Bryant v. Sagamore Ins. Co.

KELLY BRYANT; HOLLIE BRYANT, Plaintiffs - Appellants, v. SAGAMORE INSURANCE COMPANY, Defendant - Appellee.

No. 14-7039

UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

January 6, 2015

(D.C. No. 6:13-CV-00240-RAW)

(E.D. Okla.)

ORDER AND JUDGMENT^*

Before LUCERO, GORSUCH, and MORITZ, Circuit Judges.

Plaintiffs Kelly Bryant and Hollie Bryant appeal the district court's grant of summary judgment in favor of Sagamore Insurance Company (Sagamore) on their breach of contract and bad faith claims. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

BACKGROUND

The parties are familiar with the facts as fully outlined in the district court's orders. We restate them briefly here only as they are relevant to our decision.

Kelly Bryant ("Kelly") insured his automobiles with Sagamore under a policy containing a named-driver exclusion (NDE) specifically excluding coverage for his minor daughter, Hollie Bryant ("Hollie"). Hollie was involved in an accident while driving one of Kelly's insured vehicles . The following day, Kelly contacted Sagamore through his insurance broker. Sagamore sent Kelly a reservation-of-rights letter and attempted numerous times to contact him. When Kelly failed to respond, Sagamore sent him a second reservation-of-rights letter noting his failure to respond, requesting he contact Sagamore immediately, and warning him Sagamore could decline coverage under the terms of the policy based on his failure to cooperate in their investigation.

When Kelly again failed to respond, Sagamore sent a third letter, noting his continued failure to cooperate and requesting he and Hollie appear for an examination under oath. After Kelly and Hollie (collectively, "the Bryants") failed to appear for their scheduled examinations, Sagamore declined coverage, citing both the NDE and Kelly's failure to cooperate in investigation of the claim.

Sometime thereafter, Cuba Lawrence, the driver of the vehicle involved in the accident with Hollie, filed an action in state court and obtained a default judgmentagainst Hollie for $694,726.23. Kelly neither notified Sagamore of Lawrence's lawsuit nor requested Sagamore defend Hollie.

As it turned out, Hollie was insured under a policy issued to her stepfather, and that insurer paid Lawrence's property damage claim and the bodily injury policy limits of $100,000. In exchange, Lawrence released Hollie from all liability including the default judgment. Despite this release, it is undisputed the Bryants never sought to vacate or release the default judgment against Hollie.

Lawrence eventually sought coverage from Sagamore which responded that it had already declined coverage based on the NDE provision and Kelly's non-cooperation. The Bryants then filed this breach of contract and bad faith action against Sagamore, asserting Sagamore lacked any reasonable basis to deny the claim. While this action was pending, Sagamore paid Lawrence its full, $50,000 bodily injury limit in exchange for Lawrence's release of all claims against Kelly and Hollie.

Both parties moved for summary judgment. Relying on Mulford v. Neal, 264 P.3d 1173, 1182-83 (Okla. 2011) (per curiam), the Bryants argued Sagamore knew when it denied coverage that NDE provisions excluding minors from coverage in their parents' policies violated state public policy and were unenforceable, at least when both parents' policies excluded the minor.

But Sagamore argued Mulford was factually inapplicable because Hollie was not excluded under both parents' policies, as in Mulford. Further, Sagamore pointedout that while the Oklahoma Supreme Court issued Mulford prior to Sagamore's issuance of insurance policies to Kelly, Mulford was not published until after Sagamore denied coverage. See Porter v. Okla. Farm Bureau Mut. Ins. Co., 330 P.3d 511, 518 (Okla. 2014) (holding insurer did not act in bad faith by refusing to follow court opinion before it was ordered published; unpublished opinion lacks precedential effect unless and until it is released for publication). Sagamore also argued it denied coverage for the additional and independent reason that Kelly failed to cooperate with its investigation, as required by the policy.

In two separate orders, the district court granted Sagamore's motion for summary judgment and denied the Bryants' motion. It concluded Sagamore did not breach the contract or act in bad faith in denying the Bryants' claim because Mulford lacked precedential effect at the time Sagamore denied coverage and because Sagamore alternatively and reasonably denied the claim based on Kelly's failure to cooperate with its investigation.

The Bryants appeal the district court's grant of summary judgment to Sagamore, but they have not appealed the district court's denial of their own summary judgment motion.

DISCUSSION

In this diversity action, our review is de novo and we apply the same standard as the district court. Fowler v. United States, 647 F.3d 1232, 1237 (10th Cir. 2011). Summary judgment is proper when the moving party shows "there is no genuine dispute as to any material fact." Fed. R. Civ. P. 56(a). In deciding whether the moving party is entitled to judgment as a matter of law, we view the evidence and draw reasonable inferences in the light most favorable to the nonmoving party. Fowler, 647 F.3d at 1237.

To prove a claim for breach of contract under Oklahoma law, the Bryants must prove "1) formation of a contract; 2) breach of the contract; and 3) damages as a direct result of the breach." Digital Design Grp., Inc. v. Info. Builders, Inc., 24 P.3d 834, 843 (Okla. 2001). Under Oklahoma law, insurance contracts are interpreted "in accordance with principles applicable to all contracts." Mansur v. PFL Life Ins. Co., 589 F.3d 1315, 1319 (10th Cir. 2009). They are "construed according to the plain meaning of its language," and, if unambiguous, the court "interprets the contract as a matter of law." Id.

To prove a bad faith claim under Oklahoma law, the Bryants must prove: 1) they were entitled to coverage under the policy; 2) Sagamore had no reasonable basis to deny coverage or delay payment; 3) Sagamore violated its duty of good faith and fair dealing; and 4) the violation directly caused injury. Ball v. Wilshire Ins. Co., 221 P.3d 717, 724 (Okla. 2009). The party claiming bad faith has the "burden ofproof," and must make a "clear showing that the insurer [acted] unreasonably and in bad faith." Timmons v. Royal Globe Ins. Co., 653 P.2d 907, 913 (Okla. 1982).

On appeal, the Bryants first contend Sagamore's payment of the policy limit to Lawrence constituted a confession of judgment or admission of liability by Sagamore, precluding summary judgment on either claim. But this argument ignores the fact that Sagamore resolved Lawrence's claim while disputing liability at all times and with explicit acknowledgment from Lawrence that the settlement was in compromise of a "doubtful and disputed claim."

Further, the extra-jurisdictional cases the Bryants cite lack precedential value and are readily distinguishable. Nor does the single Oklahoma case they cite support their proposition. See Ass'n of Cnty. Comm'rs of Okla. v. Nat'l Am. Ins. Co., 116 P.3d 206 (Okla. Civ. App. 2005). Instead, the court there simply noted the district court's reliance on a Florida decision holding that a negotiated settlement does not bar the statutory obligation to pay prevailing party attorney fees. Id. at 116 P.3d 206, 208 n.5 (noting lower court's citation to Wollard v. Lloyd's and Companies of Lloyd's, 439 So.2d 217, 218 (Fla. 1983)). Thus, we reject this argument as a matter of law. See Reeder v. Am. Econ. Ins. Co., 88 F.3d 892, 894 (10th Cir. 1996) (holding an offer of payment by insurer is inadmissible under Fed. R. Evid. 408, which prohibits introduction of evidence concerning settlement efforts).

The Bryants next assert several arguments related to whether Sagamore breached the contract or acted in bad faith in declining coverage on the basis of theNDE provision. But we need not address any of these arguments because we conclude the district court properly granted summary judgment to Sagamore based on an independent and sufficient ground - i.e., Kelly's failure to cooperate with Sagamore as required by the policy terms.

"An insured . . . has an obligation to cooperate with the insurer, which is both contractual and implied in law." First Bank of Turley v. Fid. & Deposit Ins. Co. of Md., 928 P.2d 298, 304 (Okla. 1996) (footnotes omitted). Kelly's policy with Sagamore contained an express cooperation provision:

A person claiming any coverage under this policy must also:

(1) cooperate with us and assist us in any matter concerning a claim or suit, including presence at a trial.

(2) send us promptly any legal papers received relating to any claim or suit.

* * *

(6) submit to an examination under oath as often as may be reasonably required.

(7) upon our request, allow us to obtain a written or recorded statement concerning the circumstances of the claim and any damages claimed.

We shall not be liable for damages or costs assessed as a result of or due to an insured person's failure to cooperate with us under the terms of this policy, or for an insured person's failure to appear at trial, in court hearings, or at other court-ordered conferences when the insured person's attendance is necessary for defending the interests of you, the insured person, or us.

Aplt. App. at 461.

The Bryants generally argue the district court erred in granting Sagamore summary judgment on this claim because they established "legitimate," "triable"questions of fact as to whether they¹ cooperated. Aplt. Br. at 24. But to withstand summary judgment, they must show that there is "no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The "mere existence of some alleged factual dispute between the parties" is not enough. Id. at 247.

The Bryants specifically dispute Sagamore's evidence that Kelly failed to respond to its inquiries before ...