Bryant v. Sagamore Insurance

Citations: 18 F. Supp. 3d 1245; 2014 WL 1875121; 2014 U.S. Dist. LEXIS 56332Docket: Case No. CIV-13-240-RAW

Court: District Court, E.D. Oklahoma; April 23, 2014; Federal District Court

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Plaintiffs Kelly and Hollie Bryant filed a lawsuit against Sagamore Insurance Company on May 31, 2013, for breach of contract and bad faith. The court previously denied the bad faith claims and granted Sagamore's motion for summary judgment. The breach of contract claims remain contested. Plaintiffs claim Sagamore breached the insurance contract by denying coverage for an accident involving Hollie, who was driving a vehicle insured under a policy purchased by Kelly, despite being specifically excluded from coverage. Plaintiffs reference a recent Oklahoma Supreme Court ruling to argue that the named driver exclusion is invalid. In contrast, Sagamore maintains that the exclusion was valid at the time of the coverage denial and cites Kelly's lack of cooperation during the investigation as an additional reason for denying coverage.

The court's findings include that on June 29, 2011, Hollie, while excluded from coverage, had an accident while driving a 2003 Ford Mustang insured by Sagamore. Kelly had intentionally excluded Hollie from the policy to reduce premium costs. The policy explicitly states that excluded persons are not insured and that no coverage is provided for claims arising from their use of the vehicle. Furthermore, the policy requires insured parties to cooperate fully with the insurer in the event of a claim. Kelly reported the accident to his insurance agent the day after it occurred and later contacted Sagamore but failed to respond to a reservation of rights letter sent by Sagamore regarding the claim. Ultimately, the court denied the Plaintiffs’ motion for summary judgment and granted Sagamore’s motion for summary judgment regarding the breach of contract claims.

On July 15, 2011, Sagamore attempted to contact Kelly but was unsuccessful. A subsequent call on July 20, 2011, resulted in a voicemail, to which Kelly did not respond. Sagamore sent a second reservation of rights letter to Kelly on August 23, 2011, emphasizing the need for his cooperation to resolve the claim, which Kelly did not dispute or respond to. On September 7, 2011, an independent adjuster visited Kelly’s home but found him absent, and Kelly again failed to respond to the adjuster’s card. Sagamore's attorney sent a letter on September 21, 2011, detailing Kelly’s non-responsiveness and the requirement for an examination under oath scheduled for September 30, 2011, warning that failure to appear could lead to denial of coverage. Kelly did not attend the examination. On October 19, 2011, Sagamore denied coverage based on two reasons: Hollie was an excluded driver, and Kelly’s non-compliance with the examination requirement. Kelly received this denial letter but did not respond. 

To establish a breach of contract claim, a plaintiff must demonstrate: (1) the existence of a contract, (2) a breach of that contract, and (3) resulting damages. The relationship between Sagamore and Kelly is contractual, governed by clear policy language which should be interpreted according to its ordinary meaning. Courts will not alter the terms of the policy to favor either party, and ambiguity will not be created where none exists. The principle of construing policies against the insurer applies only when the language allows for multiple reasonable interpretations.

The policy explicitly excludes Hollie as a driver and mandates Kelly's cooperation. Sagamore denied Cuba Lawrence's claim on Kelly’s policy on October 19, 2011, citing two reasons: Hollie's exclusion as a driver and Kelly's failure to cooperate in the investigation, including not attending the examination under oath. The Oklahoma Supreme Court's ruling in Mulford v. Neal, which declared named driver exclusions unenforceable, was published after Sagamore's denial. Prior to that, the Oklahoma Civil Appeals Court had upheld such exclusions, validating Sagamore's action at the time of denial.

Kelly contended that he was informed by Sagamore and his agent in July that coverage was denied due to Hollie's exclusion. However, Sagamore continued to investigate the claim, and Kelly had a contractual obligation to cooperate, which he failed to do by not responding to communications and missing the examination under oath. Consequently, Sagamore had justifiable grounds for denying coverage based on Kelly's lack of cooperation.

The court granted Sagamore’s motion for summary judgment regarding the breach of contract claims and denied the plaintiffs’ motion on the same issue, dismissing the breach of contract claims entirely. All other motions were deemed moot. The court emphasized that assertions of disputed facts must be substantiated by proper materials, and mere unsubstantiated claims do not create factual disputes sufficient to oppose summary judgment. Kelly's belief that his claim was denied does not negate his obligation to cooperate under the policy.

Hollie is not a party to the relevant insurance contract and was explicitly excluded as a driver, leading the court to question whether Kelly or Sagamore intended for her to benefit from the policy as a third-party beneficiary entitled to enforce it. The court found no breach of contract, thus it did not need to resolve the third-party beneficiary issue. Sagamore was unaware that Hollie was covered under her mother's policy, a fact that may have come to light had Kelly cooperated during the claims investigation. Following the decision in Mulford, Sagamore paid Cuba Lawrence the policy limits, but the court rejected the plaintiffs' argument to disregard Federal Rule of Evidence 408 and apply Florida law to assert that this payment indicates a breach. The payment was made based on the new precedent suggesting Lawrence could be viewed as an innocent third party, not as an admission of breach from October 2011 when the outcome of Mulford was uncertain. Furthermore, the Mulford ruling did not clearly invalidate the driver exclusions in Kelly’s policy, noting that named driver exclusions for minors could be negotiated between divorced parents regarding insurance coverage. Kelly claimed he might not have received all correspondence sent to his father's address, but under Oklahoma law, there is a presumption of receipt for correctly addressed and stamped mail, which he failed to rebut, and it was his responsibility to provide Sagamore with his accurate address.