The Oklahoma Court of Civil Appeals recently addressed whether an insurer that had settled a claim by its insured for a violation of the duty of good faith and fair dealing could seek to recover a portion of the settlement from its soliciting agent under indemnity or contribution theories. In GuideOne America Ins. Co., Inc. et al. v. Shore Ins. Agency and Nancy Shore, 2011 OK CIV APP 69, the Court held that no such recovery was permissible. That facts that led to the dispute were as follows. The insured called the soliciting agent (Shore) following an automobile accident. Shore initially called the insurer (GuideOne) to check the insured’s coverage. Shore later spoke to the insured and told her that GuideOne’s UM coverage would not “kick in” until the other driver’s liability insurance “paid everything.” The insured asked Shore not to report the claim because she was afraid the new claim, when combined with her prior claim history, would cause the cancellation of her policy with GuideOne.
Roughly three months later, the insured apparently changed her mind and submitted a claim to GuideOne. The insured spoke directly with a GuideOne representative and relayed the incorrect advice previously received from Shore about when her UM coverage would kick in. Despite knowing that Shore’s advice was incorrect, the GuideOne representative failed to correct the insured’s misimpression.
The insured filed suit against GuideOne for breach of contract and for breach of the duty of good faith and fair dealing. GuideOne settled the suit by its insured. GuideOne sued for indemnity and contribution from the Shore Insurance Agency, which moved for and was granted summary judgment on GuideOne’s claims for indemnity, implied indemnity and contribution.
The Court of Civil Appeals made short work of the indemnity claim based on the Independent Agent Contract with GuideOne. Because that contract contained no provision requiring the Shore Agency to indemnify GuideOne, the Court of Civil Appeals held that summary judgment on that claim was appropriate.
The Court of Civil Appeals next considered GuideOne’s claim for implied indemnity. GuideOne sought implied indemnity because it claimed the settlement represented a payment on behalf of the Shore Agency–presumably as a result of vicarious liability The Court of Civil Appeals rejected that claim too, finding the undisputed evidence established that GuideOne paid the settlement, at least in part, because its representative knew the insured was operating under a misimpression about her UM coverage but failed to correct it and for that reason was ineligible to seek implied indemnity.
Lastly, the Court of Civil Appeals addressed whether GuideOne could seek contribution from the Shore Agency. The Shore Agency argued against contribution pointing out that GuideOne’s duty of good faith and fair dealing was non-delegable. Recognizing this problem, GuideOne responded by arguing the Shore Agency negligently failed to timely report the insured’s claim and further asserted the Shore Agency owed a duty to “assist policyholders and cooperate with adjustors in reporting and handling claims and render such other services to policyholders as may properly and reasonably be provided by an Agent” arising out of the Independent Agent Contract with GuideOne. The Court of Civil Appeals rejected the contract-based contribution claim. In reference to the Independent Agent Contract, the Court held that this contract was not the contract on which the insured based her claim against GuideOne and in any event contribution cannot be had for joint breach of a contract. The Court of Civil Appeals also rejected the negligence based claim. Here, the Court of Civil Appeals noted that GuideOne could not have been liable (or paid a settlement) for mere negligence because the bad faith claim brought against it by its insured requires a showing of more than mere negligence. Thus, even if GuideOne was correct that the Shore Agency was negligent, that conduct could not have been the responsibility of GuideOne, which could not be held liable for mere negligence in dealing with its insured. The Court of Civil Appeals concluded that the Shore Agency and GuideOne were not and could not be “jointly or severally liable in tort for the same injury” to the insured and thus summary judgment in favor of the Shore Agency was appropriate.
The GuideOne America Ins. Co. decision reiterates the Oklahoma Supreme Court’s earlier holdings that require more than mere negligence to establish liability for breach of the duty of good faith and fair dealing. The decision also reinforces the rule that soliciting agents do not owe a separate duty of good faith and fair dealing to insureds. Finally, GuideOne America Ins. Co. established clear guidance for drafting agent agreements between Soliciting Agents and insurers. Any insurer that wishes to allocate between itself and its soliciting agent all or some of a later determined bad faith liability must very clearly provide for that allocation via contract. Absent a clear contractual provision, the insurer will bear the entire liability in a bad faith scenario even if the soliciting agent negligently initiated or contributed to the problem.