Oklahoma Court of Appeals sustains summary judgment for insurer in finding that Oklahoma prohibits the assignment of bad faith claims.
In a matter of first impression, a division of the Oklahoma Court of Civil Appeals held that claims against insurance companies for bad faith cannot be assigned unless first reduced to a judgment. The Court sustained a summary judgment by Presiding Judge Dixon of Oklahoma County. Partners Kerry Lewis and John Tucker briefed the case at the trial and appellate levels.
The Court of Appeals’ ruling pairs Oklahoma with North Carolina as the only two states that prohibit assignment of bad faith claims.
This result is significant for insurers. It is common in Oklahoma for tort plaintiffs to settle with an insured defendant when coverage has been denied, with a condition of the settlement being that the insured defendant assigns over to the plaintiff the right to sue the defendant’s insurer for bad faith. The Court’s decision prohibits that practice.
Writing for a unanimous panel, Judge Wiseman relied on a state statute that prohibits assignment of actions “not arising out of contract.” The Court also referenced a 1967 Oklahoma Supreme Court case that held that a claim for bad faith failure to settle was “unliquidated” and thus not subject to garnishment.
The decision goes against a long line of Oklahoma cases that allowed assignment of certain tort claims as long as they arose in some matter out of a contract. Although the decision was released for publication, it is subject to review by the Oklahoma Supreme Court.
United Adjustment Services, Inc. v. Professional Insurors Agency, LLC and Chubb Custom Insurance Company, No. 110,821 (Oklahoma Court of Civil Appeals Div. II, June 5, 2013).