Litigation Imposes Chilling Effect on Insurers Who Are Called upon to Obey the Fraud Reporting Statutes

Since Contractor Acted as an Unlicensed Public Adjuster She was Refused License

Lisa Loven, is a general contractor who applied for a public adjuster license with the Oklahoma Department of Insurance (the Department) although she had been acting as an unlicensed public adjuster at the time of the application. After she disclosed that a former client sued her for acting as an unlicensed adjuster, the Department opened an investigation regarding her application. Subsequently, the Department denied her application, and Loven appealed.

Lisa Gaye Loven v. Church Mutual Insurance Company and Jeffrey F. Hanes, Case Number: 116808, C/w 116954, 2019 OK 68, Supreme Court of the State of Oklahoma (October 22, 2019) during the appeal hearing while Loven sought a license as a public adjuster. Church Mutual Insurance and its adjuster Jeffrey Hanes provided information regarding their dealings with Loven as a general contractor when she contracted for storm repair work for two churches they insured. The appellate hearing officer affirmed the denial of her application as a public adjuster because she had illegally acted as an unlicensed public adjuster.

Loven sued Church Mutual and Hanes for intentional interference with a prospective economic business advantage. The trial court granted summary judgment to Church Mutual and Hanes because a state statute provides civil tort immunity to insurers who provide any information of fraudulent conduct to the Department. Loven appealed and the Court of Civil Appeals affirmed.

ISSUE

Whether a claim of the tort of intentional interference with a prospective economic business advantage requires a showing of bad faith, and whether the immunity protections provided by statute applied.

FACTS

On July 21, 2015, Loven submitted an online application with the Oklahoma Insurance Department (the Department) to become a licensed resident public adjuster. She disclosed, as required by her application, that she was currently being sued by a former client, Loc Nguyen, who alleged that Loven acted as a public adjuster without a license which is prohibited by the Oklahoma Insurance Adjusters Licensing Act. Due to this disclosure, the Anti-Fraud Unit of the Department opened an investigation. The Department denied Loven’s application.

An administrative appeal hearing was held. Church Mutual employees and Hanes testified at the administrative appeal hearing. The hearing examiner denied the application on the grounds that Loven negotiated client’s claim settlements and acted as an unlicensed adjuster and that she received inflated compensation through ownership of a construction business due to the claims she negotiated. The hearing examiner also determined that Loven had submitted a bogus invoice in the amount of $14,923.00 and added $2,984.59 for her overhead and profit on the bogus charge. The bogus charges related to the use of a crane when “lifts” were actually used instead of a crane on the CCBC repairs.

On March 30, 2016, the State of Oklahoma charged Loven and her subcontractor with felonies of filing a false claim for insurance and conspiracy to commit a felony, stemming from the crane invoice submitted to CCBC. The charges were eventually dismissed on June 9, 2016.

On October 13, 2016, Loven filed a lawsuit against Church Mutual and its adjuster Hanes in the District Court of Oklahoma County. She alleged that Church Mutual and Hanes intentionally interfered with her prospective business opportunity/economic advantage. She specifically asserted that they intentionally interfered with her attempts to get licensed as a public adjuster in retaliation for her actions which caused them to pay more in hail damage roof claims than they had offered to pay to ECC and CCBC.

On November 7 and November 10, 2016, Hanes and Church Mutual filed motions to dismiss, arguing that: they were obligated to follow the Oklahoma Insurance Code; they were subpoenaed by the Oklahoma Insurance Department as part of Loven’s investigation; and any information they gave was protected by immunity from Loven’s lawsuit pursuant an Oklahoma statute.

The trial court entered an order granting the defendants’ motion for summary judgment. It determined that the statute provided the defendants immunity from tort liability.

ANALYSIS

Loven argued that the statutory immunity only applies when an insurer reports suspected fraudulent activity and because Church Mutual or Hanes did not initiate a suspected fraud report against her with the Department, the statutory immunity is inapplicable to them. The Supreme Court of Oklahoma explained that the statute is plain and unambiguous and that when a statute is plain and unambiguous, there is no need to resort to statutory construction nor does any justification exist for the use of interpretive devices to fabricate a different meaning.

An insurance statute requires insurers such as Church Mutual to report suspected fraud. Subsection C of the statute provides civil or criminal immunity for the filing of reports or furnishing other information, either orally or in writing, concerning suspected, anticipated or completed fraudulent insurance acts to the Anti-Fraud Division of the Insurance Department.

The immunity expressly applies to either reports made or when an insurer furnishes information, either orally or in writing for an investigation or prosecution of suspected insurance fraud. The terms of the statute, insofar as to when immunity applies, are clear and unambiguous. If Church Mutual, or any other insurer, furnished information for an investigation or prosecution, as they did in this cause, they are protected from civil action for libel, slander or any other relevant tort or any criminal action.

The only exception for such immunity is if the insurer provides such information fraudulently, in bad faith, in reckless disregard for the truth, or with actual malice.

No evidence tends to show that either Church Mutual or Hanes acted with the intentional purpose to interfere or in bad faith in responding to the Department’s questions concerning their experiences in dealing with Loven. Nor is there any evidence that any interference was done with an improper, wrongful, or malicous motive.

The purpose of their interference was in response to the Department’s investigation, which was in response to Loven’s online application to be a public adjuster. Accordingly, Church Mutual and Hanes are entitled to immunity pursuant to 36 O.S. Supp. 2012 §363.22. Because no genuine issue of material facts exists, Church Mutual and Hanes are entitled to a judgment as a matter of law.

The Supreme Court, therefore, concluded that:

  1. The statute, 36 O.S. Supp. 2012 §363 provides immunity for those who report or provide information regarding suspected insurance fraud as long as they, themselves, do not act fraudulently, in bad faith, in reckless disregard for the truth, or with actual malice in providing the information; and
  2. the alleged tort of intentional interference with a prospective economic business advantage requires a showing of bad faith.

However, because no proffered evidence in this cause tends to show bad faith, the immunity provisions apply, and summary judgment was proper.

ZALMA OPINION

It has been said that no good deed goes unpunished. In this case, the good deed of Church Mutual in providing the information demanded of it by the state of Oklahoma Department of Insurance – as required by a clear and unambiguous statute – needed to invoke the immunity provisions of the same statute. By doing what it should Church Mutual had to expend funds to defend the suit, defend an appeal to an intermediate court and defend an appeal to the Supreme Court. There should be some way to recover costs incurred or this case will have a chilling effect on other insurers who are called upon to obey the fraud reporting statutes.


© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

 

About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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