A federal court in Oklahoma granted summary judgment in favor of an insurer, finding that no duty of indemnity or defense existed and that a third-party beneficiary to the policy could not assert a claim for the breach of the duty to defend as a non-party to the insurance contract where the claim for indemnity was properly denied. Fry v. American Home Assur. Co., 2015 WL 519706 (E.D. Okla. Feb. 9, 2015), appeal filed (10th Cir. Mar. 4, 2015).
The surviving spouse of an injured employee sued an insurer after obtaining default judgment against the employer in which the insurer refused to defend and indemnify the employer. The spouse asserted that the insurer breached both the duty to defend and duty to indemnify. The court found that the duties existed if the underlying action involved claims falling within the scope of the policy. As workers in Oklahoma enjoy both a contractual and a statutory status as third-party beneficiaries of a workers’ compensation insurance agreement, the court held that the surviving spouse had standing as a third-party beneficiary to pursue a claim. However, the court held that the duty to defend runs to the insured and only the insured because to hold otherwise was too much of a departure from the concept of privity of contract. The court also held that indemnity did not exist because (1) the spouse’s complaint alleged intentional acts and (2) the insurer was not equitably estopped from denying coverage where allegations of false representations in the initial letter denying coverage were unsupported.