriers are liable for prejudgment interest on damages pursuant to 12 O.S. 1991 § 727(A)(2), not exceeding the policy limits ," 1994 OK 72, ¶ 20, 877 P.2d 1113 (emphasis added). Although the Carney Court was addressing the issue of whether prejudgment interest could properly exceed the policy limits, the Court, in reaching its determination, reasoned as follows: "the carrier's liability is limited by the contract, and we find no public policy reason to extend that liability beyond the terms of the...