Morgan v. State Farm Mut. Auto. Ins. Co.

• Citation: 488 P.3d 743
• Decision Date: 25 May 2021
• Docket Number: No. 118,881,118,881
• Court: Oklahoma Supreme Court
• Parties: George Andrew MORGAN, Plaintiff/Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant/Appellee.

488 P.3d 743

George Andrew MORGAN, Plaintiff/Appellant,

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant/Appellee.

No. 118,881

Supreme Court of Oklahoma.

FILED MAY 25, 2021

Mark E. Bialick, R. Ryan Deligans, Durbin, Larimore & Bialick, Oklahoma City, Oklahoma, for Plaintiff/Appellant.

Galen L. Brittingham, John S. Gladd, Atkinson, Haskins, Nellis, Brittingham, Gladd & Fiasco, Tulsa, Oklahoma, for Defendant/Appellee.

KANE, V.C.J.:

¶1 The United States Court of Appeals for the Tenth Circuit certified to this Court two questions of law:

1. Where a plaintiff is injured by entry of an adverse judgment that remains unstayed, is the injury sufficiently certain to support accrual of a tort cause of action based on that injury under 12 O.S. § 95 before all appeals of the adverse judgment are exhausted?

2. Does an action for breach of an insurance contract accrue at the moment of breach where a plaintiff is not injured until a later date?

¶2 We answer the first question with a "no." When the injury alleged in a tort cause of action is an adverse judgment, the claim accrues when the appeal is finally determined in the underlying case. The entry of a judgment, which remains subject to appeal, is not sufficiently certain to support accrual of a cause of action for breach of the implied duty of good faith and fair dealing.

¶3 We answer the second question with a "yes." An action for breach of contract accrues when the contract is breached, not when damages result. The discovery rule does not apply to an action for breach of contract. The claim accrues when the contract is breached, regardless of whether the plaintiff knows, or in the exercise of reasonable diligence, should have known of the breach. However, the limitations period may be tolled if the defendant fraudulently concealed the cause of action.

I. CERTIFIED FACTS AND PROCEDURAL HISTORY

¶4 The federal court's certification order sets out the facts of this case. When answering a certified question, this Court will not presume facts outside those presented in the certification order. See Hamilton v. Northfield Ins. Co. , 2020 OK 28, ¶ 4, 473 P.3d 22, 25. Our examination is confined to resolving legal issues. Id.

¶5 Plaintiff/Appellant George Andrew Morgan was driving drunk and hit Jesse Atkins with his truck at more than 40 miles per hour. Atkins was severely injured. Atkins's resulting medical bills totaled more than $2 million.

¶6 Defendant/Appellee State Farm Mutual Automobile Insurance Company provided liability insurance to Morgan at the time of the accident under a policy with a $100,000 limit. State Farm negotiated and executed a settlement with Atkins in April 2010 whereby State Farm paid its policy limit of $100,000 to Atkins and Atkins released his claims against Morgan.

¶7 During the same timeframe, Atkins pursued a workers' compensation claim in Kansas because he had been traveling for work when he was injured. The workers' compensation court issued a preliminary order for compensation, and the workers' compensation insurer began making payments to Atkins.

¶8 The workers' compensation insurer's subrogee, New York Marine and General Insurance Company (NYM), then sued Morgan in Oklahoma state court in June 2011 for reimbursement of the amounts paid to Atkins. NYM served that lawsuit on Morgan in January 2012. Morgan retained personal counsel to represent him in the action, but State Farm also provided counsel to Morgan and mounted a vigorous defense. Morgan and State Farm claimed that by releasing Morgan, Atkins severed any reimbursement claim NYM might have against Morgan due to NYM's status as subrogee. The trial court denied State Farm's motion for summary judgment on this basis on November 22, 2013. Then on February 27, 2014, a jury returned a verdict in favor of NYM in the amount of $844,865.89, finding that State Farm knew about NYM's potential claim but failed to apprise NYM of its pending settlement with Atkins. The judgment was entered against Morgan on April 8, 2014. The Oklahoma Court of Civil Appeals affirmed the judgment on June 10, 2016, and this Court denied certiorari on February 21, 2017. Mandate issued on March 23, 2017.

¶9 Morgan then brought this lawsuit against State Farm on May 23, 2017. He alleged State Farm's failure to secure NYM's release as part of its settlement with Atkins amounted to (1) breach of the implied duty of good faith and fair dealing; and (2) breach of contract. The United States District Court for the Western District of Oklahoma found that Morgan's claims accrued in 2010, when State Farm negotiated the original settlement with Atkins and, therefore, concluded the applicable two and five year statutes of limitations for the tort and contract claims, respectively, barred Morgan's suit.¹ Morgan appealed the summary judgment to the Tenth Circuit Court of Appeals. The Tenth Circuit certified two questions to this Court.

¶10 In the certification order, the Tenth Circuit notes the record in this appeal does not contain evidence supporting a finding that Morgan suffered an injury resulting from State Farm's actions before NYM secured a judgment against him in April 2014.

II. REQUIREMENTS FOR ANSWERING CERTIFIED QUESTIONS

¶11 This Court has the discretionary power to answer certified questions of law if the certified questions are presented in accordance with the provisions of the Revised Uniform Certification of Questions of Law Act, 20 O.S.2011 §§ 1601 - 1611. When assessing whether we should answer a federal certified question of law, we address both factors mentioned in § 1602: (1) would the answer be dispositive of an issue in pending litigation in the certifying court; and (2) is there established and controlling law on the subject matter? See Siloam Springs Hotel, LLC v. Century Sur. Co. , 2017 OK 14, ¶ 14, 392 P.3d 262, 266. In this case, answers to the certified questions would be determinative of issues in the underlying suit and both questions present issues of first impression for which there is no controlling Oklahoma precedent.

III. FIRST CERTIFIED QUESTION

Where a plaintiff is injured by entry of an adverse judgment that remains unstayed, is the injury sufficiently certain to support accrual of a tort cause of action based on that injury under 12 O.S. § 95 before all appeals of the adverse judgment are exhausted?

¶12 Morgan's tort cause of action against State Farm is for breach of the implied duty of good faith and fair dealing in connection with the handling of a third party claim. Morgan alleges that State Farm acted in bad faith by failing to obtain a release of the workers' compensation subrogation claim as part of the settlement with Atkins, which resulted in an adverse or excess judgment against him. The question of law presented is: when does a bad faith tort action based on an adverse or excess judgment accrue?

¶13 A bad faith tort action must be brought within two years "after the cause of action shall have accrued." 12 O.S.2011 § 95(A)(1) ; see Lewis v. Farmers Ins. Co. , 1983 OK 100, ¶ 7, 681 P.2d 67, 70. "The elements of a cause of action arise, that is, the cause of action accrues when a litigant first could have maintained his action to a successful conclusion." MBA Commercial Constr., Inc. v. Roy J. Hannaford Co. , 1991 OK 87, ¶ 13, 818 P.2d 469, 473. The essential elements for breach of the duty of good faith and fair dealing are: (1) the insured was covered under the insurance policy issued by the insurer and that the insurer was required to take reasonable actions in handling the claim; (2) the actions of the insurer were unreasonable under the circumstances; (3) the insurer failed to deal fairly and act in good faith toward the insured in their handling of the claim; and (4) the breach or violation of the duty of good faith and fair dealing was the direct cause of any damages sustained by the insured. See Badillo v. Mid Century Ins. Co. , 2005 OK 48, ¶ 25, 121 P.3d 1080, 1093. A tort is not complete until there is an injury. "In order for a litigant to maintain a negligence action to a successful conclusion, the litigant must allege injury or damages that are certain and not speculative." MBA , 1991 OK 87, ¶ 15, 818 P.2d at 474 (negligence in preparation of architectural plans); accord Stephens v. Gen. Motors Corp. , 1995 OK 114, ¶ 12, 905 P.2d 797, 800 (legal malpractice).

¶14 We look to other cases where the injury alleged is an adverse judgment. In Stephens v. General Motors Corp. , 1995 OK 114, 905 P.2d 797, we determined a legal malpractice action does not accrue until the underlying adverse judgment against the client is finally determined on appeal. See id. ¶ 9, at 799. In Stephens , the client claimed counsel allowed the limitations period to run in her breach of warranty case and, as a result, the trial court entered summary judgment against her. Id. ¶¶ 2, 4, at 798. Summary judgment was affirmed by the Court of Civil Appeals on July 9, 1993, and the client's petition for rehearing was denied on November 22, 1993. Id. ¶ 2, at 798.

¶15 The client then brought a legal malpractice action against counsel on February 3, 1994. Id. ¶ 4, at 798. Counsel filed a motion to dismiss based on the two-year statute of limitations in 12 O.S.Supp.1993 § 95. Id. Counsel argued the client knew of her possible malpractice claim no later than December 19, 1990, when she received independent advice that she may have a malpractice claim. Id. ¶¶ 3-4, at 798. The client's position was her cause of action did not accrue until the appeal was decided. Id. ¶ 5, at 798. The trial court granted counsel's motion to dismiss. Id. On appeal, this Court found that "[p]rior to the affirmation of the summary judgment of the underlying case, [the client's] cause of action for malpractice had not accrued" and reversed the dismissal. Id. ¶ 12, at 800. We explained:

The underlying lawsuit in the case at bar, that being the lawsuit [the client] filed against the manufacturer of the mobile home, did not become final until

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