Chandler (U.S.A.), Inc. v. Tyree

Citations: 2004 OK 16; 87 P.3d 598; 75 O.B.A.J. 847; 2004 Okla. LEXIS 18; 2004 WL 422993Docket: 96,436

Court: Supreme Court of Oklahoma; March 9, 2004; Oklahoma; State Supreme Court

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The Supreme Court of Oklahoma reviewed a case involving Chandler (U.S.A. Inc., National American Insurance Company, and Lagere Walkingstick Insurance Agency, Inc.) against Terry J. Tyree, the Commissioner of the State Insurance Fund. The central issue was whether the Commissioner was obligated to provide workers' compensation insurance to Chandler, a competitor in the insurance market. Chandler sought a writ of mandamus to compel the Fund to issue the insurance policy, which the District Court initially granted.

The Supreme Court noted that Chandler had not met its burden of proof and required further discovery to substantiate its claims. The appellate jurisdiction was questioned due to the Fund's motion to dismiss the appeal as moot, asserting that Chandler had obtained workers' compensation insurance from another source. Chandler countered that the appeal was not moot, citing potential damages stemming from the Fund's failure to issue the policy and the public interest in the matter. The court aimed to resolve the jurisdictional issues before addressing the merits of the case.

Chandler's damages claim is currently pending in the District Court, and the procedure for mandamus permits the inclusion of damage adjudication as part of that process under 12 O.S.2001. 1460. The case of Braine v. City of Stroud established that damages due to wrongful conduct relevant to a mandamus action are recoverable and that failing to request these damages could lead to a res judicata claim in future actions. The relationship between the pending damages claim and the mandamus claim remains undiscussed by the parties. If the damages are part of a single cause of action that includes the mandamus relief, the mandamus order would be interlocutory and not a final judgment, thus not appealable under 12 O.S.2001. 681.

The district court's writ does not qualify as a timely appeal since no certification under 12 O.S.2001. 994 was made, indicating the order is non-appealable until all claims are resolved. Previous cases have highlighted issues arising from trial courts adjudicating parts of a cause of action without an appealable order. The court must dismiss the appeal due to lack of jurisdiction, but a writ of prohibition is issued to prevent enforcement of the trial court's writ while allowing further proceedings. The Commissioner contends the case is moot; however, the court maintains jurisdiction to issue prohibition despite mootness concerns, as mootness does not prevent review when the issue may recur.

The Fund contends that the dispute is moot since Chandler acquired workers' compensation insurance from another provider. In contrast, Chandler maintains that the issue remains actionable due to an ongoing claim for damages. The Legislature has established a public policy requiring that employees under the Workers Compensation Act must be covered by either insurance or a self-insurance plan demonstrating the employer's financial capability. The court holds that Chandler's alternative insurance does not render the dispute moot, thus denying the Fund's motion to dismiss on those grounds.

Regarding jurisdiction, the appeal is deemed untimely, regardless of whether the damages claim is linked to the mandamus action or treated separately. The court lacks appellate jurisdiction due to the pending damages claim in the District Court, leading to the vacation of the Court of Civil Appeals’ opinion, which relied on the existence of such jurisdiction.

The District Court proceedings were based on briefs and stipulations from both parties. Chandler employs around 500 individuals in Oklahoma and sought insurance from the Fund, which declined to provide a premium quote or coverage. The Fund cited unique conflicts arising from insuring a competitor as a reason for its decision. Chandler then sought a writ of mandamus, contending that no statute permits the Fund to refuse coverage based on competitive status. The Fund later reiterated that its discretion allowed it to deny insurance to a competing entity, without offering additional justification beyond its earlier correspondence.

Chandler asserts that the Fund improperly denied insurance to a competing insurance carrier, NAICO, arguing that the Fund lacks the discretion to do so. The Fund counters this by stating that Chandler failed to demonstrate NAICO's compliance with Oklahoma's operational requirements and that other carriers have opted not to insure Chandler. Additionally, the Fund argues that a contractual relationship with a competitor could harm its competitive standing, which would violate the Commissioner's fiduciary duty. The Commissioner is believed to have discretion in denying insurance applications, and Chandler has not met the burden of proof necessary for a writ of mandamus.

Chandler claims that NAICO has been established in Oklahoma since 1987 and complies with all examination requirements, suggesting the Fund should bear the burden of demonstrating that NAICO poses an unacceptable risk. Furthermore, Chandler contends that the Fund has not provided evidence that insuring NAICO is beyond the Fund's safe carrying capacity. 

The discussion references 85 O.S.2001.134, which grants the Commissioner authority to decline insurance for risks not meeting legal requirements but limits the ability to refuse coverage for any compensation risk presented with the appropriate premium. Recent case law reinforces that the Fund's discretion in these matters is constrained, and while the Fund claims its decisions are beyond judicial review, case precedent indicates that courts can issue mandamus to correct an abuse of discretion. Thus, the Fund's claims of discretion do not exempt them from judicial scrutiny.

Section 134(A)(2) allows the Commissioner to refuse to insure risks that do not meet legal requirements for construction, equipment, and operation, or that exceed the State Insurance Fund's capacity. The interpretation of "this act" in 134(A)(2) is contested: Chandler argues it refers only to the stipulations in 134, while the Fund asserts it includes other relevant statutes. The Fund cites 85 O.S. Supp.2000. 131(c), which mandates that the Fund remain competitive with other insurers, and argues that insuring Chandler could compromise this competitiveness. The Fund also emphasizes the Commissioner's fiduciary duty to policyholders, which could be jeopardized by insuring a competing interest.

Both Sections 131 and 134 were established in the 1933 Act creating the State Insurance Fund, which restricts the Fund's discretion in denying coverage. The Fund contends that insuring Chandler would violate its competitive obligation, while Chandler claims this assertion lacks factual support. The burden of proof lies with Chandler to demonstrate that the Fund acted arbitrarily in denying coverage.

A mandamus action requires five elements: lack of an adequate legal remedy, a clear legal right to the relief sought, the respondent's legal duty regarding that relief, refusal to perform that duty, and that the duty does not involve discretion. A writ can correct arbitrary abuse of discretion. In previous cases, petitioners were required to provide factual evidence of their clear rights to support their claims for reinstatement or relief.

In Hall v. Tirey, the court held that an official seeking reinstatement through mandamus must demonstrate that their removal did not adhere to the statutory grounds for removal, which include incompetency, neglect of duty, or malfeasance. The burden of proof lies with the removed official to show the removal did not meet any of these statutory causes, not with the Governor to justify the removal. 

In the current case, the Fund claimed it could refuse to issue an insurance contract that would make it less than fairly competitive. The Fund argued that the burden rested on Chandler to prove that issuing insurance would not adversely affect its competitiveness. Conversely, Chandler contended that once an alternative writ was issued, the Fund bore the burden to show why the peremptory writ should not be granted, asserting that the Fund failed to present the necessary facts in its defense.

The court clarified that issuance of an alternative writ does not shift the burden of proof, which remains with the party that holds the affirmative in the pleadings. Chandler must provide facts that demonstrate issuing insurance would not harm the Fund's competitiveness. The court also recognized that in mandamus proceedings, issues are treated similarly to civil actions, governed by the Oklahoma Discovery Code, allowing for discovery procedures to be utilized.

A party can utilize discovery procedures when the opposing party possesses exclusive knowledge of relevant circumstances, as established in various case law. In cases involving an insurer’s claim file and allegations of breach of duty, the discoverability of such files is pertinent to determine if the insurer had a reasonable basis for withholding payment. Similarly, in the Chandler case, the issue revolves around whether the Fund had a reasonable, non-arbitrary basis for not issuing insurance when requested, thus necessitating Chandler's opportunity to engage in discovery to meet its burden of proof. 

The court emphasizes that discovery is essential for trial preparation and truth ascertainment, allowing Chandler to amend its alternative writ, while also permitting the Fund to amend its answer based on the discovery findings. The court vacates the Court of Civil Appeals' opinion and dismisses the appeal due to lack of jurisdiction, denying the appellant's motion to dismiss. It issues a prohibition against enforcing the trial court's writ of mandamus until plaintiffs can conduct discovery and amend their pleadings, and the defendant can respond accordingly.

Concurrences and dissenting opinions are noted, with some justices agreeing on dismissing the appeal but dissenting on the conditional prohibition against the enforcement of the trial court's writ. The dissenting justices argue for the trial court's autonomy to modify or vacate its rulings without interference from the appellate court, asserting that there is no demonstrated need for such intervention.

Post-termination proceedings in this case will be determined solely by the actions taken by the involved parties. The State Insurance Fund is now officially known as CompSource Oklahoma, and all references to the former name in Oklahoma statutes will be interpreted as references to the new name. The litigation commenced prior to this name change, so the original designation is retained for the purposes of this case.

If the plaintiff prevails, they are entitled to recover damages as determined by the court or jury and will receive a peremptory mandamus without delay, as outlined in Oklahoma statute. The definition of a cause of action is tied to the relevant transaction or wrongful act.

The issue of whether the writ is appealable as an interlocutory order is not addressed because the appeal was filed past the required thirty-day period following the trial court's order. The motion for a new trial does not extend the time for appeal, and an adjudication regarding a new trial on an interlocutory order is not itself appealable. 

The Fund contests the trial court's writ, arguing that Chandler did not pay a required premium, and therefore, the writ is currently unenforceable. The court notes that the 2001 amendment to the relevant statute was not effective until July 2001, and the version applicable at the time of the District Court's order will be applied. The Fund also cites a fiduciary responsibility concerning the State Insurance Fund.

A fiduciary is prohibited from acting in any capacity in transactions involving the State Insurance Fund if they represent a party with interests adverse to those of the Fund or its participants. The court's opinions outline three elements necessary for a writ: the respondent's refusal to act, the existence of a clear legal duty, and a declaration that this duty does not involve discretion. On the return day of the alternative writ, the served party may respond similarly to a civil action petition. The Oklahoma Discovery Code governs discovery procedures in civil suits across the state. The Fund did not claim any information related to its decision was privileged or exempt from discovery, and the ruling does not address the privilege status of the information involved. The Oklahoma statute permits no further pleadings beyond the writ and the answer, treating them as pleadings in a civil action, with subsequent proceedings conducted accordingly.