Suing Oklahoma Government Insurance Pools 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 one of the strongest mechanisms 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 a government self-insurance pool, that mechanism is far weaker and may not exist in the same form. The Oklahoma Supreme Court has held ACCO-SIG immune from bad faith tort claims directly, and its OMAG cases strongly support a cautious, different strategy for municipal-pool claims. 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 function as the practical risk pools for much of Oklahoma city and county government. They collect contributions or premiums. They investigate claims. They hire defense counsel. They make settlement offers. They decide whether to pay or deny. They perform many functions a private insurance company performs. But when their conduct is challenged, they occupy a legal space private insurers do not.

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 like ordinary commercial insurers. They are not subject to the same statutory duties imposed on licensed insurers. And, at least for ACCO-SIG, the Oklahoma Supreme Court has held that sovereign immunity bars the bad faith tort that normally serves as a check on insurer misconduct in Oklahoma.

The Limited Insurer Status 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 some regulatory and operational purposes, but not automatically subject to every liability rule Oklahoma law imposes on commercial insurance companies. The case did not involve a bad faith tort claim directly. That distinction matters. Still, 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 illustrate what can happen when the entity controlling the defense of a government liability claim has no ordinary commercial-insurer bad-faith exposure. The pressure to evaluate claims realistically is different, and the accountability mechanism may be limited to contract or professional-negligence theories rather than an insurer bad-faith tort.

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.

ACCO-SIG operates without that counterweight under the Oklahoma Supreme Court's bad-faith immunity holding, and OMAG operates under a statutory and case-law framework that makes commercial-insurer assumptions dangerous. Injured plaintiffs generally cannot sue either pool for third-party bad faith. The result is a claims environment where settlement pressure is different, where low offers may not create the same downstream exposure they would for a private insurer, and where a member government's recourse may look more like a contract or coverage dispute than a bad-faith tort.

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 many claims against Oklahoma cities and counties, and they do so in a legal environment with far less insurer-style accountability than private carriers face. No ordinary Insurance Department oversight. No clear third-party bad faith remedy. No straightforward punitive-damages pressure against the pool for claim handling. The main constraint is the contractual relationship with member governments, and as the Harmon County litigation shows, even that relationship can produce severe consequences 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 ordinary bad-faith accountability creates a predictable risk: when claims are handled poorly, the corrective mechanism is narrow. The injured plaintiff has little direct leverage against the pool. The member government may be left with contract-based remedies. And the pool itself operates in a legal environment that no commercial insurer in Oklahoma could 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?

Usually, 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. Oklahoma does not recognize a broad third-party bad faith action against the pool. Your claim runs against the city or county that employed the person who injured you, and the Governmental Tort Claims Act governs the scope of that liability unless a federal claim applies. OMAG or ACCO-SIG may control the defense behind the scenes, but that does not create a separate bad-faith claim for the injured person.

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 Governmental Tort Claims Act's sovereign immunity provisions. Board of County Commissioners of Delaware County v. ACCO-SIG, 2014 OK 87. OMAG requires a more careful statement: City of Choctaw v. OMAG, 2013 OK 6, addressed OMAG's limited insurer status and a coverage dispute, not a direct bad-faith tort claim. The practical lesson is still the same for litigation strategy: member governments and injured plaintiffs should not assume OMAG will be treated like a commercial insurer for bad-faith purposes. The safer working assumption is that contract, coverage, and federal-liability leverage matter more than insurer bad-faith pressure.

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. ACCO-SIG operates without that ordinary bad-faith incentive, and OMAG operates in a framework where typical commercial-insurer leverage may not apply with equal force. This does not mean these pools will never settle fairly. It means experienced attorneys adjust their strategy, 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.