Summary
The Oklahoma Supreme Court held that an insured's bad-faith claim against an insurer is an independent tort for conflicts-of-law purposes, rather than a contract claim governed automatically by the law applicable to the insurance policy. The court reversed the trial court's application of Kansas law, applied the public-interest exception to mootness after settlement, and remanded with instructions to dismiss the action after issuance of the mandate.
Topics
Practice areas
Questions Presented
- Whether an insured's claim that an insurer breached its implied duty of good faith and fair dealing is an independent tort for purposes of conflicts-of-law analysis.
- Whether Kansas law automatically governed Martin's bad-faith claim because the insurance policy was purchased in Kansas.
- Whether the Oklahoma Supreme Court should decide the conflicts-of-law issue despite the parties' settlement and resulting mootness.
Holdings
- An insured's claim for violation of an insurer's implied-in-law duty of good faith and fair dealing is an independent tort, not merely a contract claim, for conflicts-of-law analysis.
- The law of the state having the most significant relationship to the alleged bad-faith violation governs the insured's tort claim.
- The trial court erred by holding that Kansas law automatically governed Martin's bad-faith claim without applying the most-significant-relationship test.
- The court could decide the choice-of-law issue despite the parties' settlement because the issue presents a matter of broad and substantial public interest with potential application to every insured.
Key quotations
“This Court holds that a claimed violation of an insurer's implied-in-law duty of good faith and fair dealing presents an independent tort pursuant to Christian v. American Home Assurance Company and McCorkle v. Great Atlantic Insurance Company, requiring application of the law of the state with the most significant relationship to the alleged violation.” (¶ 7)
“This is a distinct tort based upon an implied duty of the insurer to act in good faith and deal fairly with its insured. This duty is not consensual, it is imposed by law.” (¶ 9)
Factual background
Martin was seriously injured in an automobile collision in Oklahoma City while covered by a Goodville Mutual uninsured-motorist policy purchased by her parents when they lived in Kansas. Before the collision, her parents notified the Kansas insurance agent that Martin was moving to Oklahoma and that her vehicle would be garaged there. Goodville handled the claim through its Pennsylvania operations and offered Martin amounts characterized as Kansas no-fault benefits and uninsured-motorist coverage, after which Martin asserted breach-of-contract and bad-faith claims.
Procedural history
Martin sued Gray for negligence and later added Goodville Mutual Casualty Company for breach of contract and insurer bad faith arising from an uninsured-motorist claim. The Oklahoma County District Court applied Kansas law and dismissed the bad-faith claim, certifying the order for immediate appeal. The Oklahoma Supreme Court granted review; during the appeal, the parties settled all issues and jointly moved to dismiss the appeal.
Remand instructions
The cause was remanded to the trial court with instructions to dismiss the action after issuance of the mandate based on the parties' settlement.