The opinion
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
KYLI HAMMOND, )
)
Plaintiff, )
)
v. ) Case No. CIV-19-245-D
)
LYNDON SOUTHERN INSURACE )
COMPANY, et al., )
)
Defendants. )
O R D E R
Before the Court are Plaintiff’s Motion for Partial Summary Judgment [Doc.
No. 43] and Defendants’ Motion for Partial Summary Judgment [Doc. No. 47], filed
pursuant to Fed. R. Civ. P. 56 and LCvR56.1. Plaintiff seeks a determination of a discrete
issue: whether “the cancellation of her insurance policy by Defendants was improper as a
matter of law.” See Pl.’s Mot. at 1. Defendants seek a judgment in their favor on Plaintiff’s
tort claims of insurer’s bad faith, fraud, and tortious interference with contract. Both
Motions are fully briefed and at issue. See Defs.’ Resp. Br. [Doc. No. 52]; Pl.’s Resp. Br.
[Doc. No. 53]; Pl.’s Reply Br. [Doc. No. 54].
Factual and Procedural Background
Plaintiff Kyli Hammond brings suit to recover damages for an alleged breach of
contract by Defendant Lyndon Southern Insurance Company (“Lyndon”) due to its denial
of an insurance claim under an automobile insurance policy. She also claims that Lyndon
and Defendant Jupiter Managing General Agency, Inc. (“Jupiter”), which administered the
policy, breached a duty of good faith and fair dealing in handling the insurance claim.
Plaintiff further claims that Jupiter tortiously interfered with the insurance contract and
engaged in fraudulent conduct in administering the policy and handling the claim. The
case was filed in state court and timely removed based on federal diversity jurisdiction.
This is not a typical insurance case. Before removal, Defendants filed a joint answer
in which they admitted Plaintiff suffered a covered loss, a breach of contract occurred, and
Plaintiff’s insurance claim “should have been handled differently.” See Answer [Doc.
No. 4-1], ¶¶ 8, 10, 13, 15, 20-22. Further, in the Joint Status Report filed before the initial
scheduling conference, the parties stipulated to the following facts: Plaintiff was involved
in a single-car accident on July 19, 2017; she had an insurance policy with Lyndon that
included collision and comprehensive coverage for the vehicle involved in the accident;
Jupiter was responsible for administering the policy, payments, notices, and claims; the
policy was in full force and effect at the time of the accident; Plaintiff reported the loss to
Defendants and initiated a claim; Lyndon denied coverage for the loss but later withdrew
the denial; Lyndon breached the insurance contract; and Jupiter charged Plaintiff
“reinstatement fees” for alleged lapses in coverage. See Joint Status Report [Doc. No. 10]
at 3, ¶ 3. Other material facts are also undisputed, as discussed infra. Given this agreement,
the parties seek summary judgment rulings on several issues.
Standard of Decision
Summary judgment is proper “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). A material fact is one that “might affect the outcome of the suit under the
governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is
genuine if the facts and evidence are such that a reasonable juror could return a verdict for
either party. Id. at 255. All facts and reasonable inferences must be viewed in the light
most favorable to the nonmovant. Id.
A movant bears the initial burden of demonstrating the absence of a dispute of
material fact warranting summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986). If the movant carries this burden, the nonmovant must then go beyond the
pleadings and “set forth specific facts” that would be admissible in evidence and that show
a genuine issue for trial. See Anderson, 477 U.S. at 248; Celotex, 477 U.S. at 324. “To
accomplish this, the facts must be identified by reference to affidavits, deposition
transcripts, or specific exhibits incorporated therein.” Adler v. Wal-Mart Stores, Inc., 144
F.3d 664, 671 (10th Cir. 1998); see Fed. R. Civ. P. 56(c)(1)(A). “Cross-motions for
summary judgment are treated as two individual motions for summary judgment and held
to the same standard, with each motion viewed in the light most favorable to its nonmoving
party.” Banner Bank v. First Am. Title Ins. Co., 916 F.3d 1323, 1326 (10th Cir. 2019).
The inquiry is whether there is a need for a trial – “whether, in other words, there are any
genuine factual issues that properly can be resolved only by a finder of fact because they
may reasonably be resolved in favor of either party.” Anderson, 477 U.S. at 251.
Undisputed Facts
Along with the stipulated facts, additional facts are established by the summary
judgment record. Plaintiff purchased the insurance policy on April 4, 2017, to cover her
vehicle for a six-month period by making an initial premium payment and agreeing to make
five installment payments due on the fourth day of each month. During each of the next
three months, Plaintiff failed to make a timely payment (May 4, June 4, and July 4), but
she did make late installment payments (May 16, June 10, and July 14). Each month,
Jupiter mailed Plaintiff a billing notice (stating an installment number, payment amount,
and due date), a cancellation notice (stating the policy would be cancelled if payment was
not received by a later date – May 12, June 10, and July 10), and a reinstatement notice
(stating the policy had been reinstated upon payment – May 17, June 11, and July 15).
Each of the cancellation notices was sent before the deadline to make an installment
payment had passed; the notices warned that coverage would be cancelled for nonpayment
by a cancellation date and, if cancellation occurred, a $15 reinstatement fee would be
required to reinstate coverage.1 Each time Plaintiff missed a payment deadline, the policy
was terminated on the cancellation date (May 12, June 10, and July 10), and a $15 fee was
assessed. Each cancellation date was less than 10 days after an installment was due, even
though the policy required 10 days’ notice to cancel for nonpayment of premiums.
Within days after the third reinstatement notice, Plaintiff had a single-car accident
in the insured vehicle on July 19, 2017, and promptly submitted an insurance claim.2
1 For example, the first cancellation notice was dated April 30, 2017, requested payment of
the installment amount “by the cancellation date,” and stated: “If you fail to pay the Total Amount
Due before May 12, 2017, your insurance coverage will be cancelled effective 12:00 AM
STANDARD TIME on May 12, 2017.” See Defs.’ Mot., Ex. 3 [Doc. No. 47-3] (emphasis
omitted); see also id. Ex. 6 [Doc. No. 47-6] (identical form with cancellation date of June 10,
2017), Ex. 9 [Doc. No. 47-9] (identical form with cancellation date of July 10, 2017).
2 Defendants state that this was Plaintiff’s second claim, that her first claim was made within
the first month of coverage due to a tree falling on the vehicle, and that Jupiter promptly paid the
claim. Although Plaintiff does not dispute these facts, Defendants provide no evidentiary support
for them, and their relevance to the issues presented is unclear. Thus, they are disregarded.
Jupiter immediately mailed a reservation of rights letter, stating “there is a potential
coverage problem” and “[t]his loss requires further investigation.” See Def.’s Mot., Ex. 11
[Doc. No. 47-11]. Specifically, “[a] preliminary review of your policy indicates that the
above mention [sic] loss occurred within 5 DAYS after your policy reinstated. Your policy
cancelled on 07/10/17 and reinstated effective 07/15/17.” Id. (emphasis in original).
Plaintiff contacted Jupiter by telephone on July 25, 2017, about submitting a
photograph taken at the scene of the accident to prove the date of loss. Plaintiff submitted
the photo the next day, but it lacked a date stamp. On August 18, 2017, Jupiter’s claim
adjuster recommended a “soft denial” of the claim “pending proof of date of loss within
[the] coverage period;” Jupiter’s claim file contains notes stating that Plaintiff had not
provided such proof – “no towing[,] no police report[,] photo taken, however no timestamp
to confirm date and time of loss.” See Def.’s Mot., Ex. 12 at 3 (8/18/17 entry). A
supervisor approved the recommendation on August 23, 2017, and a denial letter was sent
to Plaintiff on August 24, 2017.
Despite the recommended “soft denial” (a term which is not explained by the record),
Plaintiff received a letter that stated in full:
Dear Sirs/Madam:
The investigation of the above captioned matter has been completed and after
careful examination of the circumstances surrounding this accident, we believe
there is sufficient evidence at this time to make a proper decision regarding this
claim. After further review of your policy there is indication that the above
mention [sic] loss occurred within 10 days of your policy’s inception, renewal,
reinstatement or coverage changes.
After thorough investigation and review regarding the information surrounding
this loss we unfortunately must respectfully decline to provide coverage for this
loss. Neither the insured or the claimant provided evidence that this loss
occurred within the policy period.
Please contact the undersigned should you have any additional information
regarding this claim. Should you have any information which would affect this
decision please contact this office immediately.
Defs.’ Mot., Ex. 13 [Doc. No. 47-13].
The vehicle was also covered by an insurance policy related to a car loan, and the
lender made a claim under its policy after Defendants denied coverage. Securian Casualty
Company paid the lender $10,966.06 in settlement of the claim in October 2017. Plaintiff
filed this action in December 2017.3
Discussion
A. Defendants’ Cancellation of the Policy
Plaintiff seeks a ruling on whether Defendants properly cancelled the policy. She
asserts Oklahoma law is clear that an anticipatory or conditional notice of cancellation –
issued before an incident of nonpayment has occurred – is legally insufficient to permit
cancellation of a policy that requires prior notice. See Pl.’s Mot. at 4-8. Plaintiff relies on
two Oklahoma Supreme Court decisions as dispositive of the issue: Equity Insurance Co.
v. City of Jenks, 184 P.3d 541 (Okla. 2008); and Equity Insurance Co. v. St. Clair, 196 P.3d
981 (Okla. 2008). Although not entirely clear, the Court understands that Plaintiff seeks a
resolution of this issue in order to advance her claim that Defendants engaged in bad faith
3 Defendants also present evidence, which is undisputed, that Plaintiff stated in September
2017 that she was preparing to seek bankruptcy protection, and Plaintiff later filed a voluntary
bankruptcy petition in June 2018 (while this case was pending in state court). Defendants do not
explain the relevance of these facts, which postdate the denial of coverage.
conduct by relying on a lapse in coverage to deny the insurance claim, and to recover the
amount of reinstatement fees that were charged. See Pl.’s Mot. at 10; Reply Br. at 1, 4.
In response, Defendants first argue that the cancellation issue is “irrelevant” because
“the date of loss occurred on a date coverage was in force and effect.” See Defs.’ Resp.
Br. at 2. This argument seems to focus on Plaintiff’s breach of contract claim; Defendants
concede “[t]he fact that the accident happened so close to a lapse in coverage is one of the
reasons why the claim was initially denied.” Id. at 3. Logically, this concession means the
issue is relevant to the handling of Plaintiff’s insurance claim and the denial of coverage.
Regarding reinstatement fees, Defendants point out that Plaintiff’s cited cases do not
address whether an insurer can properly assess a fee for an insured’s untimely payment of
a premium installment. Defendants argue that “[a] consequence [of] not making premium
payments when due is the imposition of a $15 reinstatement fee that Plaintiff agreed to
when she took out the policy.” Id. at 4.
Upon consideration, the Court finds that the issue of improper cancellation of
insurance coverage under the policy is directly relevant to Plaintiff’s bad faith claim. The
Court further finds that Defendants’ effort to distinguish the Equity Insurance Company
cases – arguing that those cases concerned third-party benefits and compulsory insurance
law (id. at 3-4) – is unpersuasive. The holding of the Oklahoma Supreme Court in each
case was clear and unequivocal, and Oklahoma’s public policy of protecting innocent third
parties played no apparent part in the decision. Instead, applying a notice provision like
the one in Lyndon’s policy in this case, the Oklahoma Supreme Court elected to follow the
weight of authority from other jurisdictions interpreting similar provisions to mean “that
notice of cancellation for nonpayment of premium cannot be given before the premium is
due.” See City of Jenks, 184 P.3d at 544 (discussing cases). Specifically, the supreme
court held: “Equity’s notice of its intent to cancel the policy at a future date if an installment
premium was not paid was ineffective notice of cancellation for nonpayment of premium
under the terms of the policy.” Id. at 541-42. Further, after surveying the case law and
explaining its rationale, the court announced: “Under the terms of the Equity policy, we
find that effective notice of cancellation for nonpayment of premium cannot be given
before the premium is due.” Id. at 545.4
The Oklahoma Supreme Court reaffirmed these clear pronouncements a few months
later, ruling that City of Jenks was dispositive of additional arguments advanced by other
parties. In St. Clair, the supreme court reiterated its position: “To effectively cancel its
automobile insurance policy for nonpayment of a premium in accordance with the policy
4 The supreme court reasoned as follows:
The policy in the case at bar states that the company “may cancel” for
nonpayment of premium. The use of the word “may” indicates that the insurer has the
option to cancel the policy for nonpayment of premium. This language suggests to the
insured that if he fails to pay an installment, the company may elect to cancel the
policy, but it must give him ten days’ notice if it does so. It would lead the insured to
believe that a failure to pay the premium on or before the due date does not
automatically result in cancellation, but merely gives rise to the possibility of
cancellation.
We find that Equity Insurance Company’s anticipatory notice of cancellation,
conditioned upon [the insured’s] failure to make the next installment payment when
due, was ineffective to cancel the policy. If the insurer elects to cancel the policy for
nonpayment of premium, then according to the policy terms it must give the insured a
ten-day notice. Notice of cancellation cannot be given prior to occurrence of the event
that triggered the insurer's option to cancel: nonpayment of premium.
City of Jenks, 184 P.3d at 545 (citation omitted, emphasis in original).
terms, Equity must provide an insured at least a ten-day notice of its clear, unequivocal in
praesenti act of canceling the policy following the insured’s failure timely to pay the
premium that was due.” St. Clair, 196 P.3d at 984 (emphasis in original).
In this case, Defendants do not dispute that the notice provision of Lyndon’s policy
and Equity Insurance Company’s policies are almost identical. Compare City of Jenks,
184 P.3d at 543, and St. Clair, 196 P.3d at 982 n.5, with Pl.’s Am. Pet. [Doc. No. 1-2],
Ex. 2 (Policy at p.17). It is also undisputed that Defendants’ notice of cancellation was
given to Plaintiff before the installment payment was due. Because Defendants did not
provide effective notice of cancellation for nonpayment, they could not properly cancel
Plaintiff’s insurance coverage. The Court therefore finds that Plaintiff’s insurance policy
remained in effect and no lapse in coverage occurred.
On the other hand, regarding Defendants’ assessment of a reinstatement fee each
time Plaintiff made an untimely installment payment, the Court cannot discern any
relevance of this issue to an actionable claim asserted by Plaintiff. The operative pleading
is her state court Amended Petition [Doc. No. 1-2]. Allegations that “Jupiter improperly
and without sufficient or proper notice . . . cancelled Plaintiff’s policy of insurance in May
2017, June 2017, and July 2017” and that “Jupiter wrongly charged Plaintiff a fee of $15.00
to reinstate her policy of insurance in May 2017, June 2017, and July 2017” (id. ¶¶ 36-37)
are made solely to support a claim against Jupiter of tortious interference with contract. Id.
at 4-7, ¶¶ 32-45 (Third Cause of Action). For reasons discussed infra, the Court finds that
Jupiter is entitled to a judgment as a matter of law on the tortious interference claim.
Therefore, there is no need to resolve whether Plaintiff’s view of the collectability of a
reinstatement fee is correct. If the Court were to render a decision on this issue, it would
essentially be giving an advisory opinion, which is improper. Therefore, the Court declines
Plaintiff’s invitation to rule on whether Defendants improperly charged her a $15 fee.
B. Plaintiff’s Claim of Insurer’s Bad Faith
Defendants assert that Plaintiff cannot prove that their handling of her insurance
claim was unreasonable and constituted bad faith conduct.5 They rely on the principle that
the existence of a coverage dispute precludes liability; they “contend a legitimate dispute
existed as to the date of Plaintiff’s claim.” See Def.’s Mot. at 7. Defendants also rely on
the rule that bad faith “requires a showing of ‘more than simple negligence.’” Id. at 8
(quoting Badillo v. Mid Century Ins. Co., 121 P.3d 1080, 1093 (Okla. 2005)).
Under Oklahoma law, an insurer has an “‘implied-in-law duty to act in good faith
and deal fairly with the insured to ensure that the policy benefits are received.’” Badillo,
121 P.3d at 1093 (quoting Christian v. Am. Home Assur. Co., 577 P.2d 899, 901 (Okla.
1977)); accord Newport v. USAA, 11 P.3d 190, 195 (Okla. 2000). “[A]n insurer’s right to
resist payment or resort to a judicial forum to resolve a legitimate dispute” is well
established. Gov’t Employees Ins. Co. v. Quine, 264 P.3d 1245, 1249 (Okla. 2011); see
Ball v. Wilshire Ins. Co., 221 P.3d 717, 725 (Okla. 2009); Brown v. Patel, 157 P.3d 117,
126-27 (Okla. 2007). “However, when presented with a claim by its insured, an insurer
‘must conduct an investigation reasonably appropriate under the circumstances’ and ‘the
5 Defendants do not deny that they both owed Plaintiff a duty of good faith and fair dealing;
they question only whether the alleged conduct (primarily, Jupiter’s claim handling on behalf of
Lyndon) was sufficient to constitute bad faith.
claim must be paid promptly unless the insurer has a reasonable belief that the claim is
legally or factually insufficient.’” Newport, 11 P.3d at 195 (quoting Manis v. Hartford
Fire Ins. Co., 681 P.2d 760, 762 (Okla. 1984)); see Buzzard v. Farmers Ins. Co., 824 P.2d
1105, 1109 (Okla. 1991); see also Bannister v. State Farm Mut. Auto. Ins. Co., 692 F.3d
1117, 1128 (10th Cir. 2012). An insurer’s duty “to timely and properly investigate an
insurance claim is intrinsic to an insurer’s contractual duty to timely pay a valid claim.”
Brown, 157 P.3d at 122 (emphasis omitted). “If there is conflicting evidence from which
different inferences may be drawn regarding the reasonableness of an 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.” Newport, 11 P.3d at 195 (internal
quotation omitted); accord Badillo, 121 P.3d at 1093.
Upon consideration of the summary judgment record, viewed in the light most
favorable to Plaintiff as required by Rule 56, the Court finds that a genuine dispute of
material facts precludes summary judgment on the issue of bad faith conduct. Plaintiff has
presented sufficient facts from which reasonable jurors could find that Defendants did not
conduct a timely investigation or take appropriate action under the circumstances and,
instead, unreasonably denied Plaintiff’s insurance claim based solely on her alleged failure
to provide proof that the loss occurred during the policy period. The reasonableness of
Defendants’ conduct to ensure that Plaintiff received the benefits of her insurance policy
is reasonably subject to different conclusions and must be resolved by a trier of fact.
Therefore, the Court finds that Defendants are not entitled to summary judgment on
Plaintiff’s bad faith claim.
C. Plaintiff’s Claim of Tortious Interference with Contract
Jupiter asserts that Plaintiff’s tortious interference claim against it fails as a matter
of law because “the claim is viable only if the interferor is not a party to the contract or
business relationship.” See Defs.’ Mot. at 10 (emphasis in original) (citing Voiles v. Santa
Fe Minerals, Inc., 911 P.2d 1205, 1209 (Okla. 1996), and Wilspec Tech., Inc. v. DunAn
Holding Group Co., 204 P.3d 69, 74 (Okla. 2009)). Jupiter argues that Plaintiff cannot
prevail on a claim that Jupiter interfered with her insurance contract with Lyndon where
Jupiter “was a party to the contract and business relationship.” See Defs.’ Mot. at 10.
Plaintiff makes no effective response to this argument. Citing Morrow Development
Corp. v. American Bank & Trust Co., 875 P.2d 411, 416 (Okla. 1994), she argues only:
“That Jupiter’s actions were pursuant to a contract it had with Lyndon Southern does not
automatically and necessarily inoculate it from a tortious breach of contract [sic] claim.”
See Pl.’s Resp. Br. at 12 (footnote omitted, noting that Jupiter had not adduced proof of
any contract with Lyndon).6
Oklahoma law prohibits a tortious interference claim against a defendant who was
either a party or an agent acting on behalf of a party to the contract. The Oklahoma
Supreme Court held as a matter of law in Voiles, 911 P.2d at 1210, that a defendant “cannot
be liable for wrongfully interfering with a contract if it was acting in a representative
capacity for a party to that contract.” In so ruling, the court relied on an established legal
principle. See Ray v. Am. Nat’l Bank & Trust Co., 894 P.2d 1056, 1060 (Okla. 1994)
6 The cited legal authority addresses when conduct may be privileged or excused. See
Morrow, 875 P.2d at 417.
(affirming summary judgment for defendant who “was at all times acting on behalf of
[contracting party]” because defendant “could not wrongfully interfere with a contract
concerning which it was acting in a representative capacity for a party”).
In this case, Plaintiff’s tortious interference claim is based on Jupiter’s actions in
sending billing, cancellation, and reinstatement notices, in cancelling her insurance policy,
in charging reinstatement fees, and “[i]n handing the administration of Plaintiff’s policy
and claim.” See Am. Pet. ¶¶ 33-37, 39. From the pleading stage, however, it has been
undisputed that Jupiter was responsible for administering the policy, payments, notices,
and claims on behalf of Lyndon. Each of the written notices makes clear on its face that it
was sent on Lyndon’s behalf. The billing and cancellation notices bear both Jupiter’s and
Lyndon’s names and request a payment that may be mailed directly to Lyndon. See, e.g.,
Defs.’ Mot., Exs. 2 & 3 [Doc. Nos. 47-2 and 47-3]. The reinstatement notices were sent in
the form of a letter from Lyndon. Id. Ex. 4 [Doc. No. 47-4]. Plaintiff’s insurance claim
under the policy was made directly to, and handled solely by, Jupiter on behalf of Lyndon.
See id. Ex. 12 [Doc. No. 47-12] (claim file of both Jupiter and Lyndon); Ex. 13 [Doc. No.
47-13] (denial on Lyndon letterhead, signed by Jupiter claim adjuster, stating Jupiter is
providing policy and claims administration for Lyndon). Under the circumstances shown
by the record, there can be no question that Jupiter was not meddling in Plaintiff’s insurance
contract with Lyndon but, instead, was performing it on Lyndon’s behalf.
In short, Plaintiff’s claim against Jupiter for allegedly interfering with her insurance
contract with Lyndon is based solely on Jupiter’s acts on behalf of Lyndon with respect to
the contract. Therefore, the Court finds that this claim fails as a matter of law.
D. Plaintiff’s Fraud Claim
Although not entirely clear, Jupiter seems to assert only that Plaintiff lacks proof of
an essential element of a fraud claim – that is, a false misrepresentation of fact – because
the claim is based solely on Jupiter’s statements in billing and cancellation notices
regarding the legal status of the policy. See Defs.’ Mot. at 11. Plaintiff disputes this
assertion. She argues that Jupiter also made material misrepresentations of fact during the
handling of her insurance claim. Although one might argue that these alleged
misrepresentations also concerned legal rather than factual matters – such as the types of
evidence that Plaintiff must produce to substantiate her claim – the Court declines to
entertain an argument that Jupiter has not actually made. Upon consideration of
Defendants’ Motion, the Court finds that Jupiter has failed to carry its initial burden under
Rule 56 to demonstrate the absence of a dispute of material fact warranting summary
judgment on Plaintiff’s fraud claim.
Conclusion
For these reasons, the Court finds that Plaintiff is entitled to a determination as a
matter of law that Defendants’ cancellation of her coverage under the insurance policy was
ineffective and that Jupiter is entitled to summary judgment on Plaintiff’s claim for tortious
interference with contract, but that summary judgment is not warranted on any other issue
or claim addressed by the Motions.
IT IS THEREFORE ORDERED that Plaintiff’s Motion for Partial Summary
Judgment [Doc. No. 43] is GRANTED, as set forth herein, and that Defendants’ Motion
for Partial Summary Judgment [Doc. No. 47] is GRANTED in part and DENIED in part.
Plaintiff's breach of contract claim against Defendant Lyndon Southern Insurance
Company, her bad faith claim against both Defendants, and her fraud claim against
Defendant Jupiter Managing General Agency, Inc. remain for trial.
IT IS SO ORDERED this 19" day of August, 2020.
\ by Q
TIMOTHY D. DeGIUSTI
Chief United States District Judge
15