First Bank of Turley v. Fid. & Deposit Ins. Co.

First Bank of Turley v. Fid. & Deposit Ins. Co.

Opinion

 [**300]  CERTIFIED QUESTIONS FROM A UNITED STATES COURT

OPALA, J.

 [*P1]  The United States District Court for the Northern District of Oklahoma [certifying court] certified the following questions ¹ in  [**301]  accordance with the provisions of the Uniform Certification of Questions of Law Act, 20 O.S.1991 §§ 1601 et seq.:

(1) Once an insurance company has declined to defend its insured [***2]  in a lawsuit, does the insured have any obligation to keep the insurance company advised of developments in the lawsuit, or [to supply] new information which may bear on the insurer's decision?

(2) Under Oklahoma law, does an insurance company have as a defense in a bad-faith case the "comparative bad faith" of the insured"? and

(3) If "comparative bad faith" is an available defense, what is the effect of the defense (i.e. are damages barred or reduced), what are the elements of the defense, and is the insured's duty to deal in good faith a continuing one?

 [*P2]  In answer to the first question, we hold that an insured's failure to give proper notice when demanding that the insurer defend the suit or an insured's giving of inadequate notice does not constitute actionable conduct either ex contractu or ex delicto. The omission or deficiency in notice-giving is to be [***3]  treated as contractual nonperformance or misperformance of a policy condition, which the insurer may invoke as a defense. If the facts surrounding notice and its adequacy are in dispute, the issue is one for the trier. As for the case before us, we defer to the certifying court, as we must, to resolve the question whether the evidentiary materials in this suit may be regarded as tendering an issue of law because the material facts, which are undisputed, will support but a single inference. For a detailed explanation of our analysis of the first question see Part III, infra. We answer the second question in the negative. In response to the third question, we hold that the insured, who fails, in whole or in part, in its duty-triggering obligation that calls for notice to the insurer, which must include critical facts connected with the lawsuit to be defended, is not answerable in tort; the deficiency in the insured's notice may be interposed as a defense against the insurer's liability - i.e., as a complete (in toto) bar to any recovery - or, if the facts so warrant, against the quantum of the insured's recoverable loss (pro tanto defense).

 [***4]  I

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