Summary
holding that an insurer's liability for failure to defend is "measured by the facts then known and knowable to it"
Summary of this case from Mount Vernon Fire Insurance v. Okmulgee Inn Venture, LLCOpinion
No. 75215.
October 31, 1995.
Appeal from the District Court.
Alan Agee, Brett Agee, James W. Carlton, Jr., Garvin, Agee, Carlton Mashburn, Pauls Valley, for appellants.
Robert Trent Pipes, Danny K. Shadid, Shadid Pipes, Oklahoma City, for appellees.
On certiorari to the Court of Appeals, temporary division XXXII.
Plaintiffs [Ruth Gray and Robert Alan Tarr] sued Fred Holman [agent] and Republic Underwriters Insurance Company [insurer or defendants] to recover for loss of property by fire. The trial judge gave summary judgment to the defendants on the plaintiffs' contractual and tort theories of liability. The Court of Appeals (a) affirmed the nisi prius ruling insofar as it rests on the contractual theory but (b) reversed the summary disposition for the agent on the plaintiffs' negligence theory, (c) held that plaintiffs' claim for bad-faith refusal to settle was not preserved for appellate review, and (d) remanded the cause. On certiorari previously granted.
THE COURT OF APPEALS' OPINION IS MODIFIED IN PART, THE NISI PRIUS SUMMARY JUDGMENT FOR THE DEFENDANTS IS REVERSED IN PART, AND THE CAUSE IS REMANDED WITH DIRECTIONS TO PROCEED IN A MANNER NOT INCONSISTENT WITH TODAY'S PRONOUNCEMENT.
The issues presented on certiorari are: (1) Does Robert Alan Tarr [Tarr] have standing to press his claim for loss of property by fire against Republic Underwriters Insurance Company [Republic or insurer] and Fred Holman [Holman or agent]? (2) Was the theory of bad-faith refusal to settle an insurance claim preserved for corrective relief by Ruth Gray [Gray] and Tarr's [collectively insureds] appellate paperwork? (3) Did the case present controverted facts that are material to the insureds' claim for (a) Republic's bad-faith refusal to settle and (b) Holman's negligence in failing to procure the arranged-for indemnity coverage, which make the nisi prius summary judgment for Republic and Holman legally unsustainable? We answer all three questions in the affirmative.
I THE ANATOMY OF LITIGATION
In April 1986 Ruth Gray — Tarr's mother — secured from Republic a standard fire insurance policy for certain premises in Ada. Gray claims that, while she did not hold legal title to this property, she paid the taxes on it, advanced money for its upgrade, had an oral agreement with her son for repayment of the funds which she had advanced for remodeling, and paid premiums upon the policy covering the premises. She considered the property to be security for her son's reimbursement of the expended funds.
Gray's fire insurance policy was purchased from Republic through its agent Holman. When Gray bought the policy, she allegedly informed Holman that the insured property's legal title stood in her son's name. Holman, who — according to Gray — told her that it did not matter in whose name title was held, had the policy issued to her as the only insured.
Holman disputes that, before Gray presented the claim for fire loss, she ever advised him that title to the insured property was in her son.
On June 4, 1986 the insured property was destroyed by fire. Through Holman, Gray informed Republic of the fire loss on June 5, 1986. Her claim was denied on August 15, 1986 on the grounds that legal title to the insured premises was not in her name, i.e., she did not have an "insurable interest" in the property. The record does not disclose whether, after declaring her policy "avoidable", Republic ever refunded any premiums Gray had paid.
In early 1987 Gray hired counsel to recover the fire loss. Upon (a) Republic's persistence that Gray did not have an insurable interest in the covered property and (b) its continued denial of the claim, Gray and Tarr sued both Holman and Republic on June 2, 1988 — more than one year, but less than two years, after the fire. Gray and Tarr advanced a contract theory of liability against both the insurer and its agent. They also pressed a tort theory for Republic's alleged bad-faith refusal to pay the claim and for Holman's negligence in failing to procure the arranged-for indemnity policy. On December 14, 1989 the trial court summarily ruled for Holman and Republic on the contractual theory of liability. Gray's tort theories were summarily decided in favor of the insurer on February 16, 1990. The nisi prius summary disposition of Tarr's claim [on all theories of liability] — also in favor of Republic and Holman — was effected by its March 7, 1990 order.
The summary judgment in Holman's favor on the contract theory was doubtless rested on the familiar common-law principle that one who deals as agent in behalf of a disclosed principal is not liable for the latter's breach of contract. See Underside v. Lathrop, Okla., 645 P.2d 514, 517 (1982), for a discussion of the distinction between ex contractu and ex delicto theory of liability as it affects an agent's defenses to an action for negligence in failing to procure an arranged-for policy of insurance.
While originally Gray and Tarr assigned error in the trial court's unfavorable disposition of their ex contractu theory of liability, they failed to re-urge it in the petition for certiorari now before us. We must hence leave undisturbed that part of the Court of Appeals' opinion which affirms the nisi prius summary ruling for Republic and Holman on the plaintiffs' ex contractu theory. The Supreme Court will not review issues resolved by the Court of Appeals but not retendered on certiorari. Hough v. Leonard, Okla., 867 P.2d 438, 445-46 (1993); Ford v. Ford, Okla., 766 P.2d 950, 952 (1989).
The insureds timely appealed. The Court of Appeals' opinion affirmed the nisi prius summary judgment insofar as it is rested on the contractual theory of liability but reversed the ruling for Holman on the insureds' negligence claim, held the insureds' claim for the insurer's bad-faith refusal to settle was not preserved for appellate review, and remanded the cause for trial of the insureds' negligence claim against Holman. The insurer and the insureds filed separate petitions for rehearing. One rehearing petition was denied on October 22, 1992 and the other on September 22, 1994. This court granted Gray and Tarr's timely plea for certiorari on December 12, 1994.
II
IF GRAY IS FOUND TO HAVE BEEN TARR'S AGENT WHEN SHE PURCHASED FIRE COVERAGE FOR HIS PROPERTY, TARR — WHETHER A DISCLOSED OR UNDISCLOSED PRINCIPAL — CAN BRING AN ACTION IN TORT AGAINST THE INSURER TO REDRESS ANY INJURY TO HIS PROPERTY OR HARM TO HIS INTEREST FROM THE TRANSACTION BY GRAY AS HIS AGENT
Resolution of Tarr's standing to sue Republic and Holman requires a factual inquiry into whether Gray was Tarr's agent or merely an officious volunteer. If, in fact, Tarr was either Gray's disclosed or undisclosed principal and Gray was authorized to secure fire coverage for the premises on Tarr's behalf, any injury to the property or harm from the agent's (Gray's) transaction can be redressed ex delicto.
For a general discussion of the distinction between federal and state standing concepts, see Toxic Waste Impact Group, Inc. v. Leavitt, Okla., 890 P.2d 906, 913 (1994) (Opala, J., concurring.).
Agency is a "contract by which one person, with greater or less discretionary powers, undertakes to represent another in certain business relations." F. WHARTON, AGENCY AND AGENTS (1876); see also RESTATEMENT OF AGENCY (SECOND) § 1 which defines agency as:
". . . the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act."
For a history of common-law agency, see B.S. MARKESINIS and R.J.C. MUNDAY, AN OUTLINE OF THE LAW OF AGENCY pp. 1-225 (Butterworths 1992).
Officious volunteers are those who introduce themselves into matters which do not concern them and do something which they are neither legally nor ethically bound to do or which is not in pursuance of the protection of another's interest. Booker v. Sears Roebuck Co., Okla., 785 P.2d 297, 310 (1990); Kelly v. Tyra, 103 Minn. 176, 114 N.W. 750, 752 (1908).
See RESTATEMENT OF AGENCY (SECOND) § 316(1) which states:
"A person who . . . intentionally interferes with the performance of the principal's business by the agent is subject to liability to the principal for the harm caused to him."
In their briefs Republic and Holman assure us they knew nothing of Tarr or of his interest in the insured property until the present action was brought. Gray represents that Tarr authorized her to procure the insurance policy. Whether Gray and Tarr did, at the time she purchased the fire-loss coverage, stand vis-a-vis each other as agent and principal presents a factual dispute which is unfit for summary disposition and hence remains unresolved by the trilogy of the trial court's critical summary rulings of December 14, February 16 or March 7. Tarr's standing to sue cannot be denied anterior to determining Gray's status qua Tarr's agent.
By resting its March 7 order upon the one-year limitation in the insurance contract, the trial court attempted to avoid ruling on whether Tarr's tort remedy against Republic and Holman was timely invoked. Its order erroneously reasons that since the insureds' claim was brought more than one year after the operative event, i.e., the June 4 fire, it was contractually barred regardless of which theory is urged. Because our jurisprudence affords a two-year limitation for a tort action based on bad-faith refusal to settle a claim, Lewis v. Farmers Ins. Co., Inc., Okla., 681 P.2d 67, 70 (1983), the trial court's reasoning is clearly flawed. See also McGehee v. State Ins. Fund, Okla., 904 P.2d 70 (1995).
III
BAD-FAITH REFUSAL TO SETTLE A CLAIM IS FAIRLY COMPRISED IN THE ERRORS ASSIGNED FOR APPELLATE REVIEW BY GRAY AND TARR'S PETITION IN ERROR
Without specifically referencing bad-faith refusal to settle a claim in section "D" of their joint petition in error, Gray and Tarr challenge as erroneous the nisi prius conclusion that Gray did not have an insurable interest in the property destroyed by fire. The insureds' omission is not fatal to preserving for appellate review bad-faith refusal to pay a claim. That issue is fairly comprised within the appellants' assignment of errors. Republic's refusal to settle Gray's claim is actionable if it can be established that, when the insurer's actions are measured by the facts then known and knowable to it, its failure to recognize Gray's [or Tarr's, if then known as her principal] insurable interest in the covered property was in bad faith.
Bad-faith refusal to settle a claim was first recognized as a distinct tort in Christian v. American Assur. Co., Okla., 577 P.2d 899, 901 (1978). The remedy rests on the insurer's implied-in-law duty to act in good faith and deal fairly with the insured to ensure that the policy benefits are received. Id. at 901. While numerous items of damage may result from one injurious occurrence, the party who seeks to recover for an insured loss has but a single cause of action, although the claim may be advanced concurrently on ex contractu and ex delicto theories. Mann v. State Farm Mut. Auto. Ins. Co., Okla., 669 P.2d 768, 772 (1983).
Section D of the petition in error calls for the appellant to identify the "issues and errors proposed to be raised on appeal."
Markwell v. Whinery's Real Estate, Inc., Okla., 869 P.2d 840, 843 (1994).
Buzzard v. McDanel, Okla., 736 P.2d 157, 161 (1987) (Opala, J., concurring.).
A petition in error should be construed as an entirety. In summarizing the case Gray and Tarr described their legal action as one for "bad faith refusal to settle a claim" for loss by fire to property in which they had an insurable interest. The statement of "issues and errors proposed to be raised on appeal," when read in conjunction with the "summary of case," is clearly sufficient to preserve for review the insureds' claim for bad-faith refusal to settle.
Bane v. Anderson, Bryant Co., Okla., 786 P.2d 1230, 1234 (1989).
See Gray and Tarr's petition in error, exhibit B, "Summary of Case".
Nilsen v. Tenneco Oil Co., Okla., 614 P.2d 36, 38 (1980).
IV
THE RECORD OF SUMMARY ADJUDICATION PROCESS REVEALS A HOST OF DISPUTED FACTS ON MATERIAL ISSUES
A THE NATURE OF SUMMARY PROCESS
The focus in summary process is not on facts a plaintiff might be able to prove at trial ( i.e., the legal sufficiency of evidence that could be adduced) but rather on whether the evidentiary materials as a whole (a) show undisputed facts on some or all material issues and (b) will support but a single inference in favor of a successful movant's quest for relief. Summary adjudication process — a special pretrial procedural track to be conducted with the aid of acceptable probative substitutes — is a search for undisputed material fact issues that may be resolved without forensic combat. It is a method for identifying and isolating non-triable fact issues, not a device for defeating the opponent's right to trial by jury. Only that evidentiary material which entirely eliminates from trial some or all fact issues may afford legitimate support for nisi prius resort to summary process.
"Acceptable probative substitutes" are those which may be used as "evidentiary materials" in the summary process of adjudication. Seitsinger v. Dockum Pontiac Inc., Okla., 894 P.2d 1077, 1080-81 (1995); Davis v. Leitner, Okla., 782 P.2d 924, 926-27 (1989).
B
THE RECORD WILL NOT SUPPORT A SUMMARY RULING THAT REPUBLIC'S REFUSAL TO SETTLE GRAY'S CLAIM WAS NOT IN BAD FAITH
Inherent in the summary judgment for Republic on Gray's (and Tarr's) tort theory of insurer's liability is the trial court's determination that (a) Gray did not possess an insurable interest in the property and (b) the facts known or knowable to Republic at the time of the claims's rejection legally support its refusal to pay the indemnity. Before summary disposition of this case could be effected, the trial judge was duty-bound to ascertain — from the evidentiary material before him — that as a matter of law Gray for Tarr, if her principal did not and could not demonstrate she would gain some economic advantage by the insured property's continued existence or, in the alternative, that she [or Tarr, if her principal] did not suffer some economic detriment from its loss or destruction. The law's "factual expectation" standard, adopted in Snethen, is today the Oklahoma test for use in ascertaining a person's insurable interest. Equating insurable interest with a legally cognizable estate is no longer sanctioned by our jurisprudence.
This test is nominationed the "factual expectation" test. Snethen v. Okla. U. of Farmers Ed. Co-op. U., Okla., 664 P.2d 377, 380 (1983). When applied, it suffices to negate any notion of an unlawful "wager contract". Id. at 379-80.
Snethen, supra note 17 at 380.
The now defunct "legally cognizable interest" test requires that property may be treated as insurable only if the insured has a legal or equitable right enforceable either at law or in chancery. Lucena v. Crauford, 127 Eng.Rep. 630, 651 [1806]. See also Snethen, supra note 17 at 380.
Snethen, supra note 17 at 380.
The February 16 nisi prius order, here under review, rests upon the conclusions that (1) Tarr held record title to the insured property and (2) Gray — a stranger to title — and her son stood vis-a-vis each other in a creditor/debtor relationship. The record does not disclose that the trial court applied the "factual expectation" test. Because the sparse evidentiary material supplied for the trial court's use in assaying Gray's claimed stake in the premises supports opposite inferences concerning the nature or quantum of Gray's own protectible interest in the destroyed property, the nisi prius summary rulings that (1) her interest was not insurable and (2) the insurer's refusal to settle was not in bad faith cannot be sustained. These issues present disputed facts.
C
THE RECORD DOES NOT SUPPORT BUT A SINGLE INFERENCE THAT HOLMAN'S PROCUREMENT OF THE FIRE INSURANCE POLICY IN GRAY'S NAME WAS NOT NEGLIGENT AS A MATTER OF LAW
The record reveals a dispute between Gray and Holman concerning whether she informed him that her son — Tarr — held legal title to the property sought to be insured. The nisi prius February 16 order, resolving in favor of Republic and Holman "all" of Gray's theories of liability, rests on a determination that Gray did not have an "insurable interest" in the covered property. Regardless of the Gray interest's insurability, it is the trier of fact who must determine whether Gray did in fact apprise Holman that her son held legal title to the insured premises. This fact is critical to Tarr's ( qua principal) and to Gray's ( qua agent) tort claim for Holman's negligence in procuring the arranged-for indemnity policy.
Whether Holman knew Gray did not hold legal title to the premises when he secured the fire insurance policy in her name presents a controverted fact issue. The summary adjudication process that resolves the insureds' tort claim for Holman's negligence is hence flawed.
V SUMMARY
While the insureds advanced at nisi prius both ex contractu and ex delicto theories, only the latter stands preserved for our certiorari review. Republic and Holman challenged Tarr's standing to press a claim for the fire loss. The record discloses that no inquiry was made below (a) to ascertain if in fact Gray was Tarr's agent and had been authorized to secure fire-loss coverage for his property or (b) to probe into the nature and extent of Gray's own protectible interest, if any she had, in the destroyed premises. If it be determined that at the time Gray purchased the fire insurance policy Tarr was either her disclosed or undisclosed principal, he can bring a tort action to redress any injury to his property or harm to any of his interest occasioned by Holman's negligence.
A petition in error must be construed as an entirety. The issue of bad-faith refusal to settle a claim is clearly preserved for appellate review by the "summary of case", when that part of Gray and Tarr's joint petition in error is read in conjunction with its "Section D" assignments.
Summary adjudication process is a search for non-triable facts — not a technique for defeating the opponent's right to trial by jury. The evidentiary materials as a whole reveal disputed material facts concerning the insurer's bad-faith refusal to settle and about Holman's negligence. The February 16 order, when viewed in light of the record before us, fails to disclose that the trial court applied the correct criteria — under the currently in force "factual expectation" test — to determine if Gray, in her individual capacity, had an insurable interest in the covered property. Because several facts material to Gray and Tarr's ex delicto theory of liability are controverted, summary judgment for Republic cannot be sustained. The summary ruling for Holman is equally insupportable.
See Snethen, supra note 17 at 380.
The Court of Appeals' pronouncement for Republic and Holman on the insureds' ex contractu theory of liability is left undisturbed by today's opinion. After review of the errors addressed to the tort theories (pressed by both Gray and Tarr against the insurer and against Holman),
THE COURT OF APPEALS' OPINION IS MODIFIED IN PART, THE NISI PRIUS SUMMARY JUDGMENT FOR THE DEFENDANTS IS REVERSED IN PART, AND THE CAUSE IS REMANDED WITH DIRECTIONS TO PROCEED IN A MANNER NOT INCONSISTENT WITH TODAY'S PRONOUNCEMENT.
ALMA WILSON, C.J., KAUGER, V.C.J., LAVENDER, OPALA, SUMMERS and WATT, JJ., concur.
HODGES, SIMMS and HARGRAVE, JJ., concur in part and dissent in part.