Applegate v. State Farm Mutual Automobile Insurance ( 2003 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
MAR 12 2003
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
MATTHEW APPLEGATE,
an individual,
Plaintiff-Appellant,
v. No. 02-7055
(D.C. No. 01-CV-497-S)
STATE FARM MUTUAL (E.D. Okla.)
AUTOMOBILE INSURANCE
COMPANY, a foreign corporation,
Defendant-Appellee.
ORDER AND JUDGMENT *
Before KELLY , McKAY , and O’BRIEN , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
In this diversity case, plaintiff Matthew Applegate appeals from the district
court’s grant of summary judgment to defendant State Farm Mutual Automobile
Insurance Company (State Farm) on Mr. Applegate’s complaint alleging that State
Farm mishandled his insurance claim. We exercise jurisdiction under 28 U.S.C.
§ 1291, and affirm.
I. Background
In 1998 sixteen-year-old Matthew Applegate was riding as a passenger
in his parent’s car, which was driven by fifteen-year-old Nicole Underwood.
The car collided with a vehicle driven by Mitchell Plett, seriously injuring
Mr. Applegate’s spine. As a result of the accident, Mr. Applegate is now
a quadriplegic.
State Farm representative Greg Ellis was assigned the initial insurance
claim for Mr. Applegate. The Applegate family had three cars insured with State
Farm, with two carrying uninsured/underinsured motorist (UM) coverage limits of
$25,000 per person, and one carrying UM coverage limits of $10,000 per person.
When he discovered possible UM claims, Ellis transferred those claims to Kris
King in State Farm’s separate UM unit. Ellis retained the liability portion of
Mr. Applegate’s claim, which included claims against Underwood and Plett.
Nicole Underwood’s parents were also insured by State Farm, so Ellis
contacted their agent’s office to determine whether they had any policy coverage
-2-
applicable to the accident. When told that they had several policies, Ellis states
that he requested a staff member in the agent’s office to set up a claim on the
policy in the Underwood household with the highest auto liability limits.
According to Ellis, the staff member told him that it appeared that all of the
policies in the Underwood household had liability limits of $25,000 per person.
The staff member ultimately reported the liability claim on a policy covering
a Plymouth Voyager for $25,000.
In October 1998 Ellis advised the Applegate family of the Underwood
policy and sent them a certificate of coverage showing the policy number and
liability limit. Meanwhile, Kris King separately offered the Applegates $60,000,
representing the stacked per-person UM coverage limits on each of the
Applegate’s three policies. Because Matthew Applegate was a minor, King
retained attorney Jon Starr to obtain court approval of the proposed settlement.
In January 1999 Starr contacted the Applegate family’s attorneys, Jim and Nancy
Lloyd, and indicated Starr’s authorization to formally settle the UM claims.
Additionally, Starr advised the Lloyds of his authority to settle the liability claims
for $85,000, representing $50,000 from a policy on the Plett vehicle, $10,000
from a policy on the Applegate vehicle, and $25,000 from the policy maintained
by the Underwoods, for a total settlement offer of $145,000.00.
-3-
On January 19, 1999, the Lloyds separately requested Starr, King, and Ellis
to send certified copies of the declaration sheets for all of the policies in effect
at the time of the accident. Ellis responded one week later by sending the Lloyds
a certificate of coverage verifying the policy limits on the Underwood’s liability
policy.
On Friday, January 29, Ellis discovered another policy owned by the
Underwoods that had a liability limit of $100,000.00 per person. Ellis informed
Starr of the discovery that day and informed the Lloyds on the following Monday.
Ellis evaluated the claim under the higher policy and ultimately received authority
to offer $100,000.00 in place of the $25,000.00 policy. Accordingly, Starr
formally offered to settle all of Mr. Applegate’s claims for $220,000.00, and
requested the Lloyds to advise Starr when the Applegates were ready to move
forward with the settlement and court authorization process. The Lloyds
responded by letter, dated July 13, 1999, indicating that the Applegates were
ready to proceed. Starr scheduled a court date for July 29, 1999, but the
Applegates canceled. Soon after, Matthew Applegate turned eighteen, and State
Farm paid him $60,000 in UM benefits. The parties never settled the liability
claims, and Mr. Applegate sued.
Mr. Applegate’s complaint alleged deceit, breach of contract, institutional
bad faith, and negligent training and supervision. The allegations derived from
-4-
Mr. Applegate’s belief that Ellis had knowledge of the higher Underwood policy
from the beginning, and that he withheld this information and attempted to force
the Applegates into settling for the smaller amount. State Farm subsequently
moved for summary judgment, and the district court granted the motion by order
dated March 21, 2002. Mr. Applegate’s appeal raises two issues in connection
with the district court’s order.
II. Standard of Review
When reviewing a diversity action, we look to state substantive law, but we
follow federal law in determining the propriety of the district court’s grant of
summary judgment. Eck v. Parke, Davis & Co., 256 F.3d 1013, 1016 (10th Cir.
2001). “We review the district court’s grant of summary judgment de novo,
applying the same legal standard used by the district court.” Simms v. Okla.
ex rel. Dep’t of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326
(10th Cir. 1999). Summary judgment is proper if the moving party shows “that
there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). “[T]he
substantive law will identify which facts are material. Only disputes over facts
that might affect the outcome of the suit under the governing law will properly
preclude the entry of summary judgment. Factual disputes that are irrelevant or
unnecessary will not be counted.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
-5-
248 (1986). “[A]n issue of material fact is genuine only if the nonmovant
presents facts such that a reasonable jury could find in favor of the nonmovant.”
Simms, 165 F.3d at 1326. In considering whether summary judgment was
appropriate, “we view the evidence and draw reasonable inferences therefrom in
the light most favorable to the nonmoving party.” Id.III. Deceit Claim
Granting State Farm’s motion for summary judgment on Mr. Applegate’s
cause of action for deceit, the district court concluded:
[P]laintiff cannot establish this cause of action because there is no
evidence of a representative of State Farm deceiving him. Plaintiff
testified he never spoke to anyone at State Farm and never saw any
correspondence from State Farm regarding his case. Further,
plaintiff’s father testified he did not notify plaintiff of the $25,000.00
offer until after the $100,000.00 offer was made. In fact, plaintiff
still has not accepted the $100,000.00 offer. An essential element of
a fraud or deceit claim is reliance on the misrepresentation by the
person claiming injury. There is absolutely no evidence plaintiff
relied on any representation made by State Farm since no
representation was made to him and he apparently did not act on any
representation. . . . [P]laintiff has simply failed to produce evidence
showing that defendant State Farm tried to deceive him.
Aplt. App. Vol II, doc. 10 at 7-8 (citation omitted). On appeal, Mr. Applegate
argues that these statements demonstrate that “the trial court incorrectly assumed
that because the misrepresentation at issue was made to [Mr. Applegate’s]
attorney and not directly to [Mr. Applegate], the misrepresentation was not
actionable.” Aplt. Br. at 11. In response, State Farm argues that the particular
-6-
recipient of the alleged misrepresentation in this case is immaterial because
Mr. Applegate has not demonstrated a cause of action for deceit in any event.
We agree.
As the district court correctly noted, to establish a cause of action for deceit
under Oklahoma law a plaintiff must prove:
(1) the defendant made a material misrepresentation; (2) that it was
false; (3) the defendant made the representation knowing it was false
or in reckless disregard of the truth; (4) that the defendant made it
with the intention that it should be acted upon by the plaintiff; (5)
that plaintiff acted in reliance upon it; and (6) that plaintiff thereby
suffered injury.
Sturgeon v. Retherford Publ’ns, Inc., 987 P.2d 1218, 1228 (Okla. Ct. App. 1999)
(emphasis omitted) (citing Ramsey v. Fowler, 308 P.2d 654, 656 (Okla. 1957)).
Most obvious in the present case is Mr. Applegate’s failure to demonstrate that he
acted on the alleged misrepresentation of the liability claim and that he has
suffered injury as a result. Neither Mr. Applegate nor his representatives
accepted the offer on the lower policy limit, which Mr. Applegate claims was
purposefully understated. Additionally, Mr. Applegate has produced no
evidence that he suffered injury as a result of the offer itself. Finally, because
Mr. Applegate has also not accepted the $100,000.00 offer, he cannot plausibly
claim that he has suffered from not receiving that money. On summary judgment,
issues concerning all other elements of the claim become immaterial if the
plaintiff does not come forward with sufficient evidence on any essential element
-7-
of the cause of action. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670
(10th Cir. 1998). Accordingly, because Mr. Applegate failed to make a showing
that he suffered injury as a result of his reliance on the alleged misrepresentation,
the district court properly granted summary judgment for State Farm on
Mr. Applegate’s claim of deceit.
IV. Bad Faith Claim
Mr. Applegate also contends the district court erred by granting State Farm
summary judgment on his claim of bad faith. This cause of action was originally
based on allegations that State Farm’s purposeful mishandling of his claims was
“consistent with approved company-wide practices or policies which reward and
encourage the systematic reduction or avoidance of the payment of claims in an
effort to utilize its claim-handling process as a profit center for the company.”
Aplt. App. Vol. I, doc. 1 at 5. In its motion for summary judgment, State Farm
argued that the only policy limits in controversy were those issued to the
Underwoods. State Farm then correctly advised the court that Oklahoma law does
not impose a duty of good faith on insurance companies to persons who are not
parties to the underlying insurance agreement and therefore does not recognize
a bad faith tort action against an insurer by third parties.
-8-
In his response, Mr. Applegate assured the court that his bad faith claim
was unrelated to any third-party claim based on the Underwood policies.
Mr. Applegate stated:
Throughout the course of this lawsuit, counsel for Plaintiff has
repeatedly advised counsel for State Farm that no claim is being
made for recovery under a third-party bad faith theory. Although
well written and thoroughly researched, State Farm’s argument
concerning third-party bad faith has no application to this lawsuit as
no claim for third-party bad faith has been made here.
Plaintiff’s bad faith claim relates to State Farm’s handling of his first- party
UM claim.
Aplt. App. Vol. I, doc. 5 at 7. The district court specifically relied on these
statements and, consequently, limited its discussion of the bad faith cause of
action to Mr. Applegate’s arguments concerning his UM claims. The court
ultimately rejected those arguments, and Mr. Applegate has abandoned them
in this appeal.
Mr. Applegate now contends that the district court ignored two additional
arguments concerning the issue of State Farm’s bad faith: (1) “State Farm
assumed a duty of good faith to third parties and breached that duty”; and
(2) “State Farm adopted a hairsplitting, hyper-technical interpretation of the
duty of good faith toward an insured pursuing both first and third-party claims.”
Aplt. Br. at 14. In each of these arguments, however, Mr. Applegate attempted to
raise issues concerning State Farm’s mishandling of the Underwood policies, thus
-9-
directly contradicting his specific assurances to the district court that his bad faith
cause of action concerned only the UM claims. Mr. Applegate should not be
surprised that the district court did not consider them. Moreover, we have
carefully reviewed the substance of these arguments in light of the entire record
in this appeal, and we conclude that they are without merit. Accordingly,
the district court properly granted summary judgment for State Farm on
Mr. Applegate’s claim of bad faith.
The judgment of the United States District Court for the Eastern District of
Oklahoma is AFFIRMED.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
-10-