Bad Faith Blog

The Oklahoma Supreme Court held that whether a property owner under a contract for deed is owed a duty of good faith and fair dealing by an insurer of previous owner’s insurance policy is a question of fact. Hensley v. State Farm Fire and Casualty Company, 398 P.3d 11 (Ok. 2017) State Farm Fire and Casualty Company (“State Farm”) issued a homeowners policy to named insured Kenneth Hensley and his wife (“Hensleys”).

Summary: The seller of a home was insured under a Homeowner’s Policy and a Renter’s Policy issued by United Services Automobile Association (USAA). Past basement problems, including flooding, were not disclosed by the seller. The basement flooded after the buyer took possession, and buyer sued the seller. After USAA denied coverage, the parties reached a settlement wherein a consent judgment was entered for $300,000 in favor of Huckins in the underlying case and Huckins then filed suit against USAA for breach of the duty to defend Van Sickle, breach of contract, common law and statutory bad faith, and punitive damages. The District Court held that USAA had not breached its duty to defend, as the claim was not an “occurrence,” and the buyer appealed. The Montana Supreme Court reversed and held USAA had a duty to defend under the renter’s policy.

Summary: American Modern insured James and Ruth Roller when Mr. Roller set fire to the garage in a failed suicide attempt. American Modern investigated the loss, denied their claim, and then the Rollers filed a declaratory judgment action. The trial court denied coverage which the appellate court affirmed on all grounds.

Summary: A homeowner’s insurer brought an action against the insured for declaratory judgment that liability coverage was barred by an exclusion for bodily injury resulting from use of a “jet ski.” The insured counterclaimed alleging bad faith. The trial court found for the insurer on the bad faith claim after a first appeal found coverage was owed. The court held on the appeal of the bad faith ruling that the meaning of “jet ski” was ambiguous and fairly debatable, barring the bad faith action.