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Oklahoma Lawmakers Reject Measure to Expand Liability Insurance Coverage

Posted on March 25, 2020

Oklahoma recently joined several other US states in rejecting a controversial interpretation of insurance laws proposed by the American Law Institute (ALI).

Senate Bill 1692 is directed one section of the ALI’s Restatement of the Law of Liability Insurance, stating that the provision conflicts with existing federal and state law. The legislative measure passed the Senate on March 9, 2020, and was passed to the House the following day for consideration.

ALI is an organization that has published Restatements of the Law in various legal areas for decades, seeking to provide summaries on certain topics to guide judges who are faced with complicated issues in litigation.

The content is considered a synopsis of common law principles in the relevant areas of practice, so the Restatements do not supersede existing judicial orders or statutes. The questionable provision targeted by SB 1692 is Section 27, which would significantly expand insurance coverage, particularly in car accident claims involving reckless driving.

Charles Bryan Alred, founding partner at Charles Bryan Alred, PC in Tulsa, OK, explained the Restatement section in more detail.

“Basically, Section 27 of the Restatement shifts the burden of who has to pay punitive damages after an auto collision. Typically, the driver that actually engaged in recklessness would be on the hook for paying this type of damages. Drunk driving, drag racing, and road rage are examples of reckless driving that may justify punitive damages.”

Mr. Alred noted the fundamental contradiction in the Restatement Section 27.

“There are two goals of punitive damages in a vehicle crash: First, punishing reckless drivers and, second, making an example out of them through discouragement. In other words, when you know you could be paying enormous amounts in punitives, you’re not going to engage in the same dangerous acts. Section 27 contradicts both of these objectives. There’s really no punishment for a driver’s recklessness if the insurance company is forced to pay these amounts. And no one will learn a lesson when they know insurance will pay.”

In Oklahoma, punitive damages are only a consideration when conduct is extreme and dangerous, reflecting a disregard for the safety of others.

The formula for valuing punitive damages is the greater of:

  • Twice the amount of the actual compensatory damages awarded to the plaintiff, which include medical costs, lost wages, pain and suffering, emotional distress, and other losses; OR,
  • An amount equal to $100,000 – $500,000, depending on the nature of the wrongful conduct.