Guide for Causes of Action for Bad Faith Claims

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Last Updated
July 20, 2021

Bad Faith Claim by Common Law

Oklahoma does not have statutory grounds for bad faith.

Bad Faith Claim by Common Law

Generally, there is no third-party bad faith. A true third party lacks standing to sue for bad faith. Allstate Ins. Co. v. Amick, 680 P.2d 362 (Okla. 1984). An insurance company owes a duty of good faith to a party to the contract of insurance. It is from this contractual relationship, or in some cases a statutory requirement, that the duty of good faith arises. McWhirter v. Fire Ins. Exchange Inc., 1994 OK 93, 878 P.2d 1056 (Okla. 1994); Gianfillippo v. Northland Cas. Co., 1993 OK 125, 861 P.2d 308 (Okla. 1993); Without this relationship an action for bad faith must fail. Hoar v. Aetna Cas. & Sur. Co., 1998 OK 95, 968 P.2d 1219. Oklahoma law clearly provides that an insured cannot bring a bad faith claim against an insurance agency or its agent because they are not parties to the insurance contract. United Adjustment Servs. v. Prof'l Insurors Agency, LLC, 2013 OK CIV APP 67, ¶ 21, 307 P.3d 400, 405

However, third-party Class II can sue regarding automobile coverage. In Townsend v. State Farm Mutual Automobile Insurance, 1993 OK 119, 860 P.2d 236, the Court concluded Townsend, who was covered by the insured driver's uninsured motorist policy as an occupant in an insured vehicle, had both a statutory and contractual relationship with the insurer. Their basis for the "contractual relationship" was that "Penn, the named insured, purchased protection from uninsured motorists for himself, for family members, for permissive users, and for passengers. This gave rise to a legitimate contractual expectation that the insurer would act in good faith and deal fairly with all insureds, whether they were of a class 1 or class 2." Townsend, 1993 OK 119, P10, 860 P.2d at 238.

A bad faith claim is assignable, so long as it is first reduced to judgment. Once it’s reduced to judgment, it is considered a property and recovery of that judgment can be assigned. United Adjustment Servs. v. Prof'l Insurors Agency, LLC, 2013 OK CIV APP 67, 307 P.3d 400

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Chartwell Law represents the interests of insurers and employers, as such, we continue to continue to monitor the legal landscape. If you have any questions about issues associated with right of action for bad faith claims, our attorneys are available to help. Please contact your Chartwell Law attorney.