Porter v. Farmers Ins. Co.

• Decision Date: 27 January 2012
• Docket Number: Case No. 10-CV-116-GKF-PJC
• Parties: MICHAEL PORTER,"Plaintiff, v. FARMERS INSURANCE COMPANY, INC., Defendant.
• Court: U.S. District Court — Northern District of Oklahoma

MICHAEL PORTER,"Plaintiff,

v.FARMERS INSURANCE COMPANY, INC., Defendant.

Case No. 10-CV-116-GKF-PJC

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA

Dated: January 27, 2012

OPINION AND ORDER

Before the court are defendant Farmers Insurance Company, Inc.'s ("Farmers") Motion for Summary Judgment and Alternative Motion for Partial Summary Judgment [Dkt. ##98, 101]. This bad faith breach of insurance contract lawsuit arises from an auto accident on April 22, 2007. Plaintiff Michael Porter suffered head injuries when his Volkswagen ran off New Prue Road, hit a tree and flipped. Two days later, he was found in a stranger's house near the site of the accident. He was taken to St. John Hospital and treated for multiple skull and facial fractures. He had brain trauma, was disoriented, and could not remember details of the accident.

During 2008, Porter apparently made at least two calls to the agent, during which he did not identify himself, but "babbled" about an accident. In early 2009, he called the agency and asked a customer service representative for a copy of his policy, but did not tell the representative he had been in an accident.

In August 2009, he made a claim with Farmers, which he alleged had issued a policy covering the Volkswagen. Initially, Farmers concluded no policy covering the Volkwagen had been issued and the existing policy on plaintiff's truck had a waiver of UM coverage. Hisattorney promptly advised Farmers its agent had given Porter a security verification for the Volkswagen, and Farmers promptly opened an investigation. It determined that there had been a miscommunication between the agent and the insured, with the agent believing Porter had asked him to replace the Volkswagen for the truck on the existing policy, and Porter claiming he had asked the agent to issue a new policy. The agent had never obtained a UM waiver for the Volkswagen.

Initially, plaintiff could not recall details of the accident, and the collision report prepared by the investigating trooper showed no indication another vehicle was involved. However, on November 11, 2009, Porter testified in his examination under oath ("EUO") that a phantom driver had caused the accident. On December 24, 2009, Farmers advised plaintiff's attorney that Farmers would pay Porter $25,000 in UM statutory benefits for the accident. Because of a potential subrogation claim by Medicare and a DHS child support lien, the proceeds were not paid until November 4, 2011.

Plaintiff filed this action on February 24, 2010. He asserts claims for breach of contract and bad faith, and seeks actual and punitive damages. Farmers contends it is entitled to summary judgment on the breach of contract claim because the UM coverage statutory limits have been paid and on the bad faith claim because its handling and payment of the claim were reasonable.

The reasonableness inquiry focuses on the following issues:

1. Whether Farmers' agent, Lehrman Agency, should have turned in a claim when plaintiff contacted it in early 2009.

2. Whether, once an attorney for plaintiff submitted a claim to Farmers, it conducted a reasonable and timely investigation.

3. Once Farmers determined it would pay UM coverage statutory limits of $25,000 to plaintiff, whether it tendered payment in a reasonable and timely manner.

I. Material Facts

1. As of January 2007, Michael Porter was the named insured for a Farmers policy that insured his 1972 Ford truck. [Dkt. #99, Ex. 1, Certified Policy No. 08 16175-84-93].

2. Porter had rejected UM coverage on the policy covering the Ford truck, and the insurance policy on the truck did not provide UM coverage. [Dkt. #99, Ex. 2, UM Rejection].

Porter's Call to Agent Regarding Volkswagen Coverage

3. Porter testified that in late January 2007, he contacted his Farmers agent (Lehrman Agency) and asked to purchase new coverage for a Volkswagen. [Dkt. #99, Ex. 3, Plaintiff's 8/21/09 Statement, p. 4; Ex. 4, Porter Dep., 57:4-58:22]. Porter testified the agent asked him whether he was replacing the truck and he said, "well, no, I'm—still got the truck." [Dkt. #111, Ex. 1, Porter Dep., 58:18-22]. Asked in his deposition about what kind of coverage he sought on the Volkswagen, he testified:

I wanted the vehicle covered. I wanted my children to be safe. So, yes, I wanted everything—I wanted the proper type of insurance. I—I believe they even asked me about the UM coverage and told me that—that I would have to sign off on it if I didn't want it. And I think I refused the fact that, well, no don't—I'm not going to sign off on it because I need property liability for my children, for the well-being of my children.

Because I vaguely—I mean, not be racist, but there's too many Mexicans in this world now, and was back then, and a lot of people that don't have insurance. And I don't want by kids in that position. And anybody that lives that way is ignorant as far as I'm concerned.

* * *

I wouldn't let nobody ride in my car—I wouldn't even let you as an adult ride in my car without uninsured motorist. Nobody rides in my vehicles without uninsured motorist but me.

[Id., 59:18-60:21].

4. Timothy Lehrman, the Agent's customer service representative who handled Porter's insurance coverage request, testified he spoke by telephone with Porter on January 29, 2007 and that Porter said to him, "I would like to make a car change." [Dkt. #99, Ex. 6, Timothy Lehrman Dep., 16: 10-12; 16:23-24]. Lehrman testified that based on Porter's request, he "swapped one car out for another." [Id., 35:14-17]. He described the process:

I have a screen that I go in. I replace the vehicle. I put the new vehicle's policy—or identification number in it. It pulls up the replaced vehicle, the new vehicle, takes out the old vehicle, and then I submit it.

[Id., 35:19-23]. Lehrman testified that "sometime in between the actual change and the submit button, you are able to print a security verification form." [Id., 36:15-17]. When the "submit"

button is hit, Farmers gets the information. [Id., 36:23-37:2]. In a "customer view comment screen," he logged in "[t]hat I made a car change from a '92—or from a pickup to a '92 Volkswagen, faxed verification forms." [Id., 37:4-24]. Lehrman testified that he faxed a security verification form to Porter showing coverage on the Volkswagen. [Id., 31:15-23]. A verification form for the Volkswagen for the period of 1/29/07 to 7/12/07 is attached as Ex. 4 to plaintiff's response brief. [Dkt. #111, Ex. 5]. Lehrman testified he does not know why the change "did not go through all the way" to Farmers. [Dkt. #99, Ex. 6, T. Lehrman Dep., 35:1-6]. Lehrman did not obtain a UM waiver for the 1993 Volkswagen. [Id., 32:2-4]. He testified that when a new policy is written, a UM form has to be signed, but when there is simply a car change on an existing policy, no UM needs to be signed. [Id., 53:12-20].

5. Lehrman Agency office manager and customer service representative Cindy Fortney thinks it is possible that the policy change did not go through because Timothy Lehrman did not hit the "submit" button or that there was some failure on Farmers' side of the transaction. [Dkt. #99, Ex. 7, Cindy Fortney Dep., 7:2-14; 42:12-22].

6. Farmers never issued a policy covering Porter's Volkswagen, nor did it charge Porter a premium for the Volkswagen. [Dkt. #99, Ex. 8, Cheryl Jordan Affid., ¶¶4-5].

Policy Provisions

7. The policy number listed on the security verification for the Volkwagen is: 08 16175-84-93. [Dkt. #111, Ex. 5]. Under "Definitions," the policy states:

Your insured car means:

1. The vehicle described in the Declarations of this policy or any private passenger car or utility car with which you replace it. You must advise us within 30 days of any change of private passenger car or utility car. If your policy term ends more than 30 days after the change, you can advise us anytime before the end of that term.

2. Any additional private passenger car or utility car of which you acquire ownership during the policy period. Provided that:

a. You notify us within 30 days of its acquisition, and

b. As of the date of acquisition, all private passenger and utility cars you own are insured with a member company of the Farmers Insurance Group of Companies.

Ownership shall include the written leasing of a private passenger or utility car for a continuous period of at least six months.

[#99, Ex. 1, Policy at 6]. The policy further states:

PART II - UNINSURED MOTORST

Coverage C - Uninsured Motorist Coverage

(Including Underinsured Motorist Coverage)

We will pay all sums which an insured person is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by the insured person. The bodily injury must be caused by accident and arise out of the ownership, maintenance or use of the uninsured motor vehicle.

Determination as to whether an insured person is legally entitled to recover damages or the amount of damages shall be made by agreement between the insured person and us. IF no agreement is reached, the decision will be made by arbitration.

Additional Definitions Used In This Part Only

As used in this part:

1. Insured person means:

a. You or a family member.

b. Any other person while occupying your insured car.

c. Any person for damages that person is entitled to recover because of bodily injury to you, a family member, or another occupant of your insured car. . . .

3. Uninsured motor vehicle means a motor vehicle which is

a. Not insured by a bodily injury liability bond or policy at the time of the accident.

b. Insured by a bodily injury liability bond or policy at the time of the accident which provides coverage in amounts less than the amount of the claim for damages.

c. A hit-and-run vehicle whose operator or owner has not been identified and which causes bodily injury with or without contact to:

(1) You or any family member.

(2) A vehicle which you or a family member are occupying.

(3) Your insured car.

d. Insured by a bodily injury

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