I love reading good news for consumers in Oklahoma. I especially love reading news that some of the deceptive tactics used by car dealers and insurance companies get wrangled.
The Oklahoma Supreme Court recently released, McMullan v. Enterprise Financial Group, Inc, 2011 OK 7. The issue before the Court was whether a vehicle service contract is an insurance contract subject to bad faith claims. Id. at ¶ 1. Fortunately, the Court held that these contracts are subject to bad faith claims. Id.
The issue of bad faith arises when an insurance carrier with a particular duty fails to act reasonably on behalf of the insured. In most cases, such as McMullan, the insurance carrier denies a legitimate claim.
In McMullan, the consumer purchased a used vehicle with an accompanying repair contract. The consumer submitted the claim to the warranty provider, who quickly denied the claim. The consumer filed a bad faith action. In the district court, the judge dismissed the bad faith claims against the company because the contract was not an insurance contract. Id. at ¶ 4.
The Oklahoma Supreme Court analyzed the similarities between insurance company regulations, and warranty service contracts. The Court found that the two were similar, and that regardless of their language, warranty contract and insurance contracts were the same because "the consumer has purchase insurance." Id. at ¶ 13. The Court held that "a vehicle service contract which meets the definition of and is designed to function and perform as 'insurance' should be treated like any other insurance contract if it is breached." Id. at ¶ 18.
this is a valuable opinion for Oklahoma's consumers. This strengthens Oklahoma's already strong consumer protections.