The Adjuster's Playbook: 'Delay, Deny, Defend'

I. Introduction: The Asymmetry of the Insurance Contract

An insurance policy is a unique commercial instrument. Unlike a standard contract for goods, which involves a simultaneous exchange, insurance is an aleatory contract: the insured pays premiums for years in exchange for a future promise of protection. When a catastrophic loss occurs, the insured is often in a state of financial and emotional vulnerability, while the insurer holds the capital. This inherent power imbalance is the fertile soil for the tort of Bad Faith.

In Oklahoma, as established in the landmark case of Christian v. American Home Assurance Co. (1977), the law imposes an implied duty of good faith and fair dealing on the insurer. This duty requires the carrier to treat the insured's interests with the same consideration it gives its own. However, modern corporate insurance practice has evolved away from this fiduciary-like standard toward an adversarial model known as "Delay, Deny, Defend." In this model, the claims department is not a service center, but a profit center, where the primary metric of success is "severity control"—the suppression of claim payouts below their actuarial value.

II. The Economics of Delay: The "Float"

To understand Bad Faith, one must follow the money. Insurance companies generate revenue from two sources: underwriting profit (premiums minus claims) and investment income. The time between the receipt of a premium and the payment of a claim is the "float." Insurers invest this float, earning billions in returns. Therefore, every day a claim payment is delayed is a day the insurer retains the principal and earns interest.

This creates a perverse economic incentive. A carrier with $50 billion in reserves earning a modest 5% annual return generates approximately $6.8 million per day in passive income. Institutional delay is not merely bureaucratic incompetence; it is a fiduciary duty to shareholders. By delaying payment on a valid claim for 90 days, the carrier essentially forces the insured to provide an interest-free loan. When this tactic is applied systematically across millions of claims, the aggregate profit is staggering. This systemic malice is the target of the "Institutional Bad Faith" claim.

III. Institutional Bad Faith: The "Timmons" Doctrine

The most potent form of Bad Faith litigation targets the corporation’s internal policies. Under Timmons v. Royal Globe Insurance Co., the Oklahoma Supreme Court recognized that a corporation can be liable for punitive damages if its internal systems are designed to encourage valid claim denial. We look for evidence of "Institutional Bad Faith" in three key areas, primarily compensation structures where discovery often reveals that claims adjusters’ bonuses and performance reviews are tied to "severity" metrics—meaning, the lower their average payout, the higher their bonus. This creates a direct financial conflict of interest. An adjuster cannot be impartial when their mortgage payment depends on shortchanging the insured.

Additionally, we scrutinize internal Training Manuals for the "Anchoring" tactic. Redacted training documents frequently instruct adjusters to "anchor" negotiations by making an unreasonably low initial offer (e.g., 30% of case value). The psychological goal is to lower the claimant’s expectations so that a subsequent low settlement feels like a victory. This violates the duty to effectuate "prompt, fair, and equitable settlements" once liability is reasonably clear. Finally, we look for the "Silent Treatment," where training manuals advise adjusters to let a file "age" for 14-21 days before returning a call, exploiting the claimant’s anxiety to force a desperation settlement. Under 36 O.S. § 1250.5(2), failing to "acknowledge and act reasonably promptly" is a statutory violation.

IV. The Unfair Claims Settlement Practices Act (UCSPA)

Oklahoma’s UCSPA, codified at 36 O.S. § 1250.1 et seq., provides the statutory framework for defining Bad Faith conduct. While the statute itself does not create a private private cause of action, violations of its provisions are admissible as evidence of the insurer’s state of mind (malice) for the purposes of tort liability.

Key provisions we litigate include § 1250.5(4), which prohibits "refusing to pay claims without conducting a reasonable investigation based upon all available information." This is the "Drive-By Denial," where an insurer denies a claim based on a cursory review while ignoring exculpatory evidence provided by the insured. Also critical is § 1250.5(7), "compelling insureds to institute litigation... by offering substantially less than the amounts ultimately recovered." This targets the "Lowball" tactic. If a jury awards $100,000 on a claim where the insurer offered $10,000, that disparity itself is evidence of Bad Faith.

V. Conclusion

Bad Faith litigation is the only mechanism that forces an insurance company to internalize the cost of its own greed. Without the threat of punitive damages, the rational choice for an insurer would always be to deny every claim, wait to be sued, and then pay only what was originally owed, keeping the investment income in the interim. Tort liability changes the calculus. It reminds the giant that the contract is not a request for charity, but a promise of security, purchase at a premium, enforcing the ancient maxim: pacta sunt servanda—agreements must be kept.