Farmers California Auto Policy

I represent a lady who separated from her husband and moved from California to Oklahoma. She has now lived in Oklahoma for several years but she and her husband continue to purchase insurance together through agent in California. Agent aware client lives in Oklahoma as the declarations page has her Oklahoma address listed but continues to write her a California Insurance Policy. She had a wreck in Oklahoma but the defendant is underinsured, but Farmers is claiming California UM law will apply. Not sure how California law differs but I assume it must be more favorable to Farmers. Is this a Bad Faith case for writing a policy in California where agent knows insured lives in Oklahoma?

Answer: I have a bad feeling about a bad faith case from this. I think you may have to get the policy reformed to make Oklahoma, rather than California, law apply. I doubt the Supreme Court would hold there was not at least an arguable basis for Farmers claim to apply California law. The big difference in Oklahoma and California law will be that under California law, the tort-feasor’s liability limit is deducted from the policy limit, which will severely limit and maybe eliminate your recovery. Your reformation claim will in large part be based on Gentry v. American Motorist Ins. Co., 1994 OK 4, 867 P.2d 468 (Constructive fraud will justify reforming an insurance policy to cover a loss not otherwise covered, where the agent led the insured to believe the loss in question would be covered, even though the agent had no intent to defraud the insured). You also have an argument based on estoppel under Security Ins. Co. of New Haven v. Greer, 1968 OK 3, 437 P.2d 243 (Ins. Co. estopped by agent’s knowledge of hay stored on insured property to assert policy defense based on that fact). Incidentally, the California statute of limitations on a UM claim is only one year.