Opinion · Supreme Court of Oklahoma

Wathor v. Mutual Assurance Administrators, Inc.

Wathor v. Mut. Assurance Adm’r, Adm’xs, Inc., 87 P.3d 559 (Okla. 2004)

Type
Opinion
Court
Supreme Court of Oklahoma
Jurisdiction
Oklahoma
Date
2004-01-22
Topic
general

determining independent adjuster hired by insurer owed no duty to insureds and could not be held liable on negligence theory | “[T]he purported breaches of the implied duty of good faith and fair dealing do not relate to any aspect of performance under the terms of the Amended Operating Agreements.” | “Agents of the insurer—even agents whose acts may have been material to a breach of the duty—do not normally owe the insured a duty of good faith since agents are not parties to the insurance contract.” | “[A]gents are not parties to the insurance contract.”

Citator

Cited by
36 opinions
WATHOR v. MUTUAL ASSURANCE ADMINISTRATORS, INC.,2004 OK 2
87 P.3d 559
DOUG AND SHANNON WATHOR, individually and as parents of NICHOLAS WATHOR,
a minor child, individually and on behalf of themselves and all others
similarly situated, Plaintiffs-Appellants, v. MUTUAL ASSURANCE
ADMINISTRATORS, INC., a domestic corporation, Defendant-Appellee.
No. 97,696
Supreme Court of Oklahoma.
January 20, 2004
As Corrected January 22, 2004.
Rehearing Denied March 29, 2004.
Page 560
CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION III

¶ 0 A third party administrator for a self-funded health insurance program denied an insured's claim for emergency medical treatment and a tonsillectomy. The insured sued the administrator for breach of contract and for breach of the tort duty of good faith and fair dealing. The administrator defended on the ground that both claims must fail because it was not in privity of contract with the insured. The trial court agreed and entered judgment for the administrator. The Court of Civil Appeals affirmed. We granted certiorari and affirm.
OPINION OF THE COURT OF CIVIL APPEALS VACATED; JUDGMENT OF THETRIAL COURT AFFIRMED.
Steven S. Mansell, Mark A. Engel, Steven S. Ashmore, Oklahoma City, Oklahoma, for Plaintiffs/Appellants.

Elaine R. Turner, Susanna G. Voegeli, Oklahoma City, Oklahoma, and Ronald A. White, Tulsa, Oklahoma, for Defendant/Appellee.Page 561
BOUDREAU, J.
¶ 1 Oklahoma County offered its employees, like plaintiff Doug Wathor, access to its self-funded health insurance program called the Oklahoma County Health and Dental Plan (Plan). Oklahoma County hired defendant Mutual Assurance Administrators, Inc. (MAA) as its third party administrator (TPA).1MAA's Administrative Service Contract (Contract) with Oklahoma County obligated MAA to provide the ministerial and clerical services required by the Plan in connection with its operation. Under the Contract, MAA initially determines whether any particular claim for benefits qualifies for payment under the Plan. The Oklahoma County Budget Board (Oklahoma County) handles all appeals of denied claims and has final authority to approve or deny claims. The Contract provides for MAA to be compensated by a flat fee based solely on the number of participants in the Plan on the first day of any given month. MAA assumes no risk for any claims filed under the Plan.

¶ 2 Mr. and Mrs. Wathor (Wathors), individually and as parents of Nicholas, filed a petition alleging that MAA is an insurer who breached its contract with them and acted in bad faith when it violated Oklahoma's portability statute, 26 O.S. 2001 § 4509.2[26-4509.2], which prohibits insurers from excluding pre-existing conditions from coverage if the insured had been covered under a previous plan.

¶ 3 The Wathors filed a motion for partial summary judgment on the issue of whether they could be denied coverage on the basis of a pre-existing condition. MAA filed a response and its own motion for summary judgment. In its motion, MAA asserted, among other things, that because it is a TPA, not an insurer, both of the Wathors' claims fail as a matter of law. The trial court agreed. It denied the Wathors' motion and granted MAA's motion. The Court of Civil Appeals affirmed. We granted certiorari to determine, among other issues, the first impression issue whether a third party administrator who is not an insurer may be subject to suit based on its alleged bad faith actions in administering an insurance plan.
I. STANDARD OF REVIEW
¶ 4 Summary judgment is appropriate only where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law.Oliver v. Farmers Ins. Group ofCos.,1997 OK 71,941 P.2d 985. As this decision involves purely legal determinations, our standard of review of a trial court's grant of summary judgment isde novo. Kirkpatrick v. ChryslerCorp.,1996 OK 136,920 P.2d 122. We review all inferences and conclusions to be drawn from underlying facts contained in evidentiary materials in a light most favorable to the party opposing the motion.Oliver, supra.If the uncontroverted facts support legitimate inferences favoring well-pleaded theory of the party against whom the judgment is sought or if the judgment is contrary to substantive law, the judgment will be reversed.Hargrave v. Canadian Valley Elect. Co-op.,1990 OK 43,792 P.2d 50.
II. BAD FAITH CLAIM
¶ 5 The Wathors contend the trial court erred in concluding they could not maintain a tort action against a third party administrator for breach of an insurer's duty of good faith. Every contract in Oklahoma contains an implied duty of good faith and fair dealing.Doyle v. Kelly,1990 OK 119,801 P.2d 717, 718. In ordinary commercial contracts, a breach of that duty merely results in damages for breach of contract, not independent tort liability.Christian v. American Home Assur. Co.,1977 OK 141,577 P.2d 899.

¶ 6 Insurance contracts, however, are not ordinary commercial contracts.Id.A "special relationship" exists between an insurer and its insured stemming from the quasi-public nature of insurance, the unequal bargaining power between the insurer and insured, and the potential for an insurer toPage 562unscrupulously exert that power at a time when the insured is particularly vulnerable.Id.at 902-04. The special relationship creates a nondelegable duty of good faith and fair dealing on the part of the insurer.Id.An insurer's breach of this duty gives rise to a separate cause of action sounding in tort.Id.at 904.

¶ 7 The duty of good faith and fair dealing applies to activities after the establishment of the insurer-insured relationship, and includes the claims handling process.Kincadev. Group Health Services of Oklahoma, Inc.,1997 OK 88,945 P.2d 485, 489 n. 18. The duty is nondelegable so that insurers cannot escape it by delegating tasks to third parties.Barnes v.Oklahoma Farm Bureau Mut. Ins. Co.,2000 OK 55, ¶ 9 n. 5,11 P.3d 162, 167 n. 5.2

¶ 8 Normally, only the insurer owes the duty of good faith and fair dealing to its insured. Agents of the insurer — even agents whose acts may have been material to a breach of the duty — do not normally owe the insured a duty of good faith since agents are not parties to the insurance contract.Timmons v. RoyalGlobe Ins. Co.,1982 OK 97,653 P.2d 907, 912-13 (rejecting an attempt to hold an insurance agent liable for breach of the duty of good faith by the insurance company).3

¶ 9 In the typical case the insured is adequately protected by the nondelegable duty that the law imposes on the insurer. However, the imposition of a nondelegable duty on the insurer does not necessarily preclude an action by an insured against a plan administrator for breach of an insurer's duty of good faith. InWolf v. Prudential Ins. Co. of America,50 F.3d 793(10th Cir. 1995), the Tenth Circuit Court of Appeals considered the issue of whether an insured under a self-funded health benefits plan could sue the plan administrator for its own bad faith refusal to pay for treatment.

¶ 10 InWolf,the plan administrator had primary control over benefit determinations (including some intermediate appeals). As payment for administering the plan, the plan administrator received a percentage of the premiums paid for participant coverage. The plan administrator's percentage increased as losses decreased. In addition, if losses increased to a certain level, the plan administrator had to share the risk with the board; if losses got even higher, the plan administrator had to underwrite the entire risk.

¶ 11 In determining whether the plan administrator owed the insured a duty of good faith, the Tenth Circuit refused to decide the issue by simply concluding the plan administrator was a stranger to the insurance contract. Rather, the court emphasized that the analysis should focus on the factual question whether the plan administrator acted sufficiently like an insurer such that there was a "special relationship" between the plan administrator and the insured that would give rise to the duty of good faith.Id.at 797. The Tenth Circuit predicted the Oklahoma Supreme Court would impose a duty of good faith on an entity in the position of the plan administrator inWolf,for the same reasons we imposed that duty on "true" insurers inChristian. Wolf,50 F.3d at 798.

¶ 12 We agree with the analysis of the Tenth Circuit under the facts presentedPage 563inWolf.In a situation where a plan administrator performs many of the tasks of an insurance company, has a compensation package that is contingent on the approval or denial of claims, and bears some of the financial risk of loss for the claims, the administrator has a duty of good faith and fair dealing to the insured.

¶ 13 Applying this analysis to the facts of this case, we observe the following. Like the plan administrator inWolf,MAA unquestionably performed some of the tasks of an insurance company in its claims handling process. However, in contrast to the facts inWolf,MAA's compensation package was not tied to the approval or denial of claims but was instead a flat fee based on the number of participants in the Plan. Likewise, MAA did not share the risk of loss with the Plan if losses increased to a certain level, and did not underwrite the entire risk if losses got even higher. In other words, under the facts presented in this case, MAA had neither the power, the motive, nor the opportunity to act unscrupulously.See Christian,577 P.2d at 902. Accordingly, we affirm the trial court's judgment in favor of MAA on the Wathors' bad faith claim.4
III. BREACH OF CONTRACT CLAIM
¶ 14 The Wathors also contend the trial court erred in dismissing their claim for breach of contract against MAA. While the Wathors are strangers to the Administrative Service Contract between Oklahoma County and MAA, it is well settled that third party beneficiaries of a contract may maintain an action on the contract.Keel v. Titan Constr. Corp.,1981 OK 148,639 P.2d 1228; 15 O.S. 2001 § 29[15-29];see also15 O.S. 2001 § 29[15-29] ("A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.").

¶ 15 Assuming, without deciding, the Wathors are third party beneficiaries of the Administrative Service Contract, that status merely entitles them to step into the shoes of Oklahoma County to enforce Oklahoma County's contractual rights against MAA. The Administrative Service Contract obligates MAA to provide claims handling service for Oklahoma County. It does not obligate MAA to pay covered claims on behalf of Oklahoma County. The relief sought by the Wathors from MAA is not claims handling service, but payment under the Plan for what they contend is covered treatment. Thus, even assuming the Wathors are third party beneficiaries of the Contract, that status does not entitle them to maintain a breach of contract action against MAA for failure to pay their claim. We affirm the trial court's judgment in favor of MAA on the Wathors' breach of contract claim.5
IV. CONCLUSION
¶ 16 Because of the special relationship between insurers and their insureds, Oklahoma imposes a duty of good faith and fair dealing on insurers which gives rise to an independent action in tort. Normally we do not impose such a duty on third party administrators of health insurance plans because the administrators are not parties to the insurance contract between the insurer and the insured.See Timmons v. Royal Globe Ins.Co.,1982 OK 97,653 P.2d 907.6Page 564However, such a duty maybe imposed on a plan administrator where, under the specific facts and circumstances of the case, the plan administrator acts sufficiently like an insurer such that there is a "special relationship" between the plan administrator and the insured that gives rise to the duty.

¶ 17 The plan administrator in this case, MAA, does not act sufficiently like an insurer and therefor does not have a tort duty of good faith and fair dealing toward the Wathors. Accordingly, we affirm the trial court's judgment in favor of MAA on the Wathors' bad faith claim.

¶ 18 We also affirm the trial court's entry of judgment in favor of MAA on the Wathors' breach of contract claim. The Wathors are strangers to the Administrative Service Contract between Oklahoma County and MAA. Assuming, without deciding, that the Wathors are third-party beneficiaries of the Administrative Service Contract, that status does not entitle them to maintain a breach of contract action against MAA for failure to pay a covered claim because the Administrative Service Contract does not obligate MAA to pay covered claims on behalf of Oklahoma County.OPINION OF THE COURT OF CIVIL APPEALS VACATED; JUDGMENT OF THETRIAL COURT AFFIRMED.

Concur: Hodges, Lavender, Kauger, Boudreau, Edmondson, JJ.

Concur in Result: Hargrave, Winchester, JJ.

Dissent: Watt, C.J., Opala, V.C.J.
OPALA, V.C.J., dissenting.
¶ 1 I dissent from the court's opinion. It concludes Mutual Assurance Administrators, Inc. (MAA) had "neither the power, the motive, nor the opportunity to act unscrupulously."1I would reverse the summary judgment given below to MAA and remand the cause to the trial court for a thorough exploration of the status MAA occupiedvis-a-visOklahoma County (the County). Summary judgment is not appropriate for this case. The record is completely devoid of evidentiary material regarding MAA's relationship to the County. The status MAA held with respect to the County is critical to determining whether MAAmay be heldliable in tortfor bad faith in its handling of appellants' insurance claims.

¶ 2 Because the nisi prius analysis (and that by the Court of Civil Appeals — the COCA) is inconsistent with Oklahoma's common law, I would direct that on remand the trial court conduct a fact-based inquiry to determine whether MAA functioned as the County's non-employee agent or as an independent contractor.2If an agency relationship did exist between MAA and the County, the former may be liable in bad-faith tort.Page 565Its liability is rested on the premise that a principal may never bestow upon its agent immunity from tort the latter commits while acting for the former.3On the other hand, if it should be found at nisi prius that MAA is an independent contractor, the inquiry must then go further to determine whether the tasks delegated to MAA by the County (quaprincipal and insurer) are: 1) those which are either nondelegable by an insurer or integral to its functions and 2) encompass a well-defined legal duty of an insurer. If so, MAA may be found liable for its own tortious acts for which the County would also be answerable under the rule that one's breach of another's nondelegable duty makes both the actor and the holder of a nondelegable duty responsibleex delicto.
I
ANATOMY OF LITIGATION
¶ 3 Appellants, Doug and Sharon Wathor, brought suit against appellee, MAA, alleging breach of contract and breach of an insurer's duty of good faith and fair dealing in failing to settle their claim for certain medical expenses incident to a pre-existing condition. At nisi prius summary judgment went to MAA.The COCA affirmed, holding that MAA, as a third-partyadministrator, is not subject to an insurer's duty of goodfaith.4Appellants sought certiorari to determinewhether a third-party administrator of an insurer may be liablein tort for bad-faith denial of a claim.Page 566
II
SUMMARY JUDGMENT IS NOT APPROPRIATE FOR THIS CASE BECAUSE THENISI PRIUS COURT MUST FIRST DETERMINE THE STATUS MAA HELDVIS-A-VISOKLAHOMA COUNTY, THE INSURER
¶ 4 Thesine qua nonanalysis to be made heremust beginby first determining whether MAA stood towards the County in the status of a non-employee agent or of an independent contractor.5The MAA's status is material because: 1) if MAA acted as an agent, liability may be imposed here because an agent, while acting for the principal, cannot insulate itself from tort liability6and 2) if MAA served as an independent contractor, liability may nonetheless be visited if MAA was performing a core function of the County and its well-defined duty as an insurer.7

¶ 5 Summary judgment is permissibleonly ifno substantial controversy exists as to any material fact.8When the record is devoid of evidentiary material that shows undisputed facts supportive only of inferences that favor the movant, it is error to decide the case by summary process. Disputed issues of fact must be resolved by trial, the law's very antithesis of summary decision-making. Whether a principal/agent relationship exists presents generally a question of fact to be resolved at nisi prius.9

¶ 6 Existence of a principal/agent relationship is determined by considering the actual intent and effect of the contract's languagein light of the parties' actual day-to-day conductvis-a-visone another.10The label used by the contracting parties to define their relationship does not alone determine whether they in fact standvis-a-visone another in a principal-agent relation.11The central factor in determining whether an agency relationship exists is the principal's right to, as well as its exercise of, control over the agent.12The essence of a principal/agent status is the principal's power to give directions and the agent's duty to obey them.13If a right of control is present, aPage 567principal/agent relationship may be found and the tort doctrine ofrespondeat superiorliability invoked. On the other hand, if the right of control be absent, the relationship is likely to be that of an independent contractor.14In a case likethis, finding that MAA served the County as independentcontractor will not by itself absolve MAA of its legalresponsibility.If the County delegated to MAA a well-defined duty integral to its business as insurer, MAA may nonetheless stand liablequainsurer.

¶ 7 The record contains no evidentiary material for resolution of the critical fact issue of whether MAA acted for the County as its agent or as an independent contractor. If the latter, what were MAA's duties? MAA's statusvis-a-visthe County must be resolvedbeforeit may be determined whether liability is imposable on MAA for failing to settle the claim in suit in good faith.
III
WHETHER BY ACCIDENT OR DESIGN, TODAY'S PRONOUNCEMENT EMASCULATESTHE BAD-FAITHCHRISTIANTORT AND SENDS IT ON A CHAOTIC PATH TOVIRTUAL EXTINCTION
A.
Today's Refinement Of The Mandatory Relationship Between theInsured-plaintiff and the Policy-writing Insurer Who Failed,Directly or Through Others, to Settle the Claim in Good FaithImposes a New Actionability Requirement That Is Inconsistent Withthe Teachings of Christian and its Progeny
¶ 8Christian15fashioned a new delictual liability of an insurer who refuses to settle in good faith a claim for a covered loss. Later jurisprudence fine-tuned the parameters of the new tort by requiring that standing to press aChristianclaim for vindication be confined to persons who,vis-a-visthe insurer, occupy the status of an insured.16Third-party beneficiaries of an insured's policy-covered loss are without standing.17By today's footnote18the courtfurther refines the mandatory relationship of theinsured-plaintiffvis-a-vis the insurer-defendant byrequiring that henceforth actionable harm be inflicted by one whoalso stood in a contractual statusvis-a-visthe plaintiff.This will doubtless deprive aggrieved parties of standing againstall of insurer's (non-employee) contractually-engaged agents (orinsurer-hired independentPage 568contractors who perform for the insurerthe duties of claims management, adjustment and settlement).

¶ 9 Whether by design or accident, this newsine qua nonrelationship of the insured to every bad-faith defendantwill have a far-reaching impact on the future complexion of that tort.Corporate insurers do business only through others— human agents or corporate contractors. If, as the court appears to declare today, insurer's agents (or independent contractors)bear no liability for a bad-faith tort while not insurersthemselves but rather on a mission for the insurer, the insureritself stands exonerated by operation of law and by issuepreclusion.19This is so because the law will recognizeno vicarious responsibility for non-tortious acts of acontractually engaged (non-employee) agent or for the independentcontractor's non-tortious discharge of nondelegableduties.20Putting the principle in simpler language, vicarious liability is not imposable where no actionable claim may be pressed against the actor and there is no allegation of an independent tort by the vicariously liable obligor.21Today's pronouncement is final and releases the Administrator of its bad-faith liability. Relitigation of the very same issue against the insurerquaprincipal obligor on a theory of vicarious liability is barred by the doctrine of issue preclusion.22
B.
Christian's Progeny Requires Of A Plaintiff No More Than AnInsured/Insurer Relation with The Policy-issuing Insurer
¶ 10 The court cavalierly declares the Administrator's statusvis-a-visthe County as "legally irrelevant." This is so because the court concludes the harmed plaintiffs lacked a contract-based "special relationship"vis-a-visthe Administrator. This very pronouncement infuses theChristiantort with nothing short of legal schizophrenia. The "special relationship" our jurisprudence requires isPage 569that between the policy-writing insurer and its insuredand not that between the insured and the insurer's (non-employee) agents (or its independent contractors hired to manage, adjust or settle claims).It is sufficient for liability's imposition to showthat the insurer is the defendant's principal or its hirer (forclaims settlement tasks).23No extant source ofOklahoma law requires that bad-faith harm be inflicted directlyby the insurer (without interposition of controlledinstrumentalities) or that every bad-faith defendant standvis-a-visthe plaintiff in a policy-based contractualrelationship. The law merely confines an insurer'sChristiantort liability to those who stand in the status of an insuredvis-a-visthe insurer of the loss.24
C.
Today's Added Requirement — That Every Bad-faith Defendant StandVis-a-vis the Plaintiff in the Relation of Insurer — Will Have APredictably Destructive Impact on the Future Course of theChristian Tort
¶ 11Today'ssummary exoneration of the Administrator most assuredly craftstomorrow'sready-made liability-defeating defenses. Insurers (and all those acting for them except possibly their direct employees) will invoke these defenses because the immunization of their actors will effectively exonerate the hirers.25The liability shield they will raise is that which the court has fashioned for them here.26They will doubtless focus their quest for immunity from liability on want of insurer/insured relationship between the plaintiff and the harm-dealing actor clad or masquerading in the lawsuitas anindependent third-party entity.If successful, insurers will hasten to transfer the function of managing, adjusting and settling claims to a third party, all in an effort to escape responsibility for bad-faith refusal to settle covered losses. If this is what the court desires to spawn, its pronouncement should crisply say so.If not, the Administrator's status does indeedmatter. It must be fully explored and settled before exonerationmay be effected.

¶ 12 The ominous cloud the court has cast over the insurer's bad-faith liability should be allowedneitherto disturb the industry's businessnorplant doubt in the minds of the insureds.Delphic oraclesno less than revolutionary legal changes rob the law and the public marketplace of a badly needed opportunity for orderly business growth in an atmosphere of calm and stability. Uncertainty generated by shifting judicial climates tends to have a disruptive effect on day-to-day activity and adversely to affect the quality of deliverable legal-advice services.
D
The Principle of Nondelegable Duty Operates To Extend the Hirer's(County's) Liability But Does Not Exonerate the Actor(Administrator) of its Individual Tort Liability; The Latter IsSecondarily Liable for the Bad-faith Tort and Would Have anEquitable Indemnity Claim Against the Primarily LiableActor/Hirer
¶ 13 From a statement inTimmons v. Royal Globe27(that an insurer has a nondelegable duty to settle in good faith), the court draws an utterly unwarranted conclusion that itsTimmonspronouncement is broadPage 570enough to exonerate every non-employee agent and every independent contractor of its individual liability.In doing so, the courtmagnifies the principle of nondelegable duty beyond its legal limit bystretching it into immunity from tort liability — a concept notincluded in the construct.The teachings ofTimmonsclearly do not include exoneration extending that far.

¶ 14 The principle of nondelegable duty28is an exception to the general rule29that the hirer of an independent contractor is not ordinarily liable for the negligence of the independent contractor. The nondelegable-duty conceptoperates to extend the hirer's liability.This is so because that liability extends to the torts of the hirer's independent contractors, butit does not relieve the independentcontractors of individual tort liability.30If there is recovery against an independent contractor,31the latter will, based on equitable indemnity, have a claim against the hirer with a nondelegable duty.32

¶ 15 Indemnity is a right which inures to one who discharges a duty owed by him, butPage 571which, as between himself and another, should have been discharged by the other.33The remedy of indemnity is appropriate where one party has a primary or greater liability or duty which requires him to bear the whole of the burden as between the parties.34The indemnity concept transfers liability from one who has been compelled to pay damages to anotherwhere the entire loss should have been borneby a third party.35In short, where two parties are separately liable to a third party for a bad-faith tort, one of themprimarily(because it has anondelegable duty),and the othersecondarily,if there is recovery against the secondary obligor, the latter would have an equitable indemnity claim36against the primary obligor.

¶ 16 The County and Administrator bear separately liability for the latter's bad-faith refusal to settle covered losses. The County is the primary obligor because it has a nondelegable duty (quainsurer) to settle claims in good faith and cannot escape its liability by engaging an independent contractor. The Administrator, who is a secondary obligor but was was sued alone, would have an indemnity claim against the County. By immunizing the Administrator today's pronouncement will make the so-called liability for nondelegable duty unenforceable. This is so because no one can be vicariously liable for the acts of another which are not actionable.37
E.
The Notion of Immunizing from Bad-Faith Tort Liability ThirdParties Acting As (Non-employee) Agents and IndependentContractors In Managing, Adjusting and Settling An Insurer'sClaims offends the Procedural Symmetry Mandated By Art. 5, § 46,Okla.Const.38
¶ 17 Assuming the court intends to let theChristiantort die a slow and painful death to be inflicted by the insured's lack of standing to proceed against the insurer-controlled instrumentalities —i.e.,human or corporate non-employee agents (or insurer-hired independent operators) — its jurisprudence runs afoul of Oklahoma's constitutional interdiction of law that isspecial.39Today'sPage 572pronouncement is indeed special law.It changes time-honored common-law tort liability principles by making non-employee agents and other operators immune from delictual liability. They stand exonerated by want of adirectcontractual insurance-anchored nexus with the plaintiff.
IV
SUMMARY
¶ 17 This case was incorrectly decided by summary process. That process was inappropriately applied. Full-scale inquiry into MAA's statusvis-a-visthe County is required to determine whether MAA may be held liable in bad-faith tort. No court can decide, on this record, whether MAA served as a non-employee agent for the County or as an insurer-hired independent contractor performing well-defined core functions of an insurer. Because the conduct of the contracting parties (MAA and the County), one toward the other, has not been inquired into, no conclusion may be drawn at this stage as to the Administrator's liability.

¶ 18 If MAA was a non-employee agent, it may be liable in tort to the same extent as its principal (the County). If MAA was in fact an insurer-hired independent contractor performing a well-defined core function of the insurer (County), MAA may also be declared liablequainsurer.

¶ 19 There is no extant state jurisprudence supporting the notion foisted here today that for imposition of bad-faith liability, if the insurer's claims management function is handled by a third party, the third party must also standvis-a-visthe insured in an insurer/insured relationship.Extant precedentrequires no more than that an insurer/insured relation subsistsolely between the plaintiff and the policy-issuing entity forthe covered claim.If the court intends to now abandon or abrogate itsChristianprogeny, its opinion should clearly and explicitly state so. If that is not its intention, it ought not leave the bad-faith tort in a hopelessly chaotic aftermath. An explanation is due on how an insured may proceed when the bad-faith refusal to settle is occasioned directly by the insurer's (non-employee) human or corporate agency or by its independent hiree assigned the task of management, adjustment and settlement of losses.

¶ 20 I would reverse the trial court's summary exoneration of MAA and remand the cause for further proceedings to be conducted in a manner fully consistent with a piercing analytical inquiry urged by this dissent for post-remand proceedings.
  1. As a TPA, MAA is subject to the Third-Party Administrator's Act, 36 O.S. 2001 §§ 1441[36-1441]et seq.Pursuant to § 1442, an administrator is any person who collects premiums for an insurer or trust or whose adjuster settles claims for an insurer or trust, in connection with life or health insurance coverage or annuities in this State. ↩
  2. "We ruled over seventeen years ago [inTimmons v. RoyalGlobe Ins. Co.,1982 OK 97,653 P.2d 907] that an insurer could not avoid liability for breach of the duty of good faith and fair dealing by delegating its responsibility to an independent contractor."Barnes,11 P.3d 162, 167 n. 5. ↩
  3. The dissent argues that summary judgment should not have been granted because the trial court could not determine, on the record before it, whether MAA (the third party administrator) served as an agent for Oklahoma County or as an independent contractor. Under the facts of this case, this inquiry is legally irrelevant. The nondelegable duty of good faith and fair dealing arises from the "special relationship" created by an insurance contract. It is undisputed that MAA was a stranger to the insurance contract between Oklahoma County and Doug Wathor. Accordingly, MAA, whether it be characterized as an agent or an independent contractor, owed no such duty to the Wathors unless it acted sufficiently like an insurer such that there was a "special relationship" between it and the Wathors to give rise to such a duty. The undisputed facts in MAA's motion for summary judgment establish that it did not act sufficiently like an insurer. ↩
  4. Although the dissent proposes to offer a different test from that adopted inWolf v. Prudential Ins. Co. of America,50 F.3d 793(10th Cir. 1995), by the Tenth Circuit, the two tests are essentially identical. The dissent would inquire as to whether the tasks of the third party administrator are "integral to the functions of an insurer and encompass a well-defined legal duty making MAA liablequainsurer."Wolfwould inquire as to whether the administrator acted sufficiently like an insurer such that there is a "special relationship" between MAA and the insured that would give rise to the duty of good faith. ↩
  5. We are also convinced that the Wathors were covered for their medical expenses pursuant to Oklahoma's portability statute, 26 O.S. 2001 § 4509.2[26-4509.2], prohibiting insurers from excluding pre-existing conditions from coverage if the insured had coverage under a previous plan. However, under the facts of this case, they were required to pursue the coverage issue against the self-insured employer, Oklahoma County, rather than against the third party administrator, MAA. ↩
  6. The dissent would extend direct liability for bad faith to the insurer's agents (e.g., adjusters, claims representatives, investigators employed by the insurer, and perhaps attorneys employed by the insurer), despite the fact that these agents are not insurers and are strangers to the insurance contract which gives rise to the duty of good faith on the part of the insurer. This is contrary to our holding inTimmonsthat agents of the insurer — even agents whose acts may have been material to a breach of the duty — do not normally owe the insured a duty of good faith since agents are not parties to the insurance contract.

    The dissent also argues that the insurer "stands exonerated" if its agents (or independent contractors) bear no liability for a bad faith tort. This is simply not so. An insurer has a non-delegable duty of good faith while performing the functions of claims management, adjustment and settlement. This duty requires the insurer to take positive steps to adequately investigate, evaluate, and respond to its insureds' claims. An insurer may employ an agent or an independent contractor to perform these functions, but this does not absolve the insurer of its own non-delegable duty. If the agent or independent contractor fails to adequately perform the functions, the insurer is liable, not under the doctrine ofrespondeat superior,but because of its own failure to comply with its non-delegable duty of good faith. ↩
  7. The court comes to this conclusion based in part on the premise that an agent for a disclosed principal is not liable in an action for breach of contract. Restatement (Second) of Agency § 320.A cause of action for breach of an insurer's duty of goodfaith isex delicto.It was first recognized in Christian v.American Home Assurance Co.,where it is stated:
    [T]his is a distinct tort based upon an implied duty of the insurer to act in good faith and deal fairly with its insured. This duty is not consensual, it is imposed by law.Breach of the duty sounds in tort,notwithstanding that it also constitutes a breach of contract, and plaintiff insured may recover consequential and, in a proper case, punitive damages. The essence of the cause of action is bad faith. [emphasis supplied]
    1977 OK 141, ¶ 6,577 P.2d 899, 901. ↩
  8. For MAA's exoneration the court relies here on the decision by the United States Court of Appeals for the Tenth Circuit in Wolf v. Prudential Ins. Co. of America,50 F.3d 793(10th Cir. 1995), where an exception was made to the general rule that an agent is always liable in tort.Wolfis neither a judicialdeclaration of Oklahoma's common law nor a recognized source ofstate law.

    I suggest a different test from that announced inWolf, supra.There, the federal court focused on whether the plan administrator sufficiently "acts like an insurer . . . [so] that there is a `special relationship' between the administrator and the insured."Id.at 797. TheWolfview is plainly inconsistent with Oklahoma's common law. The correct analysis must focus on whether the specific, well-defined duty the administrator is alleged to have violated is so integral to the business of the insurer-hirer as to make it nondelegable. Coe v. Esau,1963 OK 1, ¶¶ 11-15,377 P.2d 815, 819. For a discussion of the principle of nondelegable duty, seeinfraPart III(D) ¶¶ 13-16 of the text. ↩
  9. The heart of agency is expressed in the ancient common-law maximqui facit per alium facit per se(the act of the agent or servant is the act of the principal or master). Sisk v. J.B. Hunt Transport, Inc.,2003 OK 69, ¶ 7 n. 15, 81 P.3d 55; State ex. rel. Oklahoma Bar Ass'n v. Taylor,2000 OK 35, ¶ 19 n. 31,4 P.3d 1242, 1251; Nelson v. Pollay,1996 OK 142, ¶ 7 n. 23,916 P.2d 1369, 1374; North Side State Bank v. Board of County Com'rs of Tulsa County,1994 OK 34, ¶ 14 n. 25,894 P.2d 1046, 1051 n. 25; Anderson v. Eichner,1994 OK 136, ¶ 12 n. 24,890 P.2d 1329, 1337. As the Restatement (Second) of Agency § 343 states "[a]n agent who does an act otherwise a tort is not relieved from liability by the fact that he acted at the command of the principal or on account of the principal . . ."

    The rule of law that an agent is not excused when committing tortious or criminal conduct is widely recognized. In an early Oklahoma case it is expressed thusly:
    The law of principal and agent does not apply when the agent, in pursuit of a lawful purpose, sets aside, and engages in the commission of a wrong, to the injury of the property or personal rights of another . . . Instead of the relation of the principal and agent existing and the law relating thereto being applicable, the transaction resolves itself into a conspiracy between and among the parties engaged in the commission of the wrong, and each and every party accepting benefits with knowledge of the wrong, and aiding or engaging in the wrong, are tort-feasors, and the law will hold each party jointly and severally liable in damages for the injury suffered by the wronged person.


    Rogers v. Brummett,1923 OK 711, ¶ 3,220 P. 362, 365.

    The United States Supreme Court took a similar position when it stated that "[N]either a state nor an individual can confer upon an agent authority to commit a tort so as to excuse the perpetrator." Hopkins v. Clemson Agric. College of South Carolina,221 U.S. 636, 643,31 S.Ct. 654, 656-57,55 L.Ed. 890(1911). ↩
  10. The COCA limited its holding to the specific facts of this case, stating "[MAA] does not act like an insurer such that there is a special relationship between it and Plaintiff that could give rise to the duty of good faith." For its conclusion the COCA represents that it has relied on this court's decision inChristian, supranote .I find no support inChristianforCOCA's quoted statement of the pertinent rule. ↩
  11. Agency is governed by common-law principles. See Restatement (Second) of Agency. ↩
  12. Based on the common-law duty that all individuals must act or refrain from acting in a manner that brings harm to others, an agent cannot insulate itself from tort liability. Whether acting on his own behalf or on behalf of his principal, an agent will not be relieved from the consequences of his tort merely because he (or she) stood in an agency relationship when the tort occurred.Hopkins, supranote at 643; Restatement (Second) of Agency § 343,supranote. ↩
  13. A finding that MAA served as independent contractor does not complete the required analysis. The trial court must next determine whether the County delegated to MAA a well-defined duty integral to its business as an insurer. If MAA performed obligations integral to those of the insurer and involving the latter's well-defined legal duty to the insured, it may be liablequainsurer.

    For example, each Oklahoma insurer has a nondelegable duty to settle claims in good faith. Settling and paying claims is the most basic function of an insurer.Christian, supranote, at ¶ 25, 577 P.2d at 904 ("We approve and adopt the rule that an insurer has an implied duty to deal fairly and act in good faith with its insured");Coe, supranote, at ¶¶ 12-15, at 819; Taylor v. State Farm Fire and Casualty Co.,1999 OK 44, ¶ 9 n. 19,981 P.2d 1253, 1258 n. 19. When MAA carries out this duty it acts exactly as if it were the insurer. If MAA, as an independent contractor, discharges the duty (of paying or settling claims) in bad faith MAA is liablequainsurer. Any other result would be contrary to the principles of common-law tort liability. In short, MAA, or any other entity, when actingas or foran insurer, must be held to the same standard of good faith and fair dealing as an insurer itself. ↩
  14. Hinson v. Cameron,1987 OK 49, ¶ 5,742 P.2d 549, 511,citingFlanders v. Crane Co.,1984 OK 88,693 P.2d 602, 602. ↩
  15. A-Plus Janitorial Carpet Cleaning v. Employers' Workers' Compensation Ass'n,1997 OK 37, ¶ 32,936 P.2d 916, 930. ↩
  16. Enterprise Management Consultants, Inc. v. State of Oklahoma ex rel. the Oklahoma Tax Comm'n,1988 OK 91, ¶ 6 n. 12,768 P.2d 359, 362 n. 12. ↩
  17. Enterprise Management Consultants, Inc., supranote 10, at ¶ 6 n. 12, 362 n. 12. ↩
  18. Enterprise Management Consultants, Inc.,supranote 10, at ¶ 6 n. 13, 362 n. 13; Coe,supranote 7, at ¶ 8, 377 P.2d at 818. ↩
  19. Enterprise Management Consultants, Inc., supranote 10, at ¶ 6 n. 13, 362 n. 13.See alsoRestatement (Second) of Agency § 1 which defines the principal/agent status as "a fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf andsubject to his control,and consent by the other so to act." [Emphasis added.] ↩
  20. The Restatement (Second) of Agency § 2(3) defines an independent contractor as "a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking." ↩
  21. Supranote. ↩
  22. Allstate Ins. Co. v. Amick,1984 OK 15, ¶¶ 14-15,680 P.2d 362, 364-65.Amicklimited the outer reach of theChristiantort's benefit only to those who stoodvis-a-visthe defendant-insurer in a relationship of insured.Amick'scircumscription of thestanding zone for plaintiffs does notrequire that recoverable harm must be inflicted by one acting forthe insurer who also standsvis-a-visthe insured in acontractual relation.The addition of the latter requirement is today'sipse dixit. ↩
  23. Seeauthoritiesinfranote. ↩
  24. See¶ 8 n. 3 of the court's opinion. ↩
  25. The court creates alegal paradoxwhen it strains to hold that an insurer's agents and all of its independent contractors are not liable in tort. This would make the insurer's liability exclusive. But insurers are corporate bodies and cannot act without human agents. By immunizing non-employee agents from bad-faith torts committed for the principal, the court today is setting insurers' controlled instrumentalities on a liability-free bad-faith frolic. ↩
  26. Vicarious liability is imposed by law when one person is made answerable for theactionable conductof another. Braden v. Hendricks,1985 OK 14, ¶ 18, n. 24,695 P.2d 1343, 1351, n. 24. Restatement (Third) of Torts § 13 (Vicarious Liability), Comment a: "In a number of contexts, the responsibility of one actor is legally imputed to another, and vicarious liability is imposed. The most familiar example isrespondeat superior— the liability of a principal for the tortious acts of an agent and that of a master for tortious acts of a servant.SeeRestatement Second, Agency §§ 219, 243-245. In some circumstances the employer [hirer] of an independent contractor may be held liable for the negligence of the [independent] contractor.SeeRestatement Second, Torts §§ 416-429."

    It is axiomatic that a principal cannot be made liable by application of respondeat superior if the agent's actions are not actionable. Cnota v. Palatine Area Football Ass'n,592 N.E.2d 196, 204 (Ill.App. 1992); Dumas v. Lloyd,6 Ill. App.3d 1026,286 N.E.2d 566, 569 (Ill.App. 1972); Peoples v. Conway,897 S.W.2d 206, 208 (Mo.App. 1995) (where an employee is exonerated of respondeat superior liability the employer also must stand exonerated); Fish v. Southern Pacific Company,173 Or. 294,143 P.2d 917(1943),reh. den.145 P.2d 991(1944) (where vicarious liability is based solely on the wrongful act of an agent, exoneration of the agent exonerates the principal). ↩
  27. A voluntary affirmative act by which an actor in the respondeat superior setting is released also releases the master's liability.Sisk, supranote, at ¶ 7 ("The common-law doctrine [of vicarious liability] teaches that an effective release of the servant operates to release the master."). ↩
  28. See, e.g.,Hedquist v. Merrill Lynch, Pierce, Fenner Smith, Inc.,528 S.E.2d 508, 510 (Ga. 2000); Harris v. St. Mary's Medical Center, Inc.,726 S.W.2d 902, 905 (Tenn.App. 1987); Gibson Lumber Co. v. Neely Coble Co., Inc.,651 S.W.2d 232, 234 (Tenn.App. 1983); Kirk v. Michael Reese Hospital Medical Center,117 Ill.2d 507, 111 Ill. Dec. 944,513 N.E.2d 387, 399 (Ill. 1987); Towns v. Yellow Cab Co.,382 N.E.2d 1217, 1221 (Ill.App. 1978). Issue preclusion prevents relitigation of facts and other issues actually litigated and necessarily determined in an earlier proceeding between the same parties or their privies (or others if the issues were fully and fairly litigated). Underside v. Lathrop,1982 OK 57, ¶ 6 n. 8,645 P.2d 514, 517 n. 8; Veiser v. Armstrong,1984 OK 61, ¶ 8 n. 9,688 P.2d 796, 8009 n. 9. ↩
  29. If there was an insurer-insured relationship between the plaintiffs and the insurance entity for whom the Administrator (or its hired independent contractor) was acting when harm stood inflicted, the "special relationship" thatChristian'sprogeny requires stands satisfied.SeeKuykendall v. Gulfstream Aerospace Technologies,2002 OK 96, ¶ 19,66 P.3d 374, 382; First Bank of Turley v. Fidelity and Deposit Ins. Co. of Maryland,1996 OK 105, ¶ 20 n. 31,928 P.2d 298, 306-07; Gianfillippo v. Northland Cas. Co.,1993 OK 125, ¶¶ 8-10,861 P.2d 308, 310 (an injured auto passenger covered by the driver's liability insurance policy may not bring a bad-faith action against the insurer); Goodwin v. Old Republic Ins. Co.,1992 OK 34, ¶ 6,828 P.2d 431, 432-33;Amick, supra,note, at ¶¶ 14-15, at 364-65. ↩
  30. Amick, supra,note, at ¶¶ 14-15, at 364-65. ↩
  31. Sisk, supranote, at ¶ 7. ↩
  32. The court today exonerates the insurer from (a)respondeat superiorliability and (b) liability for the acts of those who breach the insurer's nondelegable duties. ↩
  33. 1982 OK 97, ¶ 22,653 P.2d 907, 914. ↩
  34. One who owes a nondelegable duty to another cannot escapeliability for its performance by engaging an independentcontractor.In such cases, the rule that the hirer is not liable for actionable conduct of an independent contractor will not be applied. Braden v. Hendricks,1985 OK 14, ¶ 19,695 P.2d 1343, 1352, n. 26; Shell Pipe Line Corp. v. Curtis,1955 OK 212, ¶ 13,287 P.2d 681, 685; Allied Hotels, Limited v. Barden,1964 OK 16, ¶ 15,389 P.2d 968, 971. In Oklahoma Ry. Co. v. Boyd,1929 OK 82,282 P. 157, 162,140 Okla. 45, it is said, "Where one owes a nondelegable duty to third persons, he cannot escape the obligation of performing such duty by engaging for its performance through or by a contractor, and in such cases the rule that an employer is not liable for the negligence of an independent contractor has no application."SeeCopeland v. The Lodge Enterprises, Inc.,2000 OK 36, ¶ 12, n. 26,4 P.3d 695, 700quotingGreat American Indemnity Co. v. Deatherage,1935 OK 1156,52 P.2d 827, 830-31,175 Okla. 28(". . . the general rule of nonliability of the contractee is that one on whom the law imposes a positive duty to the public or an individual cannot escape the responsibility of seeing that duty performed by delegating it to an independent contractor, and will be liable for injuries resulting from the contractor's negligence in the performance thereof"); U.S. Security Services Corp. v. Ramada Inn, Inc.,665 So.2d 268, 270 (Fla. App. 1995). For a discussion of nondelegable duty owed by a public utility, see Bouziden et al. v. Alfalfa Elec. Co-op., Inc.,2000 OK 50,16 P.3d 450, 462-63 (Opala, J., dissenting).

    Nondelegable duties are addressed in the Restatement (Second) of Torts §§ 416-425. The theory ofnondelegable dutiesis also dealt with in § 214 of the Restatement (Second) of Agency, which states: "A master or other principal who is under a duty to provide protection for or to have care used to protect others or their property and who confides the performance of such duty to a servant or other person is subject to liability to such others for harm caused to them by the failure of such agent to perform the duty." ↩
  35. For the general rule of nonliability see Restatement (Second) of Torts § 409. Its terms are:
    Except as stated in §§ 410 to 429, the employer of an independent contractor is not subject to liability for bodily harm caused to another by a tortious act or omission of the contractor or his servants.
    ↩
  36. Sisk, supranote, at ¶ 7. ↩
  37. In Copeland v. The Lodge Enterprises, Inc.,2000 OK 36, ¶ 12, n. 25,4 P.3d 695, the court states:
    "The rule in Oklahoma is that a person who performs work through an independent contractor is not liable for damages to third persons caused by the negligence of the contractorexceptwhere the work is inherently dangerous or unlawful or where the employer owes a contractualor defined legal duty tothe injured party in the performance of the work." (emphasis added). Williamson v. Fowler Toyota, Inc.,1998 OK 14, ¶ 7,956 P.2d 858, 860,quotingfrom Hudgens v. Cook Industries, Inc.,1973 OK 145, ¶ 11,521 P.2d 813, 815.See also,Huckins Hotel Co. v. Clampitt,1924 OK 142,101 Okla. 190,224 P. 945, 946-947, Minnetonka Oil Co. v. Haviland,1916 OK 103,55 Okla. 43,155 P. 217, 219; W. Page Keetonet al,PROSSER AND KEETON ON THE LAW OF TORTS § 71, at 511-512 (5th Ed. 1984).
    Copelandteaches that while an innkeeper may hire an independent contractor to perform the former's nondelegable duty, he (or she) may not pass off to an independent contractor the ultimate legal responsibility for the proper performance of that duty.Id.at ¶ 12;Deatherage, supranote at 830-31. Under the nondelegable duty rule, an innkeeper may be held vicariously liable for an independent contractor's failure to exercise reasonable care even if the innkeeper has itself exercised due care. ↩
  38. Porter v. Norton-Stuart Pontiac-Cadillac of Enid,1965 OK 18, ¶ 0, syl.,405 P.2d 109, 110 ("Where two parties are jointly liable to a third party . . . [for] a tort, one of them primarily for the reason that he is the actual wrongdoer, and the other secondarily and constructively under the rule of respondeat superior but without any fault having a causal connection with the third party's injuries, the latter may recover from the former the amount he has been compelled to pay as damages for the injury").SeeRestatement (First) of Restitution § 76 ("A person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity from the other, unless the payor is barred by the wrongful nature of his conduct."). ↩
  39. Porter, supranote at 113. ↩
  40. Id. ↩
  41. Id. ↩
  42. Noncontractual or equitable indemnity may arise from a legal relationship between the parties. National Union Fire Ins. Co. v. A.A.R.W. Skyways, Inc.,1989 OK 157,784 P.2d 52, 54; Travelers Ins. Co. v. L.V. French Truck Serv., Inc.,1988 OK 76,770 P.2d 551, 555 n. 16 (Okla. 1988)). One who is only secondarily obligated to pay damages would have an indemnity claim against the primary obligor who owes a nondelegable duty.Porter, supranote at 113. ↩
  43. Sisk, supranote, at ¶ 7.Siskteaches that there can be no vicarious liability for another's acts that are immunized. By today's exoneration of the actor, the court's declaration that it has preserved the insurer's liability for a nondelegable duty becomes illusory. ↩
  44. The pertinent terms of Art. 5 § 46, Okla.Const., are:
    "The legislature shall not, except as otherwise provided in this Constitution, pass any local or special law authorizing:
    * * *
    Regulating the practice or jurisdiction of . . . in judicial proceedings or inquiry before the courts . . . or other tribunals. . . . ."
    ↩
  45. Seethe terms of Art. 5 § 46, Okla.Const.,supranote. Special laws are those which single out less than an entire class of similarly affected persons or things for different treatment. If a rule of law is special, § 46 absolutely and unequivocally prohibits its passage as law. Reynolds v. Porter,1988 OK 88, ¶¶ 13-21,760 P.2d 816, 821-24. InPorterthe court held that making a statute of limitations applicable to one tort —i.e.,singling out one tort for a different limitation from that which is applicable to other torts of the same rubric — violates Art. 5 § 46, Okla.Const., because it provides disuniform procedures for a tort of like attributes. By today's pronouncement all tortfeasors,except insurers in bad-faith cases,would remain liable underrespondeat superiorfor the torts of their agents and jointly for the torts of those independent contractors upon whom an obligation can be imposed.Creating a single exemptionfrom therespondeat superiorliability class would similarlyfall under the axe of a special-law condemnation.

    Our own jurisprudence, no less than the Legislature's enactments, must faithfully conform to the state fundamental law's interdiction of disuniform laws on prohibited subjects. Johnson v. Tony's Town Mister Quik,1996 OK 138, ¶ 5, n. 10,915 P.2d 355, 537-38; Haynes v. Tulsa Public Schools Transit,1994 OK 86, ¶ 5,879 P.2d 128, 131 (Opala, J., concurring); Great Plains Federal S L Assn. v. Dabney,1993 OK 4, ¶ 2,846 P.2d 1088, 1095-96 (Opala, J., concurring). ↩