An insurance policy is a contract. The contract basically provides the policyholder will pay the agreed amount of premiums to the insurance company in exchange for the insurance company’s promise to pay covered claims.  The law in Oklahoma has long recognized that an insurance contract is different than other kinds of contracts.

In 1977, the Oklahoma Supreme Court decided Christian v. American Home.  In that landmark case, the Court recognized the “special relationship” between an insurance company and its policyholder. The Court noted several reasons for this “special relationship,” including:

  • The policyholder “has no bargaining power and no means of protecting himself” from an abusive insurance company
  • The “quasi-public” nature of the insurance industry, which comes from the fact that it involves the public interest and is largely governmentally regulated
  • Everyone knows that when a claim is made “the insured will be disabled and in strait financial circumstances and, therefore, particularly vulnerable to oppressive tactics on the part of an economically powerful entity.”

In another landmark Oklahoma Supreme Court decision, Badillo v. Mid-Century Insurance Co., a concurring opinion in which three justices joined stated:

“Insurance companies, like other companies seeking to increase their market and customer base, have turned to mass marketing of liability insurance policies just as other companies market soap and cars. Through its advertising, the insurance company beckons the consumer to do business with it based upon slogans that suggest the liability insurance company will look after its customer’s best interest. The insurance company promises the customer will be in good hands and treated with carrying and neighborly concern. Soothing and comforting music place in the background of these advertisements. Based on these advertisements, it is only reasonable for customers to rely on the insurance company to handle claims with care and concern for the customer’s financial and legal interests.”

Many insurance companies and claim adjusters act in accordance with these long-standing principles. However, all too often, an insurance company loses sight of the duty of good faith and fair dealing and a policyholder pays the price.