McWhirter v. Fire Ins. Exchange, Inc.

McWhirter v. Fire Ins. Exchange, Inc.
1994 OK 93
878 P.2d 1056
65 OBJ 2508
Case Number: 75011
Decided: 07/19/1994
Supreme Court of Oklahoma

JIM McWHIRTER AND LISA McWHIRTER, HUSBAND AND WIFE, JMV DESIGNS, INC., AN OKLAHOMA CORPORATION, APPELLANTS, EMPLOYERS MUTUAL CASUALTY COMPANY, INTERVENING PLAINTIFF,
v.
FIRE INSURANCE EXCHANGE, INC., D/B/A FARMERS INSURANCE GROUP OF COMPANIES, A FOREIGN CORPORATION, APPELLEE, JOHNNY CRAIG AND PAMELA CRAIG, HUSBAND AND WIFE, BRAD CRAIG, A MINOR, BY AND THROUGH HIS PARENTS, WILLIAM McELVANY AND JENNIFER McELVANY, JEREMY McELVANY, A MINOR, BY AND THROUGH HIS PARENTS, DEFENDANTS.

Appeal From the District Court of Oklahoma County; Jack R. Parr, Trial Judge.

¶0 Appellants' claims arose from a fire set by defendant minors that damaged their business and property. Defendants' insurer, Fire Insurance Exchange, Appellee, acknowledged liability and offered an amount in settlement to Appellants to which Appellants claim they accepted. Appellants claim they made business decisions based on the agreed amount. Appellee did not pay Appellants and later offered a lower amount. Appellants brought action against Defendants for the fire loss and against Appellee based on several theories including tortious breach of contract, misrepresentation, intentional infliction of emotional distress, negligence, and statutory violations including the Unfair Claims Settlement Practices Act and the Claims Resolution Act. The Trial Court sustained Appellee's motion for dismissal for failure to state a claim upon which relief could be granted. HELD: Based on Walker v. Chouteau Lime, Co., Inc.

TRIAL COURT JUDGMENT AFFIRMED.

Bill J. Bruce, Deborah J. Bruce, Oklahoma City, for appellants.

John R. Hargrave, Brian Husted, Randy D. Witzke, Edmonds, Cole, Hargrave Givens & Witzke, P.C., Oklahoma City, for appellee.

LAVENDER, Vice Chief Justice:

[878 P.2d 1057]

¶1 We are asked to determine whether Appellants have stated a claim upon which relief can be granted against Farmers Insurance Group of Companies under the Unfair Claims Settlement Practices Act (UCSPA), 36 O.S. 1981 § 1221 , et seq. and the Claims Resolution Act, 36 O.S. 1981 § 1251 , et seq., as well as under contract and tort theories. In accordance with Allstate Ins. Co. v. Amick,

FACTS AND PROCEDURAL HISTORY

¶2 A fire set by Defendant minors Craig and McElvany traversed a field and damaged Jim and Lisa McWhirter's (McWhirters) business and personal property. Craig's insurer, Farmers Insurance (Farmers), contracted the McWhirters and later offered to settle with them for $62,500 for the fire loss. Farmers' agent made the offer by phone to Jim McWhirter (McWhirter). McWhirter claims to have accepted. The agent purportedly stated Farmers would deliver the payment in 7 to 10 days. Upon not receiving payment McWhirter contacted Farmers and learned Farmers' offer had been based on McElvany's insurer, State Farm, paying half. Farmers informed McWhirter that since State Farm would not pay, Farmers would only pay McWhirter $25,000 in settlement to which McWhirter refused. Farmers sent the McWhirters a $1125 check for vehicle fire loss. The check contained release language.

¶3 The McWhirters brought suit against Defendants, Farmers, and State Farm. State Farm's motion to dismiss it from the suit was sustained by the trial court. The McWhirters advanced several theories of liability against Farmers including breach of contract, tortious breach of contract, misrepresentation, negligence, intentional infliction of emotional distress, and violation of the Unfair Claim Settlement Practices Act, Claims Resolution Act, and Deceptive Trade Practices Act.

¶4 The trial court sustained Farmers' motion for dismissal for failure to state a claim upon which relief can be granted. The McWhirters appealed. The appeal was retained pending our decision in Walker v. Chouteau Lime Co., Inc.

ANALYSIS

A

¶5 In Walker, where an automobile accident victim brought action against defendant's insurer for violations of the UCSPA, we held there is no private cause of action against an insurer who violates provisions of [878 P.2d 1058] the Act and that the Act benefits the public at large, not any special class.

B.

¶6 In Allstate Ins. Co. v. Amick

¶7 In the instant case the McWhirters' theories of tortious breach of contract, misrepresentation, negligence and intentional infliction of emotional distress are claims emanating from a claim of bad faith dealings that would not have arisen but for the existence of the insurance contract with the Defendants. The McWhirters however, attempt to create a contractual or tort basis out of the facts of the settlement negotiations on which to support their claims. This argument has no merit.

¶8 In Amick we stated that "[i]n the absence of a contractual or statutory relationship, there is no duty which can be breached." The McWhirters, lifting this one sentence out of Amick, attempt to show that Amick indeed foreshadowed just such a case where settlement negotiations between an insurance company and a third party could give rise to a contractual basis that would require a duty of good faith and fair dealing to a third party. However, in Amick, all we were recounting was that principal of law wherein we noted that because there is no "contractual or statutory basis between a third party and insurer, no duty exists that could give rise to such a claim."

¶9 Therefore, even if we assume Farmers acted in bad faith in refusing to negotiate or to effect a settlement of its insured's liability to McWhirters, there is no cause of action in favor of McWhirters. This appears to be the consensus in the majority of jurisdictions.

¶10 We recognize one state court which has determined an insurance carrier is no less liable under the law for breach of its own contract obligations or tortious conduct than any other party where the insurer undertakes a new and independent obligation directly with a nonparty to the insurance contract in its efforts to negotiate a settlement of the party's claim.

¶11 Inasmuch as we recognize no duty for an insurance company to deal fairly and in good faith with an injured third party, there can be no bad faith claim arising from negotiations of settlement between the two and any evidence to that effect is simply irrelevant. Recourse for a third party claimant to recover his damages is against the tortfeasor/insured.

CONCLUSION

¶12 For the reasons stated the Trial Court's order to dismiss is AFFIRMED.

¶13 HODGES, C.J., and SIMMS, SUMMERS and WATT, JJ., concur.

¶14 KAUGER, J., concurs by reason of stare decisis.

¶15 ALMA WILSON, J., concurs in part, dissents in part.

¶16 HARGRAVE, J., disqualified.

Footnotes:

1 849 P.2d 1085 (Okla. 1993).

2 680 P.2d 362 (Okla. 1984).

3 680 P.2d 362 (Okla. 1984).

4 849 P.2d 1085 (Okla. 1993).

5 The McWhirters cite this act as a violation by Farmers of the Claims Resolution Act, 36 O.S. 1981 § 1254 (5) and (6). The language of the current statute remains the same.

6 Walker, 849 P.2d 1085.

7 Id. at 1086-87.

8 We also find the McWhirters' claim based on the Deceptive Trade Practices Act, 78 O.S. 1981 § 51 et seq., is without merit.

9 680 P.2d 362 (Okla. 1984).

10 Id. at 363.

11 Id.

12 Id. at 364-65.

13 Id. at 364. See also Gianfillippo v. Northland Cas. Co., 861 P.2d 308 (Okla. 1993) (Injured auto passenger who is covered under driver's insurance policy may not bring bad faith action against insurer, because third party was covered under liability policy and occupied insured vehicle.); cf. Townsend v. State Farm Mut. Automobile Inc. Co., 860 P.2d 236, 238 (Okla. 1993), where we held a "class 2 insured" passenger covered by insured's uninsured motorist policy could bring a bad faith action against insurer because of his "class 2 status" and because of the statutory relationship between the injured and the insurer resulting from the uninsured motorist statute.

14 "As one well-known commentator on insurance law noted, faith is owed to the insured and not to a third party." 14 G. Couch, Couch on Insurance § 51:136 (rev.2d 1982) quoted in Pixton v. State Farm Mut. Auto. Inc. Co., 809 P.2d 746, 750 (Utah App. 1991).

15 759 P.2d 523 (Alaska 1988).

16 467 N.W.2d 255 (Iowa 1991).

17 799 S.W.2d 377 (Tex. App. 1990). The facts in this case are similar to our case in that the insurer in Bowman refused to settle with the third party for all of that party's claimed loss after the claimant apparently assumed the insurer would pay all of her loss. The insurer was held not liable for bad faith.

18 809 P.2d 746 (Utah App. 1991).

19 844 P.2d 487 (Wyo. 1992).

20 Howton v. State Farm Mut. Auto. Ins. Co., 507 So. 2d 448, 450-51 (Ala. 1987).