An insurer that failed to pay a claim within 60 days cannot be considered the prevailing party even if a claimant is eventually awarded less than the carrier’s settlement offer, a divided Oklahoma Supreme Court ruled.
The 6-3 opinion marks a hard-fought victory for the plaintiff’s bar, which argued insurers were trying to use the state’s attorney fee statute for insurance claims as both a sword and a shield.
The legal dispute between convenience store owner Hamilton and Northfield Insurance Co. initially was decided in favor of the insurer at the trial court and on appeal, but then a 10th Circuit Court of Appeals panel reversed itself and asked Oklahoma’s high court to interpret a statute that had flummoxed all of the federal judges assigned to the case so far.
The Oklahoma Supreme Court’s decision, handed down Tuesday, answered the 10th Circuit’s certified question, which in short was whether the insurer was a prevailing party because the jury’s $10,652 award to Hamilton was less than the $45,000 it had offered to settle the case.
Tim Hummel, an Oklahoma City attorney who filed an amicus brief on Hamilton’s behalf, said Wednesday that it was clear to him all along that Oklahoma statutes Section 3629 would not allow an insurer to recoup its attorney fees when it failed to pay the claim within 60 days.
“The insurance companies are billion-dollar companies and they’ve got smart lawyers,” Hummel said. “They can make it sound like zero is more than $10,000.”
Hummel said the state legislature passed the attorney fee statute to encourage insurers to quickly settle valid claims. If they don’t pay in 60 days, the court can award attorney fees in addition to actual damages.
The statute also allows insurers to recover their attorney fees if the policyholder refuses a reasonable settlement offer and takes the carrier to court. But does the statute that requires the prevailing party to pay apply when the claim isn’t timely paid?
That is the question that launched Billy Hamilton’s claim for repairs to a leaky roof on his convenience store in Council Hills, Okla. on its long voyage through state and federal courts.
Hamilton filed a lawsuit in December 2015 after Northfield refused to pay the claim, alleging bad faith and breach of contract. Northfield removed the case to federal court.
In June 2017, his attorney — Kris Ted Ledford of Owasso, Okla. — demanded the insurer make a serious settlement offer, saying he had invested $12,000 in “hard costs” so far. Northfield offered $45,000. Ledford refused and took the case to trial.
A district court judge granted summary judgment to Northfield on the bad-faith claim and instructed the jury to award no more than the cost of repairing the roof of Hamilton’s store. The jury awarded exactly that: $10,652.
Hamilton asked the court to award attorney fees and costs, but the district court ruled that the insurer, not the policyholder, had prevailed. He appealed to the 10th Circuit. Initially, an appellate panel affirmed the trial court, but reversed itself after Ledford asked for “en banc” reconsideration from all of the circuit judges.
Ledford argued that accepting Northfield’s argument that it could be deemed the prevailing part after failing to pay the claim within 60 days would allow insurers to use Section 3629 as both a shield and a sword.
“As a result, citizens who are financially unable to afford paying attorneys on an hourly rate basis will be deprived of judicial access,” he argued in his petition for en banc reconsideration. “The economics of insurance litigation will prevent attorneys from handling insurance disputes on a contingency fee basis unless they involve six figure actual damages. Insurers will handle the vast majority of insurance claims knowing their decisions will go unchallenged.”
After reconsidering its initial decision, the 10th Circuit panel decided that it could not resolve the case until the Oklahoma Supreme Court answered two questions:
1. In determining which is the prevailing party under 36 O.S. § 3629(B), should a court consider settlement offers made by the insurer outside the sixty- (formerly, ninety-) day window for making such offers pursuant to the statute?
2. In determining which is the prevailing party under 36 O.S. § 3629(B), should a court add to the verdict costs and attorney fees incurred up until the offer of settlement for comparison with a settlement offer that contemplated costs and fees?
The Oklahoma Supreme Court agreed with Ledford’s assertion that the “fee-shifting” requirement of Section 3629 does not contemplate claims that are paid after the 60-day deadline has expired. The statute speaks about settling insurance claims, not lawsuits, the court said.
“Quite plainly, the statute never discusses an offer to settle a lawsuit initiated beyond that period — the whole purpose of the statute is to avoid litigation by creating fee-shifting disincentives if the insured’s claim is not speedily resolved,” Supreme Court Justice Noma Gurich wrote for the majority.
Justices James R. Winchester, John Kane IV and Dustin Rowe dissented, but no dissenting opinion was attached to the ruling.
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