Goodwin v. Old Republic Ins. Co.

• Decision Date: 17 March 1992
• Docket Number: Nos. 66166,66186,s. 66166
• Citation: 1992 OK 34,828 P.2d 431
• Parties: Ronald GOODWIN, Appellant, v. OLD REPUBLIC INSURANCE COMPANY, Appellee. OLD REPUBLIC INSURANCE COMPANY, Appellant, v. Gerard K. DONOVAN, Appellee.
• Court: Oklahoma Supreme Court

Page 431

828 P.2d 431

1992 OK 34

Ronald GOODWIN, Appellant, v. OLD REPUBLIC INSURANCE COMPANY, Appellee.

OLD REPUBLIC INSURANCE COMPANY, Appellant, v. Gerard K. DONOVAN, Appellee.

Nos. 66166, 66186.

Supreme Court of Oklahoma.

March 17, 1992.

Appeal from the District Court of Oklahoma County; William R. Said, judge.

The appellant, Ronald Goodwin (Goodwin/employee), filed an action in district court for intentional infliction of emotional distress and bad faith refusal to pay timely his workers' compensation awards. The district court granted summary judgment in favor of the appellee, Old Republic Insurance Company (Insurance Company/insurer), and on behalf of the appellee, Gerard K. Donovan (Donovan/insurer's attorney/representative). We assume that a workers' compensation insurance company may be subjected to liability in tort for a wilful, malicious and bad faith refusal to pay an employee's workers' compensation award, and we hold that the facts of this case do not support an action for bad faith.

AFFIRMED.

Ben A. Goff, Oklahoma City, for appellant, Ronald Goodwin.

Arlen E. Fielden, Carol Kessinger-Huhn, Oklahoma City, for appellee/cross-appellant, Old Republic Ins. Co.

Charles F. Alden III, Oklahoma City, for appellee, Gerard K. Donovan.

KAUGER, Justice.

The dispositive issue of first impression presented is whether a workers' compensation insurance company may be subjected to liability in tort for a wilful, malicious and bad faith refusal to pay an employee's workers' compensation award. We assume that a workers' compensation insurance company may be subjected to liability in tort for a wilful, malicious and bad faith refusal to pay an employee's workers' compensation award, and we hold that the facts of this case do not support an action for bad faith. ¹

FACTS

On December 15, 1983, the appellant, Ronald Goodwin (Goodwin/employee/claimant), filed a petition in district court alleging that the appellant, Old Republic Insurance Company (Old Republic/insurer), had in bad faith failed to pay a workers' compensation award. Although Goodwin conceded that Old Republic's trial of his claims are not the basis for the bad faith action, he contended that the appeal of the orders, without a likelihood of success, and the delay in payment of the awards once mandate was spread of record, constituted bad faith. Old Republic filed a third party petition naming the appellee, Gerard K. Donovan (Donovan/insurer's attorney/representative), a party to the suit. Donovan had represented Old Republic in the actions before the workers' compensation court.

The award became due and payable on June 3, 1983. ² On June 8 and again on June 20, Goodwin's attorney in the workers' compensation cause requested payment. Donovan did not notify Old Republic that the award was due and payable until June 20, 1983. The next day, eighteen days after Goodwin's award became due and payable, Old Republic issued Goodwin a check for accrued payments and interest. ³

On January 21 and 28, 1986, respectively, Donovan and Old Republic filed motions for summary judgment. They argued that: 1) Goodwin's complaints fell within the exclusive jurisdiction of the Workers' Compensation Court; and 2) that the facts presented would not support a cause of action for bad faith refusal to pay an insurance claim. The trial court sustained both motions on March 18, 1986. Goodwin appealed.

I.

WE ASSUME THAT A WORKERS' COMPENSATION INSURANCE COMPANY MAY BE SUBJECTED TO LIABILITY IN TORT FOR A WILFUL, MALICIOUS AND BAD FAITH REFUSAL TO PAY AN EMPLOYEE'S WORKERS' COMPENSATION AWARD.

Goodwin asserts that he may sue the workers' compensation insurance carrier in district court for bad faith refusal to pay his award. The essence of his assertion is that the recovery of a workers' compensation award from his employer is separate and apart from his right to recover on the insurance contract which the employer has purchased for his benefit--that, in effect, he has two distinct causes of action. Old Republic insists that the Workers' Compensation Act provides the exclusive remedy for all injuries arising from the employment relationship, whether direct or indirect. The exclusivity provision, 85 O.S.Supp.1984 § 12, provides in pertinent part:

"The liability prescribed in Section 11 of this title shall be exclusive and in place of all other liability of the employer ... for such injury, loss of services, or death ..." (Emphasis supplied.)

It should be noted that the exclusivity provision of the statute relates to the liability of the employer--not that of the insurer.

An insurer's implied-in-law duty of good faith and fair dealing extends to all types of insurance companies and insurance policies. ⁴ However, the insurer's duty to deal fairly and act in good faith is limited. It does not extend to every party entitled to payment from insurance proceeds. There must be either a contractual or a statutory relationship between the insurer and the party asserting the bad faith claim before the duty arises. ⁵

A third-party beneficiary contract exists if the proceeds of an insurance policy are payable to third persons. ⁶ Since 1910, 15 O.S.1981 § 29 has held that "A contract made expressly for the benefit of a third person may be enforced by him at any time before the parties thereto rescind it." ⁷ The beneficiary of a workers' compensation insurance contract meets the criteria for assertion of the right, because the Legislature specifically provided in 85 O.S.1981 § 65.3 that workers are third-party beneficiaries of the employer's liability policy with the insurer. ⁸ It provides:

"Every contract of insurance issued by an insurance carrier for the purpose of insuring an employer against liability under the Workers' Compensation Act shall be conclusively presumed to be a contract for the benefit of each and every person upon whom insurance premiums are paid, collected, or whose employment is considered or used in determination of the amount of premium collected upon such policy for the payment of benefits as provided by the Workers' Compensation Act ..."

In Christian v. American Home Assurance Co., 577 P.2d 899, 904 (Okl.1978), we recognized the right of an insured to pursue a bad faith cause of action against its insurer and described the rule for imposition of bad faith liability:

"We approve and adopt the rule that an insurer has an implied duty to deal fairly and act in good faith with its insured and that the violation of this duty gives rise to an action in tort for which consequential and, in a proper case, punitive, damages may be sought. We do not hold that an insurer who resists and litigates a claim made by its insured does so at its peril that if it loses the suit or suffers a judgment against it for a larger amount than it had offered in payment, it will be held to have breached its duty to act fairly and in good faith and thus be liable in tort.

We recognize that there can be disagreements between insurer and insured on a variety of matters such as insurable interest, extent of coverage, cause of loss, amount of loss, or breach of policy conditions. Resort to a judicial forum is not per se bad faith or unfair dealing on the part of the insurer regardless of the outcome of the suit. Rather, tort liability may be imposed only where there is a clear showing that the insurer unreasonably, and in bad faith, withholds payment of the claim of its insured." ⁹

We acknowledged that casualty insurance carriers may be subject to a bad faith action in Christian v. American Home Assurance Co., 577 P.2d 899 (Okla.1978) [disability insurance--36 O.S.1981 § 707(1) ]; McCorkle v. Great Atlantic Ins. Co., 637 P.2d 583 (Okla.1981) [fire insurance--36 O.S.1981 § 707(11) ]; Timmons v. Royal Globe Ins. Co., 653 P.2d 907 [aircraft insurance--36 O.S.1981 § 707(11) ]; Roach v. Atlas Life Ins. Co., 769 P.2d 158 (Okla.1989) [life insurance--36 O.S.1981 § 707(1) ]. ¹⁰

In Roach v. Atlas Life Ins. Co., 769 P.2d 158, 161 (Okla.1989), we found that a beneficiary of a life insurance contract met both the contractual and statutory relationship necessary to maintain a cause of action. The party seeking recovery in Roach was a named beneficiary under the insurance contract and a third party beneficiary entitled to enforce a contract made for his/her benefit pursuant to 15 O.S.1981 § 29. We affirmed Christian's recognition that an insurer's implied-in-law duty of good faith and fair dealing extends to all types of insurance companies and insurance policies, and we held that the third party beneficiary could pursue a bad faith claim.

Workers' compensation insurance falls within 36 O.S.1981 § 707's definition of casualty insurance which provides that casualty insurance includes workers' compensation and employers' liability insurance. Workers' compensation insurers are not exempted from provisions of the Oklahoma Insurance Code (Insurance Code), 36 O.S.Supp.1983 § 101 et seq. ¹¹ The Unfair Claims Settlement Practices Act (Claims Practices Act), 36 O.S.Supp.1985 § 1220 provides in § 1222 that no property or casualty insurer shall engage in unfair claim settlement practices, and it defines an unfair claim settlement practice as:

"... Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims submitted in which liability has become reasonably clear...." ¹²

Section 1227 of the Claims Practices Act provides that its provisions:

"... shall apply specifically to all claims arising under insurance policies providing liability coverage."

By definition intentional, wilful acts are not within the purview of the Workers' Compensation Act. ¹³ Title 85 O.S.Supp.1988 § 3(7) defines the injuries covered as accidental injuries arising out of and in the course of employment. Neither § 12 nor § 3(7) precludes an intentional tort claim. Goodwin is not attempting to recover for his physical impairment; he is not seeking to recover from his employer; but rather, he seeks...