Sexton v. Continental Cas. Co., No. 74651

CourtSupreme Court of Oklahoma
Writing for the CourtSUMMERS; The Honorable Thomas R. Brett; OPALA, C.J., and SIMMS
Citation1991 OK 84,816 P.2d 1135
Docket NumberNo. 74651
Decision Date10 September 1991
PartiesDonna Kay SEXTON and Robert D. Sexton, Wife and Husband, Plaintiffs, v. CONTINENTAL CASUALTY COMPANY, d/b/a CNA, Defendant.

Page 1135

816 P.2d 1135
1991 OK 84
Donna Kay SEXTON and Robert D. Sexton, Wife and Husband, Plaintiffs,
v.
CONTINENTAL CASUALTY COMPANY, d/b/a CNA, Defendant.
No. 74651.
Supreme Court of Oklahoma.
Sept. 10, 1991.

Certified Question From the United States District Court for the Northern District of Oklahoma, Thomas R. Brett.

CERTIFIED QUESTION ANSWERED.

John L. Harlan, Harlan, Harlan, & Branscum, Sapulpa, for plaintiffs.

Joseph A. Sharp, Best, Sharp, Holden, Sheridan & Stritzke, Tulsa, for defendant.

SUMMERS, Justice.

The Honorable Thomas R. Brett, Judge of the U.S. District Court for the Northern District of Oklahoma, Certified to this court the following question:

"Whether an insurer's prior denial of the insured's uninsured motorist coverage claim operates to estop that insurer from later invoking the Porter doctrine's protection against the destruction of its subrogation rights."

We answer the question in the affirmative, and hold that when an insurer completely denies a claim for uninsured motorist (UM) coverage by its insured the insurer is estopped from later invoking the defense of loss of subrogation rights.

Continental Casualty Company issued a Business Auto Policy to Avis Rent-A-Car Systems, Inc. The policy insured Avis' fleet of rental vehicles for personal injury liability with limits of $100,000 per person

Page 1136

and $300,000 per accident for the period of December 31, 1984, to December 31, 1985. Continental offered Avis uninsured motorist coverage and Avis signed a rejection of the coverage. Avis renewed the policy for the period of December 31, 1985, to December 31, 1986.

On January 5, 1986, Cecil Southern rented a car from Avis, with Donna Sexton, Barbara Howell, and another authorized as additional drivers. The rental agreement included liability insurance in the amounts of $100,000 per person and $300,000 per accident. The rental agreement also offered "Personal Accident Insurance" (medical pay) for an additional charge, and that additional insurance was accepted. Neither Continental nor Avis offered uninsured motorist insurance coverage to the authorized drivers.

The next day Barbara Howell was driving the rental car when a collision occurred, resulting in injuries to plaintiff Sexton and another passenger. The parties stipulated that the total damages of all claimants under the Continental policy exceeded the $300,000 liability coverage.

The injured parties agreed as to how to split the $300,000 from Continental. The Sextons made a claim upon Avis for uninsured motorist coverage, which Avis denied on the basis of its previous rejection of UM coverage. The Sextons also made a claim with Continental for UM coverage, which in turn denied the UM claim.

After Avis and Continental denied the Sextons' UM claims the Sexton's received $97,250 from the $300,000 upon signing a release prepared by an attorney retained by Avis. The release discharged driver Howell and Avis "from all actions, causes of action, claims, demands, damages, costs, loss of services, expenses and compensation, on account of, or in any way growing out of any and all known and unknown personal injuries and property damage resulting or to result from the accident." Avis acted on behalf of Continental in distributing the $300,000.

Donna and Robert Sexton also recovered $10,000 from Farmers & Merchants Insurance Company. This amount represented the liability coverage on Howell's personal vehicle. No stipulation or finding has been made as to whether the Sexton's damages exceed $107,250.

Twice before we have noted the existence of the question, but in neither case was it properly before us, and, as is our practice, we declined to address it hypothetically. See Uptegraft v. Home Ins. Co., 662 P.2d 681, 687 (Okl.1983) and Frey v. Independence Fire & Cas. Co., 698 P.2d 17, 20 (Okla.1985). Continental would have us today pass over it a third time, claiming there can be no UM coverage once the insured settled for less than liability policy limits. Resolution of the question Continental raises is not fairly comprised within the question certified for our decision. 1 We thus decline to address it, and proceed to answer the question certified by Judge Brett.

UM COVERAGE OF RENTAL VEHICLES

First we should acknowledge how Southern's car, rented from Avis, comes to be covered by uninsured motorist coverage even though Avis had rejected UM coverage from its insurer. In Moon v. Guarantee Ins. Co., 764 P.2d 1331 (Okla.1988) we held that the rental company's rejection of UM coverage was not the ultimate lessee's rejection, and that absent a written rejection by the consumer/lessee, the coverage statutorily imposed by 36 O.S.1981 § 3636 was in place to accommodate those otherwise insured persons who might be injured by uninsured or underinsured motorists.

DEPRIVATION OF SUBROGATION AS A DEFENSE

In Porter v. MFA Mutual Insurance Company, 643 P.2d 302 (Okla.1982), we

Page 1137

said "as a general rule an insured who deprives insurer, by settlement and release, of its right of subrogation against the wrongdoer thereby provides insurer with a complete defense to an action on the policy." Id. 643 P.2d at 305. Today we conclude that this rule does not apply when an insurer denies coverage prior to the settlement and release. A short review of this area of the law will explain our reasoning.

An act of an insurer may cause it to waive its subrogation rights or estop the insurer from asserting those rights. Ford Motor Credit Company v. State Farm Mutual Automobile Insurance Company, 309 So.2d 914, 917 (La.App. 3rd Cir.1975). See also National Mutual Insurance Company v. Fincher, 428 N.E.2d 1386, 1389-1390 (Ind.App.1981). As explained in Allstate Insurance Company v. Austin, 120 Ga.App. 430, 170 S.E.2d 840 (1969), certiorari dismissed as improvidently granted, 226 Ga. 93, 172 S.E.2d 602 (1970):

Whether the destruction of the right to subrogation constitutes a complete defense to an action on the policy, therefore, depends upon whether there is a prior breach of contract or waiver or estoppel on the part of the insurer which of itself cancels out its right to demand subrogation as a condition of payment. Id. 170 S.E.2d at 843.

Insurers often protect their subrogation rights by including in a policy a "consent to settle" provision requiring the insurer's consent to any settlement between the insured and a third party. 2 Several jurisdictions enforce this provision and require an insured to obtain consent from its insurer prior to settling with an uninsured tortfeasor. For example, in Nationwide Mut. Ins. Co. v. Webb, 291 Md. 721, 436 A.2d 465 (1981), the Maryland court observed:

The standard uninsured motorist endorsement, and the endorsement in the instant case, requires the insurer's consent to any settlement with the uninsured motorist. Unlike "consent to sue" clauses, "consent to settle" clauses are generally upheld, at least to the extent that settlements, consent judgments, releases, covenants not to sue, etc. between insureds and the...

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29 practice notes
  • Taylor v. Government Employees Ins. Co., No. 21227.
    • United States
    • Supreme Court of Hawai'i
    • May 5, 1999
    ...consent is unreasonably withheld" (internal quotation signals and citation omitted) (emphasis added)); Sexton v. Continental Cas. Co., 816 P.2d 1135, 1137 (Okla.1991) (holding that "when an insurer arbitrarily withholds consent, such action constitutes a waiver" (emphasis 978 P.2d 748 In th......
  • VISION ONE LLC. v. PHILADELPHIA Indem. Ins. Co., No. 38411-6-II
    • United States
    • Court of Appeals of Washington
    • October 19, 2010
    ...453, 461-62 (Mo.Ct.App.1990); Schwickert, Inc. v. Winnebago Seniors, Ltd., 680 N.W.2d 79, 84 (Minn.2004); Sexton v. Cont'l Cas. Co., 816 P.2d 1135, 1138 (Okla.1991); Roberts v. Fireman's Ins. Co. of Newark, 376 Pa. 99, 101 A.2d 747, 749-50 (1954); Childs v. Allstate Ins. Co., 237 S.C. 455, ......
  • USF&G v. Federated Rural Elec. Ins. Corp., No. 96,172.
    • United States
    • Supreme Court of Oklahoma
    • October 9, 2001
    ...is primarily answerable, and which in equity and good conscience should have been discharged by the latter. Sexton v. Continental Cas. Co., 1991 OK 84, 816 P.2d 1135, 1138; Thurston National Ins. Co. v. Zurich Ins. Co., 296 F.Supp. 619 (W.D.Okla.); Texas Employers Ins. v. Underwriting Membe......
  • Mariani v. State ex rel. Okla. State Univ., 112,796.
    • United States
    • Oklahoma Supreme Court
    • March 24, 2015
    ...the law has devised for the benefit of one secondarily liable who has paid the debt of another.” Sexton v. Continental Casualty Co., 1991 OK 84 ¶ 18, 816 P.2d 1135. In the instant matter, the Claim filed under the Governmental Torts Claim Act by Salazar was filed in Salazar's name, directly......
  • Request a trial to view additional results
29 cases
  • Taylor v. Government Employees Ins. Co., No. 21227.
    • United States
    • Supreme Court of Hawai'i
    • May 5, 1999
    ...consent is unreasonably withheld" (internal quotation signals and citation omitted) (emphasis added)); Sexton v. Continental Cas. Co., 816 P.2d 1135, 1137 (Okla.1991) (holding that "when an insurer arbitrarily withholds consent, such action constitutes a waiver" (emphasis 978 P.2d 748 In th......
  • VISION ONE LLC. v. PHILADELPHIA Indem. Ins. Co., No. 38411-6-II
    • United States
    • Court of Appeals of Washington
    • October 19, 2010
    ...453, 461-62 (Mo.Ct.App.1990); Schwickert, Inc. v. Winnebago Seniors, Ltd., 680 N.W.2d 79, 84 (Minn.2004); Sexton v. Cont'l Cas. Co., 816 P.2d 1135, 1138 (Okla.1991); Roberts v. Fireman's Ins. Co. of Newark, 376 Pa. 99, 101 A.2d 747, 749-50 (1954); Childs v. Allstate Ins. Co., 237 S.C. 455, ......
  • USF&G v. Federated Rural Elec. Ins. Corp., No. 96,172.
    • United States
    • Supreme Court of Oklahoma
    • October 9, 2001
    ...is primarily answerable, and which in equity and good conscience should have been discharged by the latter. Sexton v. Continental Cas. Co., 1991 OK 84, 816 P.2d 1135, 1138; Thurston National Ins. Co. v. Zurich Ins. Co., 296 F.Supp. 619 (W.D.Okla.); Texas Employers Ins. v. Underwriting Membe......
  • Mariani v. State ex rel. Okla. State Univ., 112,796.
    • United States
    • Oklahoma Supreme Court
    • March 24, 2015
    ...the law has devised for the benefit of one secondarily liable who has paid the debt of another.” Sexton v. Continental Casualty Co., 1991 OK 84 ¶ 18, 816 P.2d 1135. In the instant matter, the Claim filed under the Governmental Torts Claim Act by Salazar was filed in Salazar's name, directly......
  • Request a trial to view additional results

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