Linn v. Okla. Farm Bureau Mut. Ins. Co.

2020 OK CIV APP 62

BRYAN LINN and CARRIE LINN, Plaintiffs/Appellees, v. OKLAHOMA FARM BUREAU MUTUAL INSURANCE COMPANY, Defendant/Appellant.

Case Number: 117311

COURT OF CIVIL APPEALS OF THE STATE OF OKLAHOMA, DIVISION IV

Decided: April 7, 2020

Mandate Issued: December 12, 2020

APPEAL FROM THE DISTRICT COURT OF

GRADY COUNTY, OKLAHOMA

HONORABLE KORY KIRKLAND, TRIAL JUDGE

AFFIRMED

James A. Scimeca, BURCH, GEORGE & GERMANY, P.C., Oklahoma City, Oklahoma, and Paul A. Bezney, Marlene Thomson, ADKERSON, HAUDER & BENZNEY, Dallas, Texas, for Plaintiffs/Appellees

David B. Donchin, Katherine T. Loy, Kaci L. Trojan, DURBIN, LARIMORE & BIALICK, Oklahoma City, , for Defendant/Appellant

P. THOMAS THORNBRUGH, PRESIDING JUDGE:

¶1 Oklahoma Farm Bureau Mutual Insurance Company (OFB) appeals the judgment resulting from the jury trial of a breach of contract and insurance bad faith case. On appeal, we affirm the court's order.

BACKGROUND

¶2 The Linns ran a cattle stocker operation. They purchased calves that were between 400 and 450 pounds, fed them until they were approximately 700 pounds, and then sold them by the pound. The Linns began financing the purchase of calves through National Livestock Credit Union in 2012. During a quarterly inventory verification count conducted in June 2013 by Jim White of National, the Linns discovered as many as 500 head were missing. The missing cattle were never located.

¶3 The Linns had a policy with OFB that covered loss of cattle by theft if theft was "likely," and in August 2013 they filed a proof of loss with OFB. OFB did not pay the claim, apparently on the basis that it did not deem that theft was "likely." The Linns alleged that, as a result of this shortfall, their stocker operation failed, and they went out of business. In February 2014, the Linns filed suit alleging breach of contract and bad faith claims handling. At the conclusion of a jury trial, the jury found for the Linns and awarded them $566,000 on their breach of contract claim, $650,000 in bad faith damages, and $250,000 in punitive damages. OFB now appeals the judgment on that verdict.

STANDARD OF REVIEW

¶4 Several issues are raised, each with differing standards and conventions for review. As such, we will state the relevant standards of review in each individual section.

ANALYSIS

I. THE QUALIFICATION OF BURL DANIEL AS AN EXPERT WITNESS

¶5 OFB's first proposition of error is that the district court erred in allowing Burl Daniel to testify as an expert regarding insurance claims handling and bad faith. Under the Oklahoma Evidence Code, the trial court stands as a "gatekeeper," admitting or excluding evidence based on the judge's assessment of its relevance and reliability. Myers v. Missouri Pac. R. Co., 2002 OK 60, ¶ 36, 52 P.3d 1014. The clear abuse of discretion standard applies when we review a decision on the admissibility of expert testimony. In the context of a ruling on the relevance of proffered evidence, "a judgment will not be reversed based on a trial judge's ruling to admit or exclude evidence absent a clear abuse of discretion." Christian v. Gray, 2003 OK 10, ¶ 43, 65 P.3d 591, quoting Myers.

¶6 The admission of expert testimony in Oklahoma is governed by 12 O.S. § 2702.

If scientific, technical or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training or education may testify in the form of an opinion or otherwise, if:

1. The testimony is based upon sufficient facts or data;

2. The testimony is the product of reliable principles and methods; and

3. The witness has applied the principles and methods reliably to the facts of the case.

Inquiries into this standard may include the compatible but more specifically stated requirements of the Daubert test adopted in Christian v. Gray, 2003 OK 10, 65 P.3d 591.

A. " Assisting the Trier of Fact"

¶7 OFB's first challenge argues that the question of whether an insurer's claims-handling duty was performed in good faith is not one upon which an expert should be allowed to testify because a jury needs no assistance to recognize bad faith in this context. OFB cites two opinions of a federal trial court in the Northern District of Oklahoma as persuasive authority to that effect.¹ These opinions, if applied as characterized by OFB, directly contradict the holdings of the Oklahoma Supreme Court on this issue.² Oklahoma has consistently recognized the assistance of experts in this area, and the law of bad faith in the handling of insurance claims is a matter of individual state law unless an ERISA plan or other preemptive federal legislation is implicated. See Hollaway v. UNUM Life Ins. Co. of Am., 2003 OK 90, 89 P.3d 1022. OFB asks this Court to depart from the mandatory precedent of the Oklahoma Supreme Court on the matter and change precedential Oklahoma common law to conform to these federal trial court opinions. We decline to do so.

B. " Qualified as an Expert by Knowledge, Skill, Experience, Training or Education"

¶8 OFB next argues that Daniel was not a "witness qualified as an expert by knowledge, skill, experience, training or education" pursuant to the first part of § 2702. The main thrust of OFB's argument is that, although Daniel held several certifications in various areas of insurance and risk management, he was not a licensed adjuster, nor had he actually worked as an adjuster. In Christian v. Gray, the Supreme Court explained that a clear abuse of discretion appellate standard applies when we review a decision on the admissibility of expert testimony, and a clear abuse of discretion may be shown by an error of law or an error of fact. "An abuse of discretion occurs when a court bases its decision on an erroneous conclusion of law or where there is no rational basis in evidence for the ruling." Nelson v. Enid Med. Associates, Inc., 2016 OK 69, ¶ 11, 376 P.3d 212. Although OFB's arguments raise questions as to Daniel's expert qualifications, they do not demonstrate a decision by the Court for which there is "no rational basis in evidence." We find no error in the admission of the testimony of Burl Daniel. Any questions as to the relevance of his qualifications and experience go to the weight the jury should have accorded his testimony, not its admissibility, and OFB had the opportunity to explore these issues at trial.

II. DIRECTED VERDICT

¶9 We review the denial of a motion for directed verdict de novo. Computer Publications, Inc. v. Welton, 2002 OK 50, 49 P.3d 732. In Badillo v. Mid Century Ins. Co., 2005 OK 48, 121 P.3d 1080 (as corrected June 22, 2005), the Supreme Court recognized that the essence of an action for breach of the duty of good faith and fair dealing "is the insurer's unreasonable, bad-faith conduct . . . and if there is conflicting evidence from which different inferences may be drawn regarding the reasonableness of insurer's conduct, then what is reasonable is always a question to be determined by the trier of fact by a consideration of the circumstances in each case." Badillo at ¶ 28, quoting McCorkle v. Great Atlantic Ins. Co., 1981 OK 128, 637 P.2d 583. Pursuant to this standard, the question before the district court was, therefore, whether the evidence was such that no juror applying the correct standards could find OFB's conduct in handling the claim was unreasonable or in bad faith.

A. The Parties' Positions

¶10 The core matter in this case is a question of theft, and OFB argues that it acted reasonably in delaying or not paying the Linns' claim because there was a reasonable dispute as to whether theft occurred. The parties appear to agree that the policy in question covered loss of cattle by theft if it was "likely" that the loss was due to theft. OFB's central argument is that a Texas Ranger, Kent Dowell, investigated the matter and stated to an OFB adjuster that he could find "no evidence" of theft. OFB argues that this report was sufficient to support a reasonable conclusion that theft was therefore not likely, and the insurer had no duty to pay the claim pursuant to the policy terms.

¶11 The Linns' counter-argument is that this conclusion was not based on a reasonable investigation of the circumstances of the alleged disappearances, but upon Ranger Dowell's mathematical calculation that there were either no missing cattle at all, or a maximum of 217 missing, a conclusion he arrived at by examining the Linns' books. The Linns argue that this report was wrong because of a simple math error by Ranger Dowell that should have been obvious during any reasonable investigation, and that OFB could not have reasonably relied on it because it was inconsistent with most of the other evidence.

B. "Reasonable Conduct" and "Legitimate Dispute"

¶12 Badillo clearly statesthat, when there is conflicting evidence from which different inferences may be drawn regarding the reasonableness of an insurer's conduct, what is reasonable is always a question to be determined by the trier of fact. This standard must be integrated with another doctrine, that of a "legitimate dispute as to coverage" precluding bad faith. For example, in Andres v. Oklahoma Farm Bureau Mut. Ins. Co., 2009 OK CIV APP 97, ¶ 18, 227 P.3d 1102, this Court held that, when insurer OFB denied a claim on the ground that the claim was not covered by the policy, it relied upon decisions from nine other jurisdictions which supported its theory, its legal theory was plausible, and there was no Oklahoma precedent. This established the good faith of the insurer's interpretation of the policy and hence a legitimate dispute as to coverage, even though OFB's interpretation was later found to be contrary to Oklahoma law.

¶13 Situations similar to that presented here are less clear cut as to what behavior or reliance is reasonable, and often present a jury question. The question here was not primarily a legal dispute as to policy interpretation, but one of whether...