Why OMAG and ACCO-SIG Can't Be Sued for Bad Faith

When a private insurance company acts in bad faith in Oklahoma, there are consequences. An insurer that unreasonably denies a valid claim, delays payment without justification, or lowballs a settlement offer in defiance of the evidence exposes itself to a tort action that can produce damages far exceeding the policy limits. That threat of bad faith liability is the single most powerful mechanism keeping private insurers honest. But when the entity controlling the defense and settlement of your claim against an Oklahoma city or county is not State Farm or GEICO but one of two government self-insurance pools, that mechanism does not exist. The Oklahoma Supreme Court has held as much for ACCO-SIG directly, and its reasoning strongly supports the same conclusion for OMAG. The consequences for injured Oklahomans are significant.

The two organizations at the center of this framework are the Oklahoma Municipal Assurance Group (OMAG), which provides liability protection for hundreds of Oklahoma municipalities, and the Association of County Commissioners of Oklahoma Self-Insured Group (ACCO-SIG), which as of the 2014 Delaware County litigation covered 74 of the state's 77 counties. Together, they are the de facto insurers for nearly every city and county government in Oklahoma. They collect premiums. They investigate claims. They hire defense counsel. They make settlement offers. They decide whether to pay or deny. They do everything a private insurance company does. But when their conduct is challenged, they occupy a legal space that no private insurer could ever claim.

What OMAG and ACCO-SIG Actually Are

Both organizations were formed under the Oklahoma Interlocal Cooperation Act, 74 O.S. § 1001 et seq., which allows governmental entities to enter into cooperative agreements for shared services. OMAG was created in 1977 by the cities of Choctaw and The Village and has grown to include hundreds of member municipalities. ACCO-SIG serves a parallel function for counties, pooling self-insured reserves, claims, and losses among its member counties to provide property and liability protection plans.

The critical legal distinction is found in the Governmental Tort Claims Act itself. For municipalities, 51 O.S. § 167(C) provides that "[t]he pooling of self-insured reserves, claims or losses among governments as authorized in this act shall not be construed to be transacting insurance nor otherwise subject to the provisions of the laws of this state regulating insurance or insurance companies." For counties, 51 O.S. § 169(C) contains identical language. The Legislature was unambiguous: these entities pool risk among governments, and that activity is not insurance as the law defines it.

This statutory foundation is what makes the entire framework possible. OMAG and ACCO-SIG are not regulated by the Oklahoma Insurance Department. They are not subject to the statutory duties imposed on licensed insurers. And critically, they are not subject to the tort of bad faith that serves as the primary check on insurer misconduct in Oklahoma.

The "Not Really an Insurer" Defense

The Oklahoma Supreme Court addressed this question directly in City of Choctaw v. Oklahoma Municipal Assurance Group, 2013 OK 6, 302 P.3d 1164. That case was a coverage dispute — not a bad faith tort action — but the Court's analysis of OMAG's legal status set the framework that would later inform the bad faith question. The City of Choctaw argued that OMAG should be treated as an insurer subject to general insurer liability rules, pointing to 36 O.S. § 607.1, which at the time provided that an interlocal entity transacting insurance "shall be considered an insurer" once it received aggregate premiums exceeding $1 million in a twelve-month period. (The statute has since been amended; the current version narrows its scope to interlocal entities insuring educational institutions.) OMAG had conceded in interrogatory answers that it qualified as an "insurer" under the then-applicable statute.

The Court rejected the city's broader argument. Justice Winchester, writing for the majority, held that § 607.1 "does not make OMAG an 'insurer' for all purposes. The statute makes OMAG an 'insurer' only for the 'kinds of insurance that the entity transacts.'" The Court drew a sharp distinction between governmental cooperative insurance plans and commercial enterprises that sell insurance for profit. The contracting parties in a governmental pool, the Court observed, "have substantially more freedom to contract than an individual consumer dealing with a commercial for-profit insurance enterprise."

In practical terms, the Choctaw decision established that OMAG could be considered an insurer for regulatory and operational purposes, but it was not subject to the general rules of liability that Oklahoma law imposes on commercial insurance companies. Although the case did not involve a bad faith tort claim directly, the Court's reasoning — that governmental pools are fundamentally different from commercial insurers and are not subject to the same liability framework — laid the foundation for what followed.

Sovereign Immunity as the Final Shield

If the "not really an insurer" argument left any ambiguity, the Oklahoma Supreme Court eliminated it a year later. In Board of County Commissioners of Delaware County v. Association of County Commissioners of Oklahoma Self-Insured Group, 2014 OK 87, 339 P.3d 866, the Court confronted the question of whether ACCO-SIG was protected by sovereign immunity under the GTCA.

The facts were stark. Delaware County had settled a federal lawsuit involving fifteen plaintiffs who alleged sexual assault by employees of the county sheriff's office. The settlement was $13.5 million. ACCO-SIG agreed to contribute $1 million, which it said was the per occurrence limit under its agreement, less defense costs already incurred. The county filed suit for breach of contract and moved to add a bad faith claim.

The Court held that ACCO-SIG qualified as an "agency" under the GTCA's definition at 51 O.S. § 152, which defines an agency as "any board, commission, committee, department or other instrumentality or entity designated to act in behalf of the state or a political subdivision." The Court reasoned that ACCO-SIG's sole purpose was to provide property and liability plans for its member counties, that its funds came from counties whose funds came from tax revenue, and that it was therefore "designated to act in behalf of" its member counties within the meaning of the GTCA.

As a governmental agency, ACCO-SIG was entitled to the sovereign immunity provided by 51 O.S. § 152.1(A), which states: "The state, its political subdivisions, and all of their employees acting within the scope of their employment, whether performing governmental or proprietary functions, shall be immune from liability for torts." And here the Court delivered the decisive blow: because "scope of employment" under the GTCA means "performance by an employee acting in good faith within the duties of the employee's office," an employee acting in bad faith is by definition acting outside the scope of employment. The GTCA only waives immunity for torts committed within the scope of employment. Bad faith, by definition, falls outside that scope. So the tort claim is structurally impossible: if the conduct was in good faith, there is no bad faith claim; if the conduct was in bad faith, there is no waiver of immunity.

The decision was 7-2, with Justice Kauger concurring in the result and Chief Justice Colbert and Justice Watt dissenting.

The Harmon County Case: What This Looks Like in Practice

The consequences of this legal framework became painfully visible in the litigation that followed. In Board of County Commissioners of Harmon County v. ACCO-SIG, 2021 OK 15, 485 P.3d 234, the Oklahoma Supreme Court considered a related dispute that arose from another catastrophic failure of claims handling.

A former inmate of the Harmon County Jail had been sexually assaulted by a City of Hollis Police officer while incarcerated. The inmate sued the Sheriff of Harmon County in federal court. ACCO-SIG, which provided $2 million in liability protection under its agreement, hired defense counsel and controlled the settlement negotiations. During more than a year of mediation, the defense team made settlement offers of $7,500, then $25,000, then $125,000, then $150,000, and finally $225,000.

The federal court entered a judgment against the Sheriff for $6.5 million plus interest, followed by an additional $512,687 in attorney fees. ACCO-SIG paid its $2 million limit. Harmon County was left holding the remaining $5 million-plus judgment on a case that might have settled for a fraction of that amount if the claims handling had been competent.

Harmon County sued ACCO-SIG for breach of contract and the defense lawyers for professional negligence. The 2021 Supreme Court opinion addressed only a disqualification issue, not the merits, but the underlying facts illuminate exactly what happens when the entity controlling the defense of a government liability claim has zero exposure to bad faith consequences. There is no financial incentive to evaluate claims realistically, no penalty for chronic lowballing, and no accountability mechanism short of a breach of contract theory, which limits damages to the terms of the agreement itself.

What This Means for Injured Oklahomans

If you are a person injured by the negligence or misconduct of a city or county employee in Oklahoma, the entity that will investigate your claim, hire the defense lawyers, and decide whether to offer you a settlement is almost certainly OMAG or ACCO-SIG. Understanding their legal position is essential to understanding why government claims behave differently from private insurance claims.

In a private insurance context, the insurer's bad faith exposure functions as a counterweight. A private insurer that refuses a reasonable settlement demand within policy limits, only to see a verdict exceed those limits, faces a bad faith claim from its own insured that can produce damages far beyond the original policy. That risk disciplines the settlement process. Adjusters know that unreasonable denials and lowball offers carry consequences.

OMAG and ACCO-SIG operate without that counterweight. Their member cities and counties cannot sue them for bad faith. The injured plaintiff certainly cannot sue them for bad faith. The result is a claims environment where the incentive to settle reasonably is muted, where lowball offers carry no penalty, and where the only recourse for a member government that disagrees with the pool's handling of a claim is a breach of contract action limited to the terms of the protection agreement.

This does not mean that claims against government entities are unwinnable. It means they require a different strategic approach. Federal Section 1983 claims bypass the GTCA framework entirely and are litigated under federal rules with federal remedies. Monell liability allows claims directly against the municipality or county based on official policy or custom, regardless of how the self-insurance pool handles the defense. An experienced civil rights attorney understands how to apply pressure through these federal mechanisms when the state-law framework limits leverage. And even within the GTCA framework, the statutory caps and procedures, while restrictive, do not eliminate liability. They simply change the tactical calculus.

Why This Matters Beyond Individual Cases

The broader systemic concern is straightforward: OMAG and ACCO-SIG collectively control the defense of claims against nearly every city and county in Oklahoma, and they do so in a legal environment where their own conduct is essentially unreviewable. No Insurance Department oversight. No bad faith exposure. No punitive damages. The only constraint is the contractual relationship with their member governments, and as the Harmon County litigation shows, even that relationship can produce catastrophic outcomes when the pool's settlement strategy proves inadequate.

This is not a criticism of every decision these organizations make. Many claims are handled competently and resolved fairly. But the structural absence of accountability creates a predictable result: when claims are handled poorly, there is no corrective mechanism with teeth. The injured plaintiff has no leverage against the pool. The member government has, at most, a breach of contract claim. And the pool itself continues to operate in a regulatory vacuum that no commercial insurer in Oklahoma would ever be permitted to occupy.

For plaintiffs' attorneys, understanding this landscape is not optional. It shapes every aspect of litigation against government entities in Oklahoma, from pre-suit GTCA notice requirements to discovery strategy to settlement negotiations. The absence of bad faith exposure on the defense side changes the pressure dynamics fundamentally, and lawyers who approach government claims with the same assumptions they use against State Farm or Progressive will find themselves in a very different fight.

Frequently Asked Questions

Can I sue OMAG or ACCO-SIG directly for mishandling my injury claim?

No. As the entity handling the defense and settlement of claims against its member governments, OMAG and ACCO-SIG are not in a direct legal relationship with you as the injured plaintiff. You cannot bring a third-party bad faith action against them. Your claim runs against the city or county that employed the person who injured you, and the GTCA governs the scope of that liability. OMAG or ACCO-SIG controls the defense behind the scenes, but you have no independent cause of action against the pool itself.

Can the city or county sue its own insurance pool for bad faith?

The Oklahoma Supreme Court has held that ACCO-SIG is immune from bad faith tort claims under the GTCA's sovereign immunity provisions. Board of County Commissioners of Delaware County v. ACCO-SIG, 2014 OK 87. While City of Choctaw v. OMAG, 2013 OK 6, addressed OMAG's status somewhat differently, focusing on its limited insurer classification under 36 O.S. § 607.1, the practical result is the same: neither organization is subject to the tort of bad faith as Oklahoma courts apply it to commercial insurers. A member government's recourse is limited to breach of contract.

Does this mean the city or county has no liability for my injuries?

No. The city or county remains liable under the GTCA for the negligent acts of its employees committed within the scope of employment, subject to the GTCA's specific exemptions and damage caps. If your claim involves a federal constitutional violation, such as excessive force or deliberate indifference, you may also have a Section 1983 claim that bypasses the GTCA entirely. The immunity discussed in this article applies to the self-insurance pool, not to the government entity itself.

Why did the Legislature exempt these pools from insurance regulation?

The GTCA expressly provides that pooling self-insured reserves among governments is not "transacting insurance" and is not subject to Oklahoma insurance laws. The rationale, as articulated by the Oklahoma Supreme Court, is that the member governments in a cooperative pool have equal bargaining power and equal interests in enforcing their contracts, unlike individual consumers dealing with commercial insurers. Whether that rationale adequately accounts for the interests of injured third parties is a separate policy question.

How does this affect settlement negotiations in my government liability case?

Significantly. In private insurance claims, the insurer's bad faith exposure creates incentive to evaluate claims fairly and settle within policy limits when the evidence supports it. OMAG and ACCO-SIG operate without that incentive. This does not mean they will never settle fairly, but it does mean the typical leverage that a plaintiff's attorney uses in private insurance negotiations may not apply with equal force. Experienced attorneys adjust their strategy accordingly, often by building the strongest possible case for trial and, where applicable, pursuing federal claims that carry different remedies and pressure points.

Are there any other states where government self-insurance pools have this kind of immunity?

Many states allow governmental entities to self-insure through interlocal cooperation agreements, and the specific rules governing those pools vary by jurisdiction. Oklahoma's framework is notable for the combination of statutory exclusion from insurance regulation and GTCA sovereign immunity, which together create a particularly comprehensive shield against bad faith tort liability. Whether other states reach similar results through their own sovereign immunity and insurance statutes is a jurisdiction-specific question that requires independent analysis.

What should I do if I have a claim against an Oklahoma city or county?

Consult an attorney who has specific experience litigating against Oklahoma government entities. The GTCA imposes strict procedural requirements, including a written notice that must be filed within one year of the loss, and the substantive rules differ substantially from ordinary negligence litigation. An attorney familiar with the OMAG and ACCO-SIG landscape can evaluate your claim, identify whether federal claims are available, and develop a strategy that accounts for the unique dynamics of government liability litigation in Oklahoma. Contact Addison Law Firm for a free consultation.

This article is for general information only and is not legal advice.