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Morgan v. State Farm Mutual Automobile Insurance Co.

United States District Court, W.D. Oklahoma

March 28, 2019




         This matter comes before the Court on Defendant State Farm Mutual Automobile Insurance Company's (“State Farm”) Motion for Summary Judgment [Doc. No. 20]. Plaintiff George Andrew Morgan (“Morgan”) filed a Preliminary Objection [Doc. No. 31]. State Farm replied [Doc. No. 32]. Plaintiff filed an Amended Objection [Doc. No. 36] and State Farm has filed an Amended Reply. [Doc. No. 39].[1]

         This lawsuit arises from State Farm's failure to protect a workers compensation carrier's statutory subrogation/lien interest and failure to pay the resulting judgment against its insured.


         State Farm insured Morgan under an automobile insurance policy (“Policy”) which provided liability coverage limits of $100, 000.00. The Policy obligates State Farm to pay “damages an insured becomes legally liable to pay because of . . . bodily injuries.” Motion, at 3 (quoting Policy [Doc. No. 20-1]). On June 16, 2009, Morgan left a bar intoxicated. Despite his intoxication, Morgan chose to operate a vehicle and struck pedestrian Jesse Atkins as he was crossing the street. Jesse Atkins was a Kansas resident in Oklahoma for a job with a Kansas company. After striking Mr. Atkins, Morgan left the accident scene. Mr. Atkins was seriously injured and underwent extensive medical treatment totaling over two million dollars in medical expenses. Morgan subsequently pled no contest to charges of: (1) driving under the influence causing great bodily injury; and, (2) leaving the scene of an injury accident. Morgan received a suspended sentence but was eventually incarcerated.[2]

         State Farm received notice of the accident on August 3, 2009, and began its investigation. On September 10, 2009, State Farm sent a letter to Morgan informing him that “it is possible the injuries claimed against you may be in excess of the protection afforded by the policy.” Letter from Todd Towe to Morgan [Doc. No. 20-11]. The letter went on to state that State Farm “will do everything possible to protect you within those limits, however, you may be held personally responsible for any judgment in excess of those limits.” Id.

         On February 19, 2010, Mr. Atkins' attorney provided Michael Feldman, State Farm Claim Representative, with Mr. Atkins' medical bills. These bills totaled $2, 119, 506.30. Mr. Feldman then requested authority to offer the policy limits of $100, 000.00 to settle Mr. Atkins' claim against Morgan. This request was granted and Mr. Feldman made the policy limits offer on February 25, 2010. The offer was accepted with instructions to make the settlement check out to “Jesse Atkins and Medicaid.” Letter from Bretz to Feldman [Doc. No. 20-18]. The check was issued and mailed by State Farm to Mr. Atkins' attorney on March 30, 2010.

         Mr. Atkins' attorney informed State Farm on April 6, 2010, that Mr. Atkins had filed a workers compensation claim against Mr. Atkins' employer and its workers compensation carrier, Kansas Building Industry Workers Compensation Fund (“Fund”). Mr. Atkins' attorney further informed State Farm that workers compensation would pay all of Mr. Atkins' medical bills. This was State Farm's first notice that workers compensation was involved. On the same date, Mr. Atkins' attorney provided State Farm with a copy of the workers compensation “Order for Compensation” which stated that Mr. Atkins' medical treatment was covered by workers compensation. No. lien had yet been asserted on behalf of the Fund. On April 22, 2010, State Farm received a release of all claims from Mr. Atkins.

         The Order for Compensation included a preliminary finding that Mr. Atkins' claim was covered by workers compensation. It was not a final order. The Fund ultimately appealed on the basis that Mr. Atkins was not in the course of his employment when he was struck by Morgan and, therefore, was not entitled to workers compensation.

         On April 21, 2010, State Farm received Mr. Atkins' signed release discharging any claims he might have against Morgan as a result of the accident. Fifteen months later, on June 15, 2011, New York Marine (“NYM”), as the subrogee for the Fund, brought suit against Morgan in Garfield County, Oklahoma. Morgan first learned of NYM's claims in January 2012. Complaint at ¶ 19; Motion, Exhibit 28, Claim File Activity Log [Doc. No. 20-28]. Morgan was served on January 6, 2012. Amended Objection at 6; Amended Objection, Exhibit Claim File Activity Log [Doc. No. 20-28].[3] State Farm learned of the lawsuit on January 30, 2012. State Farm retained legal counsel to represent Morgan in the lawsuit. Morgan also retained his own counsel. Ultimately, the Garfield County judge denied a motion for summary judgment filed on behalf of Morgan as to NYM's subrogation claims.

         Prior to trial, State Farm offered to pay NYM $100, 000.00, the same amount of the policy limits already paid to Atkins. NYM rejected the offer. NYM counteroffered to settle for $700, 000.00. The case went to trial on February 26, 2014. The jury returned a verdict in favor of NYM and against Morgan in the amount of $844, 865.89 on February 27, 2014. Judgment was entered on April 8, 2014. After the judgment was entered, State Farm continued to attempt negotiations with NYM and again offered NYM the policy limits of $100, 000.00 for a release of the judgment against Morgan. The offer was rejected. State Farm continued to defend Morgan through post-trial motions and appeal.

         In December 2014, the Kansas Workers Compensation Appeals Board ruled on the Fund's appeal of Mr. Atkins' workers compensation claim. The Board found that Mr. Atkins was not entitled to workers compensation because he was not in the course and scope of his employment when he was struck by Morgan's vehicle. This ruling is pending further appeal in Kansas.

         On June 10, 2016, the Oklahoma Court of Civil Appeals affirmed the Garfield County judgment in favor of NYM. The Oklahoma Supreme Court denied certiorari on February 21, 2017. The mandate was issued on March 23, 2017. Morgan filed the instant action on May 23, 2017.


         Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Universal Underwriters Ins. Co. v. Winton, 818 F.3d 1103, 1105 (10th Cir. 2016). “An issue is ‘genuine' if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way, ” and “[a]n issue of fact is ‘material' if under the substantive law it is essential to the proper disposition of the claim.” ...

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