WATHOR v. MUTUAL ASSURANCE ADMINISTRATORS, INC.

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WATHOR v. MUTUAL ASSURANCE ADMINISTRATORS, INC.
2004 OK 2
87 P.3d 559
Case Number: 97696
Decided: 01/20/2004
Modified: 01/22/2004

THE SUPREME COURT OF THE STATE OF OKLAHOMA

DOUG AND SHANNON WATHOR, individually and as parents of NICHOLAS WATHOR, a minor child, individually and on behalf of themselves and all others similarly situated, Plaintiffs/Appellants,
v.
MUTUAL ASSURANCE ADMINISTRATORS, INC., a domestic corporation, Defendant/Appellee.

CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION III

¶0 A third party administrator for a self-funded health insurance program denied an insured's claim for emergency medical treatment and a tonsillectomy. The insured sued the administrator for breach of contract and for breach of the tort duty of good faith and fair dealing. The administrator defended on the ground that both claims must fail because it was not in privity of contract with the insured. The trial court agreed and entered judgment for the administrator. The Court of Civil Appeals affirmed. We granted certiorari and affirm.

OPINION OF THE COURT OF CIVIL APPEALS VACATED;
JUDGMENT OF THE TRIAL COURT AFFIRMED.

Steven S. Mansell, Mark A. Engel, Steven S. Ashmore, Oklahoma City, Oklahoma, for Plaintiffs/Appellants.
Elaine R. Turner, Susanna G. Voegeli, Oklahoma City, Oklahoma, for Defendant/Appellee.

BOUDREAU, J.

¶1 Oklahoma County offered its employees, like plaintiff Doug Wathor, access to its self-funded health insurance program called the Oklahoma County Health and Dental Plan (Plan). Oklahoma County hired defendant Mutual Assurance Administrators, Inc. (MAA) as its third party administrator (TPA).

¶2 Mr. and Mrs. Wathor (Wathors), individually and as parents of Nicholas, filed a petition alleging that MAA is an insurer who breached its contract with them and acted in bad faith when it violated Oklahoma's portability statute, 36 O.S. 2001 § 4509.2, which prohibits insurers from excluding pre-existing conditions from coverage if the insured had been covered under a previous plan.

¶3 The Wathors filed a motion for partial summary judgment on the issue of whether they could be denied coverage on the basis of a pre-existing condition. MAA filed a response and its own motion for summary judgment. In its motion, MAA asserted, among other things, that because it is a TPA, not an insurer, both of the Wathors' claims fail as a matter of law. The trial court agreed. It denied the Wathors' motion and granted MAA's motion. The Court of Civil Appeals affirmed. We granted certiorari to determine, among other issues, the first impression issue whether a third party administrator who is not an insurer may be subject to suit based on its alleged bad faith actions in administering an insurance plan.

I. STANDARD OF REVIEW

¶4 Summary judgment is appropriate only where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law. Oliver v. Farmers Ins. Group of Cos.,

II. BAD FAITH CLAIM

¶5 The Wathors contend the trial court erred in concluding they could not maintain a tort action against a third party administrator for breach of an insurer's duty of good faith. Every contract in Oklahoma contains an implied duty of good faith and fair dealing. Doyle v. Kelly,

¶6 Insurance contracts, however, are not ordinary commercial contracts. Id. A "special relationship" exists between an insurer and its insured stemming from the quasi-public nature of insurance, the unequal bargaining power between the insurer and insured, and the potential for an insurer to unscrupulously exert that power at a time when the insured is particularly vulnerable. Id. at 902-04. The special relationship creates a nondelegable duty of good faith and fair dealing on the part of the insurer. Id. An insurer's breach of this duty gives rise to a separate cause of action sounding in tort. Id. at 904.

¶7 The duty of good faith and fair dealing applies to activities after the establishment of the insurer-insured relationship, and includes the claims handling process. Kincade v. Group Health Services of Oklahoma, Inc.,

¶8 Normally, only the insurer owes the duty of good faith and fair dealing to its insured. Agents of the insurer - even agents whose acts may have been material to a breach of the duty - do not normally owe the insured a duty of good faith since agents are not parties to the insurance contract. Timmons v. Royal Globe Ins. Co.,

¶9 In the typical case the insured is adequately protected by the nondelegable duty that the law imposes on the insurer. However, the imposition of a nondelegable duty on the insurer does not necessarily preclude an action by an insured against a plan administrator for breach of an insurer's duty of good faith. In Wolf v. Prudential Ins. Co. of America,

¶10 In Wolf, the plan administrator had primary control over benefit determinations (including some intermediate appeals). As payment for administering the plan, the plan administrator received a percentage of the premiums paid for participant coverage. The plan administrator's percentage increased as losses decreased. In addition, if losses increased to a certain level, the plan administrator had to share the risk with the board; if losses got even higher, the plan administrator had to underwrite the entire risk.

¶11 In determining whether the plan administrator owed the insured a duty of good faith, the Tenth Circuit refused to decide the issue by simply concluding the plan administrator was a stranger to the insurance contract. Rather, the court emphasized that the analysis should focus on the factual question whether the plan administrator acted sufficiently like an insurer such that there was a "special relationship" between the plan administrator and the insured that would give rise to the duty of good faith. Id. at 797. The Tenth Circuit predicted the Oklahoma Supreme Court would impose a duty of good faith on an entity in the position of the plan administrator in Wolf, for the same reasons we imposed that duty on "true" insurers in Christian. Wolf,

¶12 We agree with the analysis of the Tenth Circuit under the facts presented in Wolf. In a situation where a plan administrator performs many of the tasks of an insurance company, has a compensation package that is contingent on the approval or denial of claims, and bears some of the financial risk of loss for the claims, the administrator has a duty of good faith and fair dealing to the insured.

¶13 Applying this analysis to the facts of this case, we observe the following. Like the plan administrator in Wolf, MAA unquestionably performed some of the tasks of an insurance company in its claims handling process. However, in contrast to the facts in Wolf, MAA's compensation package was not tied to the approval or denial of claims but was instead a flat fee based on the number of participants in the Plan. Likewise, MAA did not share the risk of loss with the Plan if losses increased to a certain level, and did not underwrite the entire risk if losses got even higher. In other words, under the facts presented in this case, MAA had neither the power, the motive, nor the opportunity to act unscrupulously. See Christian,

III. BREACH OF CONTRACT CLAIM

¶14 The Wathors also contend the trial court erred in dismissing their claim for breach of contract against MAA. While the Wathors are strangers to the Administrative Service Contract between Oklahoma County and MAA, it is well settled that third party beneficiaries of a contract may maintain an action on the contract. Keel v. Titan Constr. Corp., 1981 OK 148, 639 P.2d 1228; 15 O.S. 2001 § 29; see also 15 O.S. 2001 § 29 ("A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.").

¶15 Assuming, without deciding, the Wathors are third party beneficiaries of the Administrative Service Contract, that status merely entitles them to step into the shoes of Oklahoma County to enforce Oklahoma County's contractual rights against MAA. The Administrative Service Contract obligates MAA to provide claims handling service for Oklahoma County. It does not obligate MAA to pay covered claims on behalf of Oklahoma County. The relief sought by the Wathors from MAA is not claims handling service, but payment under the Plan for what they contend is covered treatment. Thus, even assuming the Wathors are third party beneficiaries of the Contract, that status does not entitle them to maintain a breach of contract action against MAA for failure to pay their claim. We affirm the trial court's judgment in favor of MAA on the Wathors' breach of contract claim.5

IV. CONCLUSION

¶16 Because of the special relationship between insurers and their insureds, Oklahoma imposes a duty of good faith and fair dealing on insurers which gives rise to an independent action in tort. Normally we do not impose such a duty on third party administrators of health insurance plans because the administrators are not parties to the insurance contract between the insurer and the insured. See Timmons v. Royal Globe Ins. Co., 1982 OK 97, 653 P.2d 907.6 However, such a duty may be imposed on a plan administrator where, under the specific facts and circumstances of the case, the plan administrator acts sufficiently like an insurer such that there is a "special relationship" between the plan administrator and the insured that gives rise to the duty.

¶17 The plan administrator in this case, MAA, does not act sufficiently like an insurer and therefor does not have a tort duty of good faith and fair dealing toward the Wathors. Accordingly, we affirm the trial court's judgment in favor of MAA on the Wathors' bad faith claim.

¶18 We also affirm the trial court's entry of judgment in favor of MAA on the Wathors' breach of contract claim. The Wathors are strangers to the Administrative Service Contract between Oklahoma County and MAA. Assuming, without deciding, that the Wathors are third-party beneficiaries of the Administrative Service Contract, that status does not entitle them to maintain a breach of contract action against MAA for failure to pay a covered claim because the Administrative Service Contract does not obligate MAA to pay covered claims on behalf of Oklahoma County.

OPINION OF THE COURT OF CIVIL APPEALS VACATED;
JUDGMENT OF THE TRIAL COURT AFFIRMED.

Concur: Hodges, Lavender, Kauger, Boudreau, Edmondson, JJ.
Concur in Result: Hargrave, Winchester, JJ.
Dissent: Watt, C.J., Opala, V.C.J.

FOOTNOTES

1As a TPA, MAA is subject to the Third-Party Administrator's Act, 36 O.S. 2001 §§ 1441 et seq. Pursuant to § 1442, an administrator is any person who collects premiums for an insurer or trust or whose adjuster settles claims for an insurer or trust, in connection with life or health insurance coverage or annuities in this State.

2 "We ruled over seventeen years ago [in Timmons v. Royal Globe Ins. Co., 1982 OK 97, 653 P.2d 907] that an insurer could not avoid liability for breach of the duty of good faith and fair dealing by delegating its responsibility to an independent contractor." Barnes, 11 P.3d 162, 167 n.5.

3The dissent argues that summary judgment should not have been granted because the trial court could not determine, on the record before it, whether MAA (the third party administrator) served as an agent for Oklahoma County or as an independent contractor. Under the facts of this case, this inquiry is legally irrelevant. The nondelegable duty of good faith and fair dealing arises from the "special relationship" created by an insurance contract. It is undisputed that MAA was a stranger to the insurance contract between Oklahoma County and Doug Wathor. Accordingly, MAA, whether it be characterized as an agent or an independent contractor, owed no such duty to the Wathors unless it acted sufficiently like an insurer such that there was a "special relationship" between it and the Wathors to give rise to such a duty. The undisputed facts in MAA's motion for summary judgment establish that it did not act sufficiently like an insurer.

4Although the dissent proposes to offer a different test from that adopted in Wolf v. Prudential Ins. Co. of America, 50 F.3d 793 (10th Cir. 1995), by the Tenth Circuit, the two tests are essentially identical. The dissent would inquire as to whether the tasks of the third party administrator are "integral to the functions of an insurer and encompass a well-defined legal duty making MAA liable qua insurer." Wolf would inquire as to whether the administrator acted sufficiently like an insurer such that there is a "special relationship" between MAA and the insured that would give rise to the duty of good faith.

5We are also convinced that the Wathors were covered for their medical expenses pursuant to Oklahoma's portability statute, 36 O.S.2001 § 4509.2, prohibiting insurers from excluding pre-existing conditions from coverage if the insured had coverage under a previous plan. However, under the facts of this case, they were required to pursue the coverage issue against the self-insured employer, Oklahoma County, rather than against the third party administrator, MAA.

6The dissent would extend direct liability for bad faith to the insurer's agents (e.g., adjusters, claims representatives, investigators employed by the insurer, and perhaps attorneys employed by the insurer), despite the fact that these agents are not insurers and are strangers to the insurance contract which gives rise to the duty of good faith on the part of the insurer. This is contrary to our holding in Timmons that agents of the insurer - even agents whose acts may have been material to a breach of the duty - do not normally owe the insured a duty of good faith since agents are not parties to the insurance contract.

The dissent also argues that the insurer "stands exonerated" if its agents (or independent contractors) bear no liability for a bad faith tort. This is simply not so. An insurer has a non-delegable duty of good faith while performing the functions of claims management, adjustment and settlement. This duty requires the insurer to take positive steps to adequately investigate, evaluate, and respond to its insureds' claims. An insurer may employ an agent or an independent contractor to perform these functions, but this does not absolve the insurer of its own non-delegable duty. If the agent or independent contractor fails to adequately perform the functions, the insurer is liable, not under the doctrine of respondeat superior, but because of its own failure to comply with its non-delegable duty of good faith.

OPALA, V.C.J.

¶1 I dissent from the court's opinion. It concludes Mutual Assurance Administrators, Inc. (MAA) had "neither the power, the motive, nor the opportunity to act unscrupulously."1 I would reverse the summary judgment given below to MAA and remand the cause to the trial court for a thorough exploration of the status MAA occupied vis-a-vis Oklahoma County (the County). Summary judgment is not appropriate for this case. The record is completely devoid of evidentiary material regarding MAA's relationship to the County. The status MAA held with respect to the County is critical to determining whether MAA may be held liable in tort for bad faith in its handling of appellants' insurance claims.

¶2 Because the nisi prius analysis (and that by the Court of Civil Appeals - the COCA) is inconsistent with Oklahoma's common law, I would direct that on remand the trial court conduct a fact-based inquiry to determine whether MAA functioned as the County's non-employee agent or as an independent contractor.2 If an agency relationship did exist between MAA and the County, the former may be liable in bad-faith tort. Its liability is rested on the premise that a principal may never bestow upon its agent immunity from tort the latter commits while acting for the former.3 On the other hand, if it should be found at nisi prius that MAA is an independent contractor, the inquiry must then go further to determine whether the tasks delegated to MAA by the County (qua principal and insurer) are: 1) those which are either nondelegable by an insurer or integral to its functions and 2) encompass a well-defined legal duty of an insurer. If so, MAA may be found liable for its own tortious acts for which the County would also be answerable under the rule that one's breach of another's nondelegable duty makes both the actor and the holder of a nondelegable duty responsible ex delicto.

I

ANATOMY OF LITIGATION

¶3 Appellants, Doug and Sharon Wathor, brought suit against appellee, MAA, alleging breach of contract and breach of an insurer's duty of good faith and fair dealing in failing to settle their claim for certain medical expenses incident to a pre-existing condition. At nisi prius summary judgment went to MAA. The COCA affirmed, holding that MAA, as a third-party administrator, is not subject to an insurer's duty of good faith.4 Appellants sought certiorari to determine whether a third-party administrator of an insurer may be liable in tort for bad-faith denial of a claim.

II

SUMMARY JUDGMENT IS NOT APPROPRIATE FOR THIS CASE
BECAUSE THE NISI PRIUS COURT MUST FIRST DETERMINE THE
STATUS MAA HELD VIS-A-VIS OKLAHOMA COUNTY, THE INSURER

¶4 The sine qua non analysis to be made here must begin by first determining whether MAA stood towards the County in the status of a non-employee agent or of an independent contractor.5 The MAA's status is material because: 1) if MAA acted as an agent, liability may be imposed here because an agent, while acting for the principal, cannot insulate itself from tort liability6 and 2) if MAA served as an independent contractor, liability may nonetheless be visited if MAA was performing a core function of the County and its well-defined duty as an insurer.7

¶6 Existence of a principal/agent relationship is determined by considering the actual intent and effect of the contract's language in light of the parties' actual day-to-day conduct vis-a-vis one another.

¶7 The record contains no evidentiary material for resolution of the critical fact issue of whether MAA acted for the County as its agent or as an independent contractor. If the latter, what were MAA's duties? MAA's status vis-a-vis the County must be resolved before it may be determined whether liability is imposable on MAA for failing to settle the claim in suit in good faith.

III

WHETHER BY ACCIDENT OR DESIGN, TODAY'S PRONOUNCEMENT
EMASCULATES THE BAD-FAITH CHRISTIAN TORT AND SENDS IT ON
A CHAOTIC PATH TO VIRTUAL EXTINCTION

A.

Today's Refinement Of The Mandatory Relationship Between the Insured-
plaintiff and the Policy-writing Insurer Who Failed, Directly or Through Others,
to Settle the Claim in Good Faith Imposes a New Actionability Requirement That
Is Inconsistent With

¶8 Christian

¶9 Whether by design or accident, this new sine qua non relationship of the insured to every bad-faith defendant will have a far-reaching impact on the future complexion of that tort. Corporate insurers do business only through others - human agents or corporate contractors. If, as the court appears to declare today, insurer's agents (or independent contractors) bear no liability for a bad-faith tort while not insurers themselves but rather on a mission for the insurer, the insurer itself stands exonerated by operation of law and by issue preclusion.

B.

Christian's Progeny Requires Of A Plaintiff No More Than An
Insured/Insurer Relation with The Policy-issuing Insurer

¶10 The court cavalierly declares the Administrator's status vis-a-vis the County as "legally irrelevant." This is so because the court concludes the harmed plaintiffs lacked a contract-based "special relationship" vis-a-vis the Administrator. This very pronouncement infuses the Christian tort with nothing short of legal schizophrenia. The "special relationship" our jurisprudence requires is that between the policy-writing insurer and its insured and not that between the insured and the insurer's (non-employee) agents (or its independent contractors hired to manage, adjust or settle claims). It is sufficient for liability's imposition to show that the insurer is the defendant's principal or its hirer (for claims settlement tasks).

C.

Today's Added Requirement - That Every Bad-faith Defendant Stand Vis-a-vis
the Plaintiff in the Relation of Insurer - Will Have A Predictably Destructive
Impact on the Future Course of the Christian Tort

¶11 Today's summary exoneration of the Administrator most assuredly crafts tomorrow's ready-made liability-defeating defenses. Insurers (and all those acting for them except possibly their direct employees) will invoke these defenses because the immunization of their actors will effectively exonerate the hirers.25 The liability shield they will raise is that which the court has fashioned for them here.26 They will doubtless focus their quest for immunity from liability on want of insurer/insured relationship between the plaintiff and the harm-dealing actor clad or masquerading in the lawsuit as an independent third-party entity. If successful, insurers will hasten to transfer the function of managing, adjusting and settling claims to a third party, all in an effort to escape responsibility for bad-faith refusal to settle covered losses. If this is what the court desires to spawn, its pronouncement should crisply say so. If not, the Administrator's status does indeed matter. It must be fully explored and settled before exoneration may be effected.

¶12 The ominous cloud the court has cast over the insurer's bad-faith liability should be allowed neither to disturb the industry's business nor plant doubt in the minds of the insureds. Delphic oracles no less than revolutionary legal changes rob the law and the public marketplace of a badly needed opportunity for orderly business growth in an atmosphere of calm and stability. Uncertainty generated by shifting judicial climates tends to have a disruptive effect on day-to-day activity and adversely to affect the quality of deliverable legal-advice services.

D

The Principle of Nondelegable Duty Operates To Extend the Hirer's (County's)
Liability But Does Not Exonerate the Actor (Administrator) of its Individual Tort
Liability; The Latter Is Secondarily Liable for the Bad-faith Tort and Would
Have an Equitable Indemnity Claim Against the Primarily Liable Actor/Hirer

¶13 From a statement in Timmons v. Royal Globe27 (that an insurer has a nondelegable duty to settle in good faith), the court draws an utterly unwarranted conclusion that its Timmons pronouncement is broad enough to exonerate every non-employee agent and every independent contractor of its individual liability. In doing so, the court magnifies the principle of nondelegable duty beyond its legal limit by stretching it into immunity from tort liability - a concept not included in the construct. The teachings of Timmons clearly do not include exoneration extending that far.

¶14 The principle of nondelegable duty28 is an exception to the general rule29 that the hirer of an independent contractor is not ordinarily liable for the negligence of the independent contractor. The nondelegable-duty concept operates to extend the hirer's liability. This is so because that liability extends to the torts of the hirer's independent contractors, but it does not relieve the independent contractors of individual tort liability. 30 If there is recovery against an independent contractor,31 the latter will, based on equitable indemnity, have a claim against the hirer with a nondelegable duty. 32

¶15 Indemnity is a right which inures to one who discharges a duty owed by him, but which, as between himself and another, should have been discharged by the other.33 The remedy of indemnity is appropriate where one party has a primary or greater liability or duty which requires him to bear the whole of the burden as between the parties.34 The indemnity concept transfers liability from one who has been compelled to pay damages to another where the entire loss should have been borne by a third party.35 In short, where two parties are separately liable to a third party for a bad-faith tort, one of them primarily (because it has a nondelegable duty), and the other secondarily, if there is recovery against the secondary obligor, the latter would have an equitable indemnity claim36 against the primary obligor.

¶16 The County and Administrator bear separately liability for the latter's bad-faith refusal to settle covered losses. The County is the primary obligor because it has a nondelegable duty (qua insurer) to settle claims in good faith and cannot escape its liability by engaging an independent contractor. The Administrator, who is a secondary obligor but was was sued alone, would have an indemnity claim against the County. By immunizing the Administrator today's pronouncement will make the so-called liability for nondelegable duty unenforceable. This is so because no one can be vicariously liable for the acts of another which are not actionable.37

E.

The Notion of Immunizing from Bad-Faith Tort Liability Third Parties Acting As (Non-employee) Agents and Independent Contractors In Managing, Adjusting and Settling An Insurer's Claims offends the Procedural Symmetry Mandated By Art. 5, § 46, Okl.Const

¶17 Assuming the court intends to let the Christian tort die a slow and painful death to be inflicted by the insured's lack of standing to proceed against the insurer-controlled instrumentalities - i.e., human or corporate non-employee agents (or insurer-hired independent operators) - its jurisprudence runs afoul of Oklahoma's constitutional interdiction of law that is special.

IV

SUMMARY

¶18 This case was incorrectly decided by summary process. That process was inappropriately applied. Full-scale inquiry into MAA's status vis-a-vis the County is required to determine whether MAA may be held liable in bad-faith tort. No court can decide, on this record, whether MAA served as a non-employee agent for the County or as an insurer-hired independent contractor performing well-defined core functions of an insurer. Because the conduct of the contracting parties (MAA and the County), one toward the other, has not been inquired into, no conclusion may be drawn at this stage as to the Administrator's liability.

¶19 If MAA was a non-employee agent, it may be liable in tort to the same extent as its principal (the County). If MAA was in fact an insurer-hired independent contractor performing a well-defined core function of the insurer (County), MAA may also be declared liable qua insurer.

¶20 There is no extant state jurisprudence supporting the notion foisted here today that for imposition of bad-faith liability, if the insurer's claims management function is handled by a third party, the third party must also stand vis-a-vis the insured in an insurer/insured relationship. Extant precedent requires no more than that an insurer/insured relation subsist solely between the plaintiff and the policy-issuing entity for the covered claim. If the court intends to now abandon or abrogate its Christian progeny, its opinion should clearly and explicitly state so. If that is not its intention, it ought not leave the bad-faith tort in a hopelessly chaotic aftermath. An explanation is due on how an insured may proceed when the bad-faith refusal to settle is occasioned directly by the insurer's (non-employee) human or corporate agency or by its independent hiree assigned the task of management, adjustment and settlement of losses.

¶21 I would reverse the trial court's summary exoneration of MAA and remand the cause for further proceedings to be conducted in a manner fully consistent with a piercing analytical inquiry urged by this dissent for post-remand proceedings.

FOOTNOTES

1 The court comes to this conclusion based in part on the premise that an agent for a disclosed principal is not liable in an action for breach of contract. Restatement (Second) of Agency § 320. A cause of action for breach of an insurer's duty of good faith is ex delicto. It was first recognized in Christian v. American Home Assurance Co., where it is stated:

[T]his 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. Breach of the duty sounds in tort, notwithstanding that it also constitutes a breach of contract, and plaintiff insured may recover consequential and, in a proper case, punitive damages. The essence of the cause of action is bad faith. [emphasis supplied]

1977 OK 141, ¶ 6, 577 P.2d 899, 901.

2 For MAA's exoneration the court relies here on the decision by the United States Court of Appeals for the Tenth Circuit in Wolf v. Prudential Ins. Co. of America, 50 F.3d 793 (10th Cir. 1995), where an exception was made to the general rule that an agent is always liable in tort. Wolf is neither a judicial declaration of Oklahoma's common law nor a recognized source of state law.

I suggest a different test from that announced in Wolf, supra. There, the federal court focused on whether the plan administrator sufficiently "acts like an insurer . . . [so] that there is a 'special relationship' between the administrator and the insured." Id. at 797. The Wolf view is plainly inconsistent with Oklahoma's common law. The correct analysis must focus on whether the specific, well-defined duty the administrator is alleged to have violated is so integral to the business of the insurer-hirer as to make it nondelegable. Coe v. Esau, 1963 OK 1, ¶¶ 11-15, 377 P.2d 815, 819. For a discussion of the principle of nondelegable duty, see infra Part III(D) ¶¶13-16 of the text.

3 The heart of agency is expressed in the ancient common-law maxim qui facit per alium facit per se (the act of the agent or servant is the act of the principal or master). Sisk v. J. B. Hunt Transport, Inc., 2003 OK 69, ¶7 n.15, ____ P.3d ___; State ex. rel. Oklahoma Bar Ass'n v. Taylor, 2000 OK 35, ¶19 n.31, 4 P.3d 1242, 1251; Nelson v. Pollay, 1996 OK 142, ¶7 n.23, 916 P.2d 1369, 1374; North Side State Bank v. Board of County Com'rs of Tulsa County, 1994 OK 34, ¶14 n.25, 894 P.2d 1046, 1051 n.25; Anderson v. Eichner, 1994 OK 136, ¶12 n.24, 890 P.2d 1329, 1337. As the Restatement (Second) of Agency § 343 states "[a]n agent who does an act otherwise a tort is not relieved from liability by the fact that he acted at the command of the principal or on account of the principal..."

The rule of law that an agent is not excused when committing tortious or criminal conduct is widely recognized. In an early Oklahoma case it is expressed thusly:

The law of principal and agent does not apply when the agent, in pursuit of a lawful purpose, sets aside, and engages in the commission of a wrong, to the injury of the property or personal rights of another...Instead of the relation of the principal and agent existing and the law relating thereto being applicable, the transaction resolves itself into a conspiracy between and among the parties engaged in the commission of the wrong, and each and every party accepting benefits with knowledge of the wrong, and aiding or engaging in the wrong, are tort-feasors, and the law will hold each party jointly and severally liable in damages for the injury suffered by the wronged person.

Rogers v. Brummett, 1923 OK 711, ¶ 3, 220 P. 362, 365.

The United States Supreme Court took a similar position when it stated that "[N]either a state nor an individual can confer upon an agent authority to commit a tort so as to excuse the perpetrator." Hopkins v. Clemson Agric. College of South Carolina, 221 U.S. 636, 643, 31 S. Ct. 654, 656-57, 55 L. Ed. 890 (1911).

4 The COCA limited its holding to the specific facts of this case, stating "[MAA] does not act like an insurer such that there is a special relationship between it and Plaintiff that could give rise to the duty of good faith." For its conclusion the COCA represents that it has relied on this court's decision in Christian, supra note 1. I find no support in Christian for COCA's quoted statement of the pertinent rule.

5 Agency is governed by common-law principles. See Restatement (Second) of Agency.

6 Based on the common-law duty that all individuals must act or refrain from acting in a manner that brings harm to others, an agent cannot insulate itself from tort liability. Whether acting on his own behalf or on behalf of his principal, an agent will not be relieved from the consequences of his tort merely because he (or she) stood in an agency relationship when the tort occurred. Hopkins, supra note 3 at 643; Restatement (Second) of Agency § 343, supra note 3.

7 A finding that MAA served as independent contractor does not complete the required analysis. The trial court must next determine whether the County delegated to MAA a well-defined duty integral to its business as an insurer. If MAA performed obligations integral to those of the insurer and involving the latter's well-defined legal duty to the insured, it may be liable qua insurer.

For example, each Oklahoma insurer has a nondelegable duty to settle claims in good faith. Settling and paying claims is the most basic function of an insurer. Christian, supra note 1, at ¶ 25, 577 P.2d at 904 ("We approve and adopt the rule that an insurer has an implied duty to deal fairly and act in good faith with its insured"); Coe, supra note 2, at ¶¶ 12-15, at 819; Taylor v. State Farm Fire and Casualty Co., 1999 OK 44, ¶ 9 n. 19, 981 P.2d 1253, 1258 n. 19. When MAA carries out this duty it acts exactly as if it were the insurer. If MAA, as an independent contractor, discharges the duty (of paying or settling claims) in bad faith MAA is liable qua insurer. Any other result would be contrary to the principles of common-law tort liability. In short, MAA, or any other entity, when acting as or for an insurer, must be held to the same standard of good faith and fair dealing as an insurer itself.

8 Hinson v. Cameron, 1987 OK 49, ¶5, 742 P.2d 549, 511, citing Flanders v. Crane Co., 1984 OK 88, 693 P.2d 602, 602.

9 A-Plus Janitorial & Carpet Cleaning v. Employers' Workers' Compensation Ass'n, 1997 OK 37, ¶ 32, 936 P.2d 916, 930.

10 Enterprise Management Consultants, Inc. v. State of Oklahoma ex rel. the Oklahoma Tax Comm'n, 1988 OK 91, ¶ 6 n. 12, 768 P.2d 359, 362 n. 12.

11 Enterprise Management Consultants, Inc., supra note 10, at ¶ 6 n. 12, 362 n. 12.

12 Enterprise Management Consultants, Inc., supra note 10, at ¶ 6 n. 13, 362 n. 13; Coe, supra note 7, at ¶ 8, 377 P.2d at 818.

13 Enterprise Management Consultants, Inc., supra note 10, at ¶ 6 n. 13, 362 n. 13. See also Restatement (Second) of Agency § 1 which defines the principal/agent status as "a 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." [Emphasis added.]

14 The Restatement (Second) of Agency §2(3) defines an independent contractor as "a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking."

15 Supra note 1.

16 Allstate Ins. Co. v. Amick, 1984 OK 15, ¶¶14-15, 680 P.2d 362, 364-65. Amick limited the outer reach of the Christian tort's benefit only to those who stood vis-a-vis the defendant-insurer in a relationship of insured. Amick's circumscription of the standing zone for plaintiffs does not require that recoverable harm must be inflicted by one acting for the insurer who also stands vis-a-vis the insured in a contractual relation. The addition of the latter requirement is today's ipse dixit.

17 See authorities infra note 23.

18See ¶8 n.3 of the court's opinion.

19 The court creates a legal paradox when it strains to hold that an insurer's agents and all of its independent contractors are not liable in tort. This would make the insurer's liability exclusive. But insurers are corporate bodies and cannot act without human agents. By immunizing non-employee agents from bad-faith torts committed for the principal, the court today is setting insurers' controlled instrumentalities on a liability-free bad-faith frolic.

20 Vicarious liability is imposed by law when one person is made answerable for the actionable conduct of another. Braden v. Hendricks, 1985 OK 14, ¶ 18, n.24, 695 P.2d 1343, 1351, n.24. Restatement (Third) of Torts §13 (Vicarious Liability), Comment a: "In a number of contexts, the responsibility of one actor is legally imputed to another, and vicarious liability is imposed. The most familiar example is respondeat superior - the liability of a principal for the tortious acts of an agent and that of a master for tortious acts of a servant. See Restatement Second, Agency §§ 219, 243-245. In some circumstances the employer [hirer] of an independent contractor may be held liable for the negligence of the [independent] contractor. See Restatement Second, Torts §§ 416-429."

It is axiomatic that a principal cannot be made liable by application of respondeat superior if the agent's actions are not actionable. Cnota v. Palatine Area Football Ass'n, 592 N.E.2d 196, 204 (Ill.App.1992); Dumas v. Lloyd, 6 Ill.App.3d 1026, 286 N.E.2d 566, 569 (Ill.App.1972); Peoples v. Conway, 897 S.W.2d 206, 208 (Mo.App.1995) (where an employee is exonerated of respondeat superior liability the employer also must stand exonerated); Fish v. Southern Pacific Company, 173 Or. 294, 143 P.2d 917 (1943), reh. den. 145 P.2d 991 (1944) (where vicarious liability is based solely on the wrongful act of an agent, exoneration of the agent exonerates the principal).

21 A voluntary affirmative act by which an actor in the respondeat superior setting is released also releases the master's liability. Sisk, supra note 3, at ¶ 7 ("The common-law doctrine [of vicarious liability] teaches that an effective release of the servant operates to release the master.").

22 See, e.g., Hedquist v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 528 S.E.2d 508, 510 (Ga.2000); Harris v. St. Mary's Medical Center, Inc., 726 S.W.2d 902, 905 (Tenn.App.1987); Gibson Lumber Co. v. Neely Coble Co., Inc., 651 S.W.2d 232, 234 (Tenn.App.1983); Kirk v. Michael Reese Hospital & Medical Center, 117 Ill. 2d 507, 111 Ill.Dec. 944, 513 N.E.2d 387, 399 (Ill.1987); Towns v. Yellow Cab Co., 382 N.E.2d 1217, 1221 (Ill.App. 1978). Issue preclusion prevents relitigation of facts and other issues actually litigated and necessarily determined in an earlier proceeding between the same parties or their privies (or others if the issues were fully and fairly litigated). Underside v. Lathrop, 1982 OK 57, ¶6 n.8, 645 P.2d 514, 517 n.8; Veiser v. Armstrong, 1984 OK 61, ¶8 n.9, 688 P.2d 796, 8009 n.9.

23 If there was an insurer-insured relationship between the plaintiffs and the insurance entity for whom the Administrator (or its hired independent contractor) was acting when harm stood inflicted, the "special relationship" that Christian's progeny requires stands satisfied. See Kuykendall v. Gulfstream Aerospace Technologies, 2002 OK 96, ¶19, 66 P.3d 374, 382; First Bank of Turley v. Fidelity and Deposit Ins. Co. of Maryland, 1996 OK 105, ¶20 n.31, 928 P.2d 298, 306-07; Gianfillippo v. Northland Cas. Co., 1993 OK 125, ¶¶8-10, 861 P.2d 308, 310 (an injured auto passenger covered by the driver's liability insurance policy may not bring a bad-faith action against the insurer); Goodwin v. Old Republic Ins. Co., 1992 OK 34, ¶6, 828 P.2d 431, 432-33; Amick, supra, note 16, at ¶¶14-15, at 364-65.

24 Amick, supra, note 16, at ¶¶14-15, at 364-65.

25 Sisk, supra note 3, at ¶ 7.

26 The court today exonerates the insurer from (a) respondeat superior liability and (b) liability for the acts of those who breach the insurer's nondelegable duties.

27 1982 OK 97, ¶22, 653 P.2d 907, 914.

28 One who owes a nondelegable duty to another cannot escape liability for its performance by engaging an independent contractor. In such cases, the rule that the hirer is not liable for actionable conduct of an independent contractor will not be applied. Braden v. Hendricks, 1985 OK 14, ¶ 19, 695 P.2d 1343, 1352, n. 26; Shell Pipe Line Corp. v. Curtis, 1955 OK 212, ¶ 13, 287 P.2d 681, 685; Allied Hotels, Limited v. Barden, 1964 OK 16, ¶ 15, 389 P.2d 968, 971. In Oklahoma Ry. Co. v. Boyd, 1929 OK 82, 282 P. 157, 162, 140 Okl. 45, it is said, "Where one owes a nondelegable duty to third persons, he cannot escape the obligation of performing such duty by engaging for its performance through or by a contractor, and in such cases the rule that an employer is not liable for the negligence of an independent contractor has no application." See Copeland v. The Lodge Enterprises, Inc., 2000 OK 36, ¶ 12, n.26, 4 P.3d 695, 700 quoting Great American Indemnity Co. v. Deatherage, 1935 OK 1156, 52 P.2d 827, 830-31, 175 Okl. 28 ("... the general rule of nonliability of the contractee is that one on whom the law imposes a positive duty to the public or an individual cannot escape the responsibility of seeing that duty performed by delegating it to an independent contractor, and will be liable for injuries resulting from the contractor's negligence in the performance thereof"); U.S. Security Services Corp. v. Ramada Inn, Inc., 665 So. 2d 268, 270 (Fla. App. 1995). For a discussion of nondelegable duty owed by a public utility, see Bouziden et al. v. Alfalfa Elec. Co-op., Inc., 2000 OK 50, 16 P.3d 450, 462-63 (Opala, J., dissenting).

Nondelegable duties are addressed in the Restatement (Second) of Torts §§ 416-425. The theory of nondelegable duties is also dealt with in § 214 of the Restatement (Second) of Agency, which states: "A master or other principal who is under a duty to provide protection for or to have care used to protect others or their property and who confides the performance of such duty to a servant or other person is subject to liability to such others for harm caused to them by the failure of such agent to perform the duty."

29 For the general rule of nonliability see Restatement (Second) of Torts § 409. Its terms are:

Except as stated in §§ 410 to 429, the employer of an independent contractor is not subject to liability for bodily harm caused to another by a tortious act or omission of the contractor or his servants.

30 Sisk, supra note 3, at ¶ 7.

31 In Copeland v. The Lodge Enterprises, Inc., 2000 OK 36, ¶ 12, n. 25, 4 P.3d 695, the court states:

"The rule in Oklahoma is that a person who performs work through an independent contractor is not liable for damages to third persons caused by the negligence of the contractor except where the work is inherently dangerous or unlawful or where the employer owes a contractual or defined legal duty to the injured party in the performance of the work." (emphasis added). Williamson v. Fowler Toyota, Inc., 1998 OK 14, ¶ 7, 956 P.2d 858, 860, quoting from Hudgens v. Cook Industries, Inc., 1973 OK 145, ¶ 11, 521 P.2d 813, 815. See also, Huckins Hotel Co. v. Clampitt, 1924 OK 142, 101 Okl. 190, 224 P. 945, 946-947, Minnetonka Oil Co. v. Haviland, 1916 OK 103, 55 Okl. 43, 155 P. 217, 219; W. Page Keeton et al, Prosser and Keeton on the Law of Torts § 71, at 511-512 (5th Ed. 1984).

Copeland

32 Porter v. Norton-Stuart Pontiac-Cadillac of Enid, 1965 OK 18, ¶0, syl., 405 P.2d 109, 110 ("Where two parties are jointly liable to a third party . . . [for] a tort, one of them primarily for the reason that he is the actual wrongdoer, and the other secondarily and constructively under the rule of respondeat superior but without any fault having a causal connection with the third party's injuries, the latter may recover from the former the amount he has been compelled to pay as damages for the injury"). See Restatement (First) of Restitution § 76 ("A person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity from the other, unless the payor is barred by the wrongful nature of his conduct.").

33 Porter, supra note 32 at 113.

34 Id.

35 Id.

36 Noncontractual or equitable indemnity may arise from a legal relationship between the parties. National Union Fire Ins. Co. v. A.A.R. W. Skyways, Inc., 1989 OK 157, 784 P.2d 52, 54; Travelers Ins. Co. v. L.V. French Truck Serv., Inc., 1988 OK 76, 770 P.2d 551, 555 n. 16 (Okla.1988)). One who is only secondarily obligated to pay damages would have an indemnity claim against the primary obligor who owes a nondelegable duty. Porter, supra note 32 at 113.

37 Sisk, supra note 3, at ¶ 7. Sisk teaches that there can be no vicarious liability for another's acts that are immunized. By today's exoneration of the actor, the court's declaration that it has preserved the insurer's liability for a nondelegable duty becomes illusory.

38 The pertinent terms of Art. 5 § 46, Okl.Const., are:

"The legislature shall not, except as otherwise provided in this Constitution, pass any local or special law authorizing:

* * *

Regulating the practice or jurisdiction of ... in judicial proceedings or inquiry before the courts ... or other tribunals ....."

39 See the terms of Art. 5 §46, Okl.Const., supra note 38. Special laws are those which single out less than an entire class of similarly affected persons or things for different treatment. If a rule of law is special, § 46 absolutely and unequivocally prohibits its passage as law. Reynolds v. Porter, 1988 OK 88, ¶¶ 13-21, 760 P.2d 816, 821-24. In Porter the court held that making a statute of limitations applicable to one tort - i.e., singling out one tort for a different limitation from that which is applicable to other torts of the same rubric - violates Art. 5 §46, Okl.Const., because it provides disuniform procedures for a tort of like attributes. By today's pronouncement all tortfeasors, except insurers in bad-faith cases, would remain liable under respondeat superior for the torts of their agents and jointly for the torts of those independent contractors upon whom an obligation can be imposed. Creating a single exemption from the respondeat superior liability class would similarly fall under the axe of a special-law condemnation.