Cornhusker Casualty Company v. Skaj ( 2015 )


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  •                                                                  FILED
    United States Court of Appeals
    Tenth Circuit
    PUBLISH                 May 18, 2015
    Elisabeth A. Shumaker
    UNITED STATES COURT OF APPEALS               Clerk of Court
    TENTH CIRCUIT
    CORNHUSKER CASUALTY
    COMPANY, a Nebraska corporation,
    Plaintiff Counter Defendant -
    Appellee,
    Nos. 13-8004; 13-8010; 13-8014
    v.
    SHARI SKAJ; STEVE SKAJ,
    Defendants Counter Plaintiffs,
    and
    VINCENT ROSTY,
    Defendant Counter Plaintiff -
    Appellant.
    ______________________________
    CORNHUSKER CASUALTY
    COMPANY, a Nebraska corporation,
    Plaintiff Counter Defendant -
    Appellee,
    v.
    SHARI SKAJ; STEVE SKAJ,
    Defendants-Counter-Plaintiffs -
    Appellants,
    and
    VINCENT ROSTY,
    Defendant Counter Plaintiff.
    _______________________________
    CORNHUSKER CASUALTY
    COMPANY, a Nebraska corporation,
    Plaintiff Counter Defendant -
    Appellant,
    v.
    SHARI SKAJ; STEVE SKAJ,
    Defendants Counter Plaintiffs -
    Appellees.
    Appeal from the United States District Court
    for the District of Wyoming
    (D.C. No. 1:11-CV-00110-SWS)
    Terence M. Ridley of Wheeler Trigg O’Donnell LLP, Denver, Colorado (Evan B.
    Stephenson and Ryan P. Day of Wheeler Trigg O’Donnell LLP, Denver,
    Colorado, with him on the briefs), for Plaintiff Counter Defendant - Appellee
    Cornhusker Casualty Company.
    R. Todd Ingram of Ingram Olheiser, P.C., Casper, Wyoming (Scott J. Olheiser of
    Ingram Olheiser, P.C., Casper, Wyoming, and Timothy W. Miller, Miller Law
    Firm, Casper, Wyoming, with him on the brief), for Defendants Counter Plaintiffs
    Shari Skaj and Steve Skaj.
    Robert M. Shively, Casper, Wyoming (T. Thomas Metier, Metier Law Firm LLC,
    Fort Collins, Colorado, with him on the brief), for Defendant Counter Plaintiff -
    Appellant Vincent Rosty.
    Before HOLMES, MATHESON, and BACHARACH, Circuit Judges.
    HOLMES, Circuit Judge.
    2
    Cornhusker Casualty Company (“Cornhusker”) appeals from the district
    court’s summary-judgment ruling, arguing that the district court incorrectly
    concluded that Cornhusker was estopped from asserting noncoverage as a defense
    to the claims of Shari and Steve Skaj. The Skajs have cross-appealed the district
    court’s sua sponte entry of summary judgment against them on their counterclaim
    for attorneys’ fees. Vincent Rosty has filed a cross-appeal as well,1 alleging that
    the district court erred in granting summary judgment to Cornhusker on some of
    his tort-based counterclaims.
    Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the judgment of
    the district court. We deny the Skajs’ pending motion to file a supplemental
    appendix and deny as moot Cornhusker’s pending motion to seal the contents of
    that proposed appendix.
    I
    R&R Roofing, Inc. (“R&R”) is a Wyoming construction company primarily
    operated by Randy Rosty and Steven Rosty. In 2007, R&R purchased a
    Cornhusker commercial liability policy (“the Policy”) that took effect on
    November 27, 2007, and listed “R&R” and “Randy Rosty” as the named insureds.
    1
    This case involves three individuals with the same surname, “Rosty”:
    Vincent Rosty, Randy Rosty, and Steven Rosty. For clarity’s sake, after first introducing
    each in text by his first name and surname, each is referred to only by his first name. See,
    e.g., United States v. Kimler, 
    335 F.3d 1132
    , 1134 n.1 (10th Cir. 2003) (“Because many
    of the people involved in this case share the same last name, they will, for the most part,
    be referred to by their first names throughout this opinion.”).
    3
    Vincent, who was an R&R employee at that time, does not appear as a named
    insured under the Policy.
    The Policy includes business automobile coverage with a liability limit of
    $1,000,000. By its terms, the Policy obligates Cornhusker to “pay all sums an
    ‘insured’ legally must pay as damages because of ‘bodily injury’ or ‘property
    damage’ to which this insurance applies, caused by an ‘accident’ and resulting
    from . . . use of a covered ‘auto.’” J. App. at 187 (Bus. Auto. Decls., effective
    Nov. 27, 2007). It ascribes to Cornhusker the “duty to defend any ‘insured’
    against a ‘suit’ asking for . . . damages” and defines “insureds” as “(a) You for
    any covered ‘auto’ [and] (b) Anyone else while using with your permission a
    covered ‘auto.’” 
    Id. Several “covered
    autos” appear on the Policy’s automobile
    schedule, including as pertinent here, a 1974 Ford F 600 dump truck. 
    Id. at 181.
    Additionally, the Policy establishes a number of loss conditions. It states,
    “We have no duty to provide coverage under this policy unless there has been full
    compliance” with various duties. 
    Id. at 192.
    In particular, after an accident, or
    after the filing of a claim or lawsuit, the policyholder must promptly notify
    Cornhusker by “[i]mmediately send[ing] . . . copies of any request, demand,
    order, notice, summons or legal paper received concerning the claim or ‘suit.’”
    
    Id. A cooperation
    clause memorializes the policyholder’s assent to “[c]ooperate
    with [Cornhusker] in the investigation or settlement of the claim or defense
    against the ‘suit.’” 
    Id. 4 On
    May 6, 2008, Vincent drove R&R’s 1974 Ford F 600 dump truck to the
    residence of Ms. Skaj to deliver roofing supplies and “to see if his kids were
    there.” 
    Id. at 1338
    (Order, filed Dec. 11, 2012). Vincent has two children by Ms.
    Skaj. At some point after Vincent stopped in an alley behind the Skaj residence,
    the truck (with a manual transmission) was accidentally knocked into second gear.
    The truck then rolled forward toward Ms. Skaj as she approached and pinned her
    against a parked motor home, producing serious injuries. A laboratory test
    performed later that day detected the presence of marijuana and
    methamphetamines in Vincent’s bloodstream.
    Within a few days of Ms. Skaj’s accident, Cornhusker retained AmeriClaim
    adjuster Charles Brando to perform an investigation. Mr. Brando sent a report
    detailing his findings to Cornhusker on May 22, 2008. Among other things, the
    report described interviews with Vincent, Mr. Skaj, two police officers, Randy,
    and Steven. In particular, it noted that Vincent had driven “off route . . . to stop
    at his [e]x’s[, i.e., Ms. Skaj’s]” residence. 
    Id. at 701
    (Claim Report, dated May
    22, 2008). The report described Randy as being “adamant that [Vincent] was
    aware of the company policy that the insured vehicles [including the Ford dump
    truck involved in the accident] are not to be used for personal business,” though
    Randy acknowledged that there were “no written policies on use of company
    5
    vehicles.” 
    Id. at 694.
    2
    In October of 2008, counsel for the Skajs wrote to Cornhusker to notify it
    of a forthcoming claim. Cornhusker sent a “[n]otice of potential excess
    exposure” to R&R, Steven, and Vincent on October 30, 2008, referencing Ms.
    Skaj’s demand for $2,000,000. 
    Id. at 339
    (Notice, dated Oct. 30, 2008). Besides
    reporting the possibility of exposure in excess of the Policy’s $1,000,000 limit,
    the notice stated:
    [W]e wish to advise you of your right to retain personal counsel,
    at your own expense, as pertains to your potential excess
    exposure. We are not advising that you must retain personal
    counsel, as Cornhusker Casualty Company will continue to
    provide a defense, but merely to advise you of your right to do
    so.
    It is likely that the [Skajs’] attorney might file a [lawsuit] against
    you. If you do receive any legal papers, please advise us
    immediately and send us copies.
    
    Id. at 340
    (emphasis added).
    On November 13, 2008, the Skajs’ counsel wrote to Cornhusker—this time
    in anticipation of litigation. Months later, on April 16, 2009, the Skajs did file a
    lawsuit in Natrona County, Wyoming, against R&R, Steven, and Vincent. The
    Skajs asserted several claims sounding in negligence and requested punitive
    damages based on their allegations that Vincent was intoxicated at the time of Ms.
    2
    In subsequent testimony, Vincent stated that, although he “didn’t really
    have R&R’s permission,” he often drove the dump truck for personal business. J. App. at
    707 (Dep. of Vincent Rosty, dated Sept. 13, 2012).
    6
    Skaj’s accident. Service on Vincent was accomplished on April 17, 2009, by
    delivering a copy of the summons and complaint to his mother. Actually locating
    Vincent, however, proved more difficult.3 When Mr. Brando attempted to do so
    on May 12, 2009, by visiting Vincent’s mother’s home, he encountered Rosty
    family members who professed a lack of knowledge both as to Vincent’s
    whereabouts and how to contact Vincent.
    At the conclusion of his investigation, Mr. Brando advised Cornhusker
    about possible ways that Vincent might be reached, specifically:
    to send him three letters to his (mother[’s]) Post Office
    Box[,] . . . one certified-return receipt requested signature
    required (if he is still getting mail at this Post Office Box), one
    regular mail (that may be forwarded if he filed a forwarding
    address), and one Return Service Requested (if he filed a
    forwarding address and the post office returns the letter with the
    new mailing address).
    
    Id. at 435
    (Supp. Report, dated May 13, 2009) (emphases omitted). The record
    does not offer any indication that Cornhusker followed Mr. Brando’s advice. 4
    Meanwhile, in April of 2009, counsel retained by Cornhusker to defend
    against the Skajs’ lawsuit sought and received an extension of “the answer
    3
    Evidence in the record indicates that an attempt was made to contact
    Vincent in December of 2008 to discuss the Skajs’ claim and the results of a drug test he
    had taken. Vincent apparently “answered [the] phone but denied being there.” J. App. at
    1017 (Policy Log, dated Dec. 24, 2008).
    4
    During discovery, Cornhusker admitted that “on May 13, 2009, it permitted
    Mr. Brando to retire his file, but only under the express understanding it could be
    reopened at a later date.” J. App. at 913 (Resps. to Requests for Admission, filed Oct. 29,
    2012).
    7
    deadline for all defendants.” 
    Id. at 430
    (Letter, dated Apr. 29, 2009) (emphasis
    added). Communication related to that request indicates that defense counsel at
    that point “d[id] not know if [she would] be representing all of the defendants.”
    
    Id. A few
    weeks later, defense counsel filed an answer to the Skajs’ complaint on
    behalf of Steven and R&R only, noting, “I do not represent Vincent Rosty.” 
    Id. at 448
    (Letter, dated May 18, 2009). During that time period, Cornhusker reached
    the conclusion, “[b]ased on the allegations of the complaint and the
    policy, . . . that Vincent . . . was not entitled to a defense under the policy.” 
    Id. at 1222
    (Dep. of Thomas Mortland, dated Aug. 15, 2012). Cornhusker did not
    attempt to advise Vincent of its decision at that time not to represent him. More
    specifically, Vincent later testified via affidavit that he “had no knowledge of the
    ongoing matter.” 
    Id. at 1238
    (Aff. of Vincent Rosty, dated Nov. 1, 2010).
    An entry of default against Vincent issued on May 21, 2009. Over the next
    year, proceedings stalled as the non-defaulting defendants were dismissed from
    the litigation and the Skajs sought to recover a judgment as to Vincent. The
    Wyoming trial court eventually set a default-judgment hearing for September of
    2010. At that juncture, Cornhusker hired separate representation for Vincent.
    Cornhusker’s retained counsel for Vincent entered an appearance on September
    23, 2010, and opposed the default-judgment proceedings. The state court held a
    hearing on the matter on September 24, 2010, and, after considering the parties’
    arguments, announced that it would enter a default judgment in favor of the Skajs
    8
    and against Vincent. Shortly thereafter, the court issued a default-judgment order
    assessing a total in damages and costs of $897,344.24 against Vincent.
    One week after the default-judgment hearing, Cornhusker sent Vincent a
    letter purporting for the first time to deny coverage. In support of its decision,
    Cornhusker stated that, at the time of Ms. Skaj’s accident, Vincent: (1) was not a
    “permissive use[r]” of the dump truck; (2) was not acting within the course and
    scope of his employment with R&R; (3) was intoxicated; and (4) had
    misappropriated roofing materials from R&R. 
    Id. at 528
    (Letter, dated Oct. 1,
    2010). It also opined that Vincent had not cooperated with Cornhusker regarding
    the Skajs’ lawsuit. For these reasons, Cornhusker declared that it would not
    indemnify Vincent for the amount of the default judgment entered against him.
    Cornhusker sent another letter to Vincent on October 7, 2010, purporting to
    “supplement[]” the foregoing correspondence. 
    Id. at 533
    (Letter, dated Oct. 7,
    2010). In this letter, Cornhusker characterized its representation of Vincent at the
    default-judgment hearing as being (1) pursuant to a reservation of rights, and (2)
    only “for the limited purpose” of having the trial court’s entry of default set
    aside. 
    Id. Further, Cornhusker
    explained that
    [a]s noted, the retention of [counsel] on your behalf in no way is
    to be deemed a waiver of any of Cornhusker’s rights under the
    Policy. Cornhusker reiterates its previous denial [of coverage]
    in this matter, and has filed a declaratory judgment action against
    you in which it is seeking a declaration from the Court that
    neither defense nor . . . indemnity are owed to you under the
    9
    Policy. [5]
    
    Id. at 534.
    Meanwhile, counsel whom Cornhusker had retained to represent Vincent in
    the default-judgment proceedings appealed from the default judgment in state
    court. Ultimately, the Wyoming Supreme Court affirmed the trial court’s entry of
    default judgment, except insofar as it awarded punitive damages. See Rosty v.
    Skaj, 
    272 P.3d 947
    , 960 (Wyo. 2012). Cornhusker nonetheless refused to pay the
    judgment on Vincent’s behalf, maintaining that Vincent was not covered by the
    Policy.
    On March 25, 2011, Cornhusker filed suit against Vincent and the Skajs in
    the United States District Court for the District of Wyoming. Cornhusker sought
    a declaration that the Policy provided no coverage to Vincent because, inter alia,
    he was not an insured and had not cooperated during the investigation. Vincent
    responded by counterclaiming against Cornhusker; in doing so, he asserted
    theories of negligence, intentional infliction of emotional distress, promissory
    estoppel, and breach of contract. He also alleged bad faith by Cornhusker and
    requested punitive damages.
    The Skajs filed their own counterclaim, seeking a declaration “that
    Cornhusker [was] required to pay the judgment in the underlying action,” J. App.
    5
    In fact, as indicated by the filing date on its complaint in federal district
    court, Cornhusker actually did not file such an action until March 25, 2011.
    10
    at 332 (Second Am. Countercl., filed Apr. 2, 2012), and, given Cornhusker’s
    refusal to pay the judgment, attorneys’ fees pursuant to Wyo. Stat. Ann. § 26-15-
    124(c). Noting that Cornhusker had defended Vincent in the underlying action
    unconditionally—viz., without a reservation of rights—with knowledge of
    possible grounds to deny coverage, Vincent and the Skajs jointly argued that
    Cornhusker should be estopped from asserting the defense of noncoverage. 6
    All of the parties filed motions for summary judgment, which the district
    court addressed at a hearing on November 29, 2012. At the conclusion of the
    proceedings, the court announced that there would be no trial. It declared that
    Cornhusker was estopped from denying coverage to Vincent because Cornhusker
    had represented that it would provide a defense, never reserved its rights, and did
    not advise Vincent of its decision to deny coverage until more than sixteen
    months after the entry of default. However, the district court awarded summary
    judgment to Cornhusker on Vincent’s sundry tort and contract claims. The court
    also denied the Skajs’ claim for attorneys’ fees.
    A written ruling memorializing the district court’s decision issued on
    December 11, 2012. The judgment—which was entered the next day—ordered
    Cornhusker to “pay the full amount of the judgment against Vincent . . . and in
    6
    After the state trial court denied a motion for relief from the default
    judgment, the Skajs served a writ on Cornhusker in order to garnish the proceeds of the
    Policy. Cornhusker removed this action to federal court and it was consolidated with the
    declaratory-judgment action.
    11
    favor of Shari Skaj and Steve Skaj in the underlying state court action,
    $822,344.24, indemnifying Vincent . . . for any amount he has previously paid in
    satisfaction of the underlying judgment.” Dist. Ct. Doc. 190, at 1 (J. in Civ. Case,
    filed Dec. 12, 2012).
    Cornhusker filed the instant appeal to challenge the district court’s finding
    that Cornhusker was estopped from denying coverage to Vincent. The Skajs have
    cross-appealed from the district court’s denial of their claim for attorneys’ fees.
    Finally, Vincent has appealed, advocating for reversal of the district court’s
    disposition of his bad-faith and punitive-damages claims.
    II
    “We review de novo the district court’s grant of summary judgment and
    apply the same legal standard used by the district court . . . .” Certain
    Underwriters at Lloyd’s London v. Garmin Int’l, Inc., 
    781 F.3d 1226
    , 1229 (10th
    Cir. 2015). Summary judgment is appropriate when “the movant shows that there
    is no genuine dispute as to any material fact and the movant is entitled to
    judgment as a matter of law.” Fed. R. Civ. P. 56(a). In applying this standard,
    we “examine the record and ‘all reasonable inferences that might be drawn from it
    in the light most favorable to the non-moving party.’” Berry & Murphy, P.C. v.
    Carolina Cas. Ins. Co., 
    586 F.3d 803
    , 808 (10th Cir. 2009) (quoting Antonio v.
    Sygma Network, Inc., 
    458 F.3d 1177
    , 1181 (10th Cir. 2006)).
    12
    Because this is a diversity action,7 we “apply the substantive law of the
    forum state,” Macon v. United Parcel Serv., Inc., 
    743 F.3d 708
    , 713 (10th Cir.
    2014), which, for purposes of this appeal, is Wyoming. “In addition, we review
    the district court’s interpretation and determination of state law de novo.” Berry
    & 
    Murphy, 586 F.3d at 808
    ; see Breaux v. Am. Family Mut. Ins. Co., 
    554 F.3d 854
    , 863 (10th Cir. 2009) (noting that “the principles of a cooperative judicial
    federalism . . . require that courts of appeals review the state-law determinations
    of district courts de novo” (internal quotation marks omitted)).
    III
    This appeal presents three principal questions: (1) whether the district court
    rightly concluded that Cornhusker was estopped from denying coverage under the
    Policy to Vincent after assuming his defense without a reservation of rights; (2)
    whether the district court properly ruled in Cornhusker’s favor on Vincent’s bad-
    faith and punitive-damages claims; and (3) whether the district court correctly
    denied the Skajs’ claim for attorneys’ fees. We answer each question in the
    affirmative, ultimately discerning no reversible error in the district court’s
    rulings.
    A
    7
    As alleged in the complaint, there is complete diversity between
    Cornhusker (a Nebraska corporation) and each of the parties it sued: the Skajs are citizens
    of Wyoming, and Vincent is “a citizen of the State of Wyoming or the State of Colorado.”
    J. App. at 36 (Compl., filed Mar. 25, 2011); see 28 U.S.C. § 1332(a)(1) (vesting in federal
    district courts original jurisdiction over actions “between . . . citizens of different States”).
    13
    1
    As a threshold matter, we address Cornhusker’s contention that Vincent and
    the Skajs are not entitled to be heard on the issue of estoppel. The district court
    rejected this line of reasoning, and we do as well.
    Cornhusker purports to “raise[] the issue of . . . standing to maintain the
    suit, and hence [the] Court’s jurisdiction to entertain it . . . , [which] would
    normally be considered a threshold question that must be resolved . . . before
    proceeding to the merits.” Steel Co. v. Citizens for a Better Env’t, 
    523 U.S. 83
    ,
    88–89 (1998). More to the point, in its opening brief, Cornhusker urges that
    “[Vincent] and the Skajs lack standing to invoke waiver and estoppel against
    Cornhusker because they are strangers to the Cornhusker Policy.” Cornhusker
    Opening Br. at 21 (capitalization altered). The crux of Cornhusker’s argument is
    that only named insureds—here, R&R and Randy—should be permitted to invoke
    theories of waiver or estoppel, whereas in this case
    neither [Vincent] nor the Skajs are parties to the Cornhusker
    Policy. Nor are they privies of R&R or Cornhusker, the only two
    parties to the Cornhusker Policy. Additionally, neither [Vincent]
    nor the Skajs have proved to be an “insured” under the
    Cornhusker Policy. . . . Accordingly, neither [Vincent] nor the
    Skajs have standing to estop Cornhusker from denying coverage.
    
    Id. at 24
    (emphasis added) (citations omitted).
    Vincent and the Skajs respond that Cornhusker advances a “strained
    attempt at a standing argument.” Skajs’ Br. at 20. We agree. Although “standing
    14
    is a threshold issue in every case before a federal court,” Turner v. McGee, 
    681 F.3d 1215
    , 1218 (10th Cir. 2012) (emphasis added) (internal quotation marks
    omitted), this is because the standing issue implicates a federal court’s subject-
    matter jurisdiction. We have explained that standing controversies involve
    “constitutional limitations on federal-court jurisdiction and prudential limitations
    on its exercise.” Sac & Fox Nation of Mo. v. Pierce, 
    213 F.3d 566
    , 573 (10th Cir.
    2000) (quoting Warth v. Seldin, 
    422 U.S. 490
    , 498 (1975)) (internal quotation
    marks omitted); accord Rector v. City & Cnty. of Denver, 
    348 F.3d 935
    , 942 (10th
    Cir. 2003). Although denominated a matter of standing, Cornhusker’s argument
    is actually of another genus entirely—one that does not implicate a court’s
    jurisdiction. Indeed, it presents no more than a garden-variety question regarding
    the proper interpretation of the Policy.
    As relevant here, the Supreme Court has dispelled the notion that a
    “‘standing’ argument [that] simply presents a straightforward issue of contract
    interpretation” can serve as a legally cognizable “standing” argument. Perry v.
    Thomas, 
    482 U.S. 483
    , 492 (1987). Indeed, the Perry Court did not countenance
    a litigant’s “argument[,] . . . characterize[d] as one of ‘standing,’” when the
    contention was merely “that [his opponents] were ‘not parties’ to [an]
    agreement.” 
    Id. at 487.
    We believe Perry applies with equal force to this
    appeal—that is, it makes clear that Cornhusker’s purported standing argument
    does not implicate our subject-matter jurisdiction. In other words, it is not a true
    15
    standing argument, in the conventional sense, at all.
    In sum, Cornhusker has not raised a legally cognizable question of standing
    that implicates our jurisdiction. We therefore treat the issue of the right to
    contest coverage under the Policy as the substantive question that it actually is.
    2
    In concluding that Vincent and the Skajs could invoke estoppel to prevent
    Cornhusker from denying coverage, the district court proceeded from Wyoming’s
    default rule that “the doctrines of estoppel and waiver cannot be employed to
    expand policy coverage.” J. App. at 1348 (quoting St. Paul Fire & Marine Ins.
    Co. v. Albany Cnty. Sch. Dist. No. 1, 
    763 P.2d 1255
    , 1262 (Wyo. 1988)) (internal
    quotation marks omitted). It then observed that our own circuit has recognized an
    exception to that legal proposition in certain circumstances—namely, in a
    situation wherein an insurer undertook the defense of an action without first
    reserving its rights. While acknowledging that the Wyoming Supreme Court had
    not directly spoken to this estoppel exception, the district court was persuaded
    that “there is no authority which suggests [that] court would reject its
    application.” 
    Id. at 1349.
    Given that the estoppel exception was generally
    available, the district court understood Wyoming jurisprudence to “suggest[]” that
    application of estoppel would be appropriate on these particular facts. 
    Id. For the
    reasons explicated below, we uphold the district court’s ruling.
    a
    16
    The Wyoming Supreme Court has not addressed whether an insurer, having
    previously assumed the defense of an action without a reservation of rights, may
    subsequently be estopped from asserting the defense of noncoverage. This case
    thus presents an unsettled question of Wyoming insurance law. Consequently, we
    “must . . . attempt to predict how [Wyoming’s] highest court would interpret [the
    issue].” Squires v. Breckenridge Outdoor Educ. Ctr., 
    715 F.3d 867
    , 875 (10th
    Cir. 2013); see Pehle v. Farm Bureau Life Ins. Co., 
    397 F.3d 897
    , 901 (10th Cir.
    2005) (“Because Wyoming has not directly addressed this issue, this court must
    make an Erie-guess as to how the Wyoming Supreme Court would rule.”). We
    may “consider all resources available” in doing so, “including decisions of
    [Wyoming] courts, other state courts and federal courts, in addition to the general
    weight and trend of authority.” In re Dittmar, 
    618 F.3d 1199
    , 1204 (10th Cir.
    2010) (internal quotation marks omitted).
    “Under our own federal jurisprudence, we will not trouble our sister state
    courts every time [an unsettled legal question in a diversity action] comes across
    our desks. When we see a reasonably clear and principled course, we will seek to
    follow it ourselves.” Pino v. United States, 
    507 F.3d 1233
    , 1236 (10th Cir. 2007);
    accord Colony Ins. Co. v. Burke, 
    698 F.3d 1222
    , 1236 (10th Cir. 2012). We see
    such a clear and principled path here.
    Wyoming’s general stance on estoppel in this context is traceable to 1961,
    when its highest tribunal observed, “Numerous cases hold that [a coverage]
    17
    provision cannot be waived by the agents of an insurance company and that the
    doctrine of estoppel cannot be applied.” Sowers v. Iowa Home Mut. Cas. Ins.
    Co., 
    359 P.2d 488
    , 493 (Wyo. 1961) (emphasis added). The Wyoming Supreme
    Court remained faithful to this principle in Tadday v. National Aviation
    Underwriters, 
    660 P.2d 1148
    (Wyo. 1983), noting that “coverage of an insurance
    policy may not be extended by waiver or estoppel . . . in accord with general
    
    law,” 660 P.2d at 1150
    (internal quotation marks omitted), and again in Ricci v.
    New Hampshire Insurance Co., 
    721 P.2d 1081
    (Wyo. 1986), when it observed that
    “the law in Wyoming is that coverage cannot be extended by waiver or 
    estoppel,” 721 P.2d at 1086
    . And, in Albany County School District No. 1, relying on
    Sowers and its progeny, the Wyoming Supreme Court again instructed that
    “estoppel is not available to bring within the coverage of an insurance policy risks
    that are not covered by its terms or that are expressly excluded 
    therefrom.” 763 P.2d at 1261
    (quoting 
    Sowers, 359 P.2d at 493
    ) (internal quotation marks
    omitted). From these cases, it is not difficult to discern Wyoming’s usual rule:
    “the principle that the doctrines of estoppel and waiver cannot be employed to
    expand policy coverage is controlling.” 
    Id. at 1262;
    accord Verschoor v.
    Mountain W. Farm Bureau Mut. Ins. Co., 
    907 P.2d 1293
    , 1298 (Wyo. 1995).
    But rules applied by courts are frequently subject to exceptions, and we
    conclude that the same holds true here. We have recognized and applied such an
    exception in Pendleton v. Pan American Fire & Casualty Co., 
    317 F.2d 96
    (10th
    18
    Cir. 1963), a diversity lawsuit involving New Mexico’s substantive law. Citing,
    inter alia, a decision rendered by this court in 1930 wherein we allowed estoppel
    to expand coverage under a policy—New Jersey Fidelity & Plate Glass Insurance
    Co. v. McGillis, 
    42 F.2d 789
    , 791 (10th Cir. 1930) (applying Utah law)—we said
    that
    a liability insurance carrier, which assumes and conducts the
    defense of an action . . . with knowledge of a ground of forfeiture
    or noncoverage under the policy, and without disclaiming
    liability or giving notice of a reservation of its right to deny
    coverage, is thereafter precluded in an action upon the policy
    from setting up the ground of forfeiture or noncoverage as a
    defense. In other words, the insurer’s unconditional defense of
    an action . . . constitutes a waiver of the terms of the policy and
    an estoppel of the insurer to assert the defense of
    noncoverage. . . . [I]t is not necessary for the [defended party]
    to show prejudice in such a situation because he is presumed to
    have been prejudiced by virtue of the insurer’s assumption of the
    
    defense. 317 F.2d at 99
    (citations omitted).
    In other words, in Pendleton, we concluded that the insurer was estopped
    from denying coverage to the ostensible insured by its conduct in unconditionally
    assuming the defense without a reservation of rights, and that prejudice was
    presumed to flow from the insurer’s actions. 
    Id. at 100–01
    (noting that “this
    situation falls within the rule of estoppel” and that “the insurer is estopped to now
    deny liability upon the insurance policy in question”). Notably, we reached this
    conclusion notwithstanding our agreement with the insurer that there was not in
    fact coverage under the policy. See 
    id. at 100
    (noting that “it is clear that the
    19
    insurer at no time had an obligation under the questioned policy to defend” the
    ostensible insured). We seemed to reason that, irrespective of the actuality of
    noncoverage, the insurer must accept the equitable consequences of its deliberate
    choice to “assume[] full control of the litigation,” without a reservation of rights,
    because the ostensible insured was “induced to, and did, relinquish control of his
    defense . . . to the insurer.” 
    Id. And those
    equitable consequences involved
    shouldering the burdens of any liability arising from the litigation that it
    deliberately elected to control. See 
    id. at 100
    –01.
    Nearly thirty years later, we had occasion to revisit the so-called
    “Pendleton exception” in resolving a dispute under Oklahoma law. In Braun v.
    Annesley, 
    936 F.2d 1105
    (10th Cir. 1991), we noted that Oklahoma’s highest
    court had not yet opined on whether it would apply an estoppel exception, of the
    type that we announced in Pendleton, to a similar set of facts. We were
    consequently mindful of Oklahoma’s general rule that “estoppel cannot be used to
    create a contract.” 
    Braun, 936 F.2d at 1110
    (citing Sec. Ins. Co. of New Haven v.
    Greer, 
    437 P.2d 243
    , 246 (Okla. 1968)). Even so, we determined that the logic
    employed in Pendleton transposed to the situation at hand:
    Tri-State defended Mr. Bradley without a reservation of rights.
    In addition, Tri-State stated at trial that it was “unclear” whether
    Tri-State would be liable for Mr. Bradley . . . . Thus, Tri-State
    acknowledged that Mr. Bradley might be covered under its
    policy. Given that the insurers in [inter alia] Pendleton . . . were
    estopped from denying coverage after providing a defense
    without a reservation of rights when the claimant was not even
    20
    arguably covered, Tri-State is also estopped when Mr. Bradley is
    arguably covered, and, like the circumstances in Pendleton . . .
    the basis of estoppel is Tri-State’s defense of Mr. Bradley without
    a reservation of rights.
    
    Id. at 1110–11
    (citations omitted) (emphases added).
    The Pendleton exception, we observed in Braun, has the potential to
    produce fair and correct results. We explained that it provided “a better rule” to
    resolve the issues presented therein—“one that encourages an insurer to
    thoroughly investigate its policy and notify persons before assuming their defense
    that it is reserving its right to later contest coverage.” 
    Id. at 1111.
    Likewise, we
    found that not applying the Pendleton exception to the particular facts before us
    would constitute error—that is, we “[did] not believe the Supreme Court of
    Oklahoma would allow an insurer to defend an individual who might be covered
    [without a reservation of rights] and then permit the insurer to deny coverage
    after the individual is found liable.” 
    Id. This was
    so, we reasoned, because
    “[s]uch a result [would] grant[] the insurer the unfettered right to induce an
    individual to relinquish control of his or her defense.” 
    Id. Ultimately, we
    were
    satisfied that “[t]he inequitable consequences of a contrary ruling provide[d]
    support for our conclusion.” 
    Id. So too,
    here. We face substantially the same factual setting that we
    confronted in Pendleton and Braun: that is, the insurer’s (Cornhusker’s) full
    assumption of control of the ostensible insured’s (Vincent’s) defense in a lawsuit
    21
    seeking to impose liability on the ostensible insured (brought by the Skajs) and
    the insurer’s (Cornhusker’s) complete failure to provide any notice to the
    ostensible insured (Vincent) that it sought to reserve its right to deny him
    coverage. Indeed, even the attorney that Cornhusker retained to represent Vincent
    acknowledged these key aspects of Cornhusker’s posture toward the Skajs’ suit in
    communications with a Cornhusker representative. As he put it, “my role is to
    fully defend Vincent . . . since Cornhusker has agreed (properly) to fully defend
    him.” J. App. at 1122 (Email, dated Nov. 5, 2010). Yet, he noted, while
    “[t]ypically, a carrier sends a reservation of rights letter which says the carrier is
    defending but reserves its rights . . . to determine whether coverage exists or not,”
    neither of Cornhusker’s October 2010 communications with Vincent (i.e., the
    October 1 and 7 letters) “can reasonably be construed as reservation of rights
    letters.” 
    Id. To be
    sure, Vincent’s lawyer “found it odd that Cornhusker would take this
    approach,” given its position that Vincent was not entitled to coverage. 
    Id. But Pendleton
    and Braun make clear that this is not the first time that insurers have
    followed such a path. And these cases also indicate that insurers should bear a
    specific consequence of such conduct: viz., they should be estopped from later
    denying coverage to an ostensible insured to escape liability stemming from
    litigation over which they deliberately assumed control without a reservation of
    rights. Given their factual similarity to the instant case, we believe that
    22
    Pendleton and Braun counsel in favor of applying estoppel to prevent Cornhusker
    from disputing coverage.
    Furthermore, our study of relevant decisions of “other . . . federal courts”
    strongly suggests that “the general weight and trend of authority,” 
    Dittmar, 618 F.3d at 1204
    (internal quotation marks omitted), is to recognize an exception such
    as the one we articulated in Pendleton. See, e.g., City of Carter Lake v. Aetna
    Cas. & Sur. Co., 
    604 F.2d 1052
    , 1060–62 (8th Cir. 1979); Pac. Indem. Co. v. Acel
    Delivery Serv., Inc., 
    485 F.2d 1169
    , 1173 (5th Cir. 1973); Peerless Ins. Co. v.
    Travelers Ins. Co., 
    393 F.2d 636
    , 639–40 (9th Cir. 1968); Nat’l Union Fire Ins.
    Co. of Pittsburgh v. Aetna Cas. & Sur. Co., 
    384 F.2d 316
    , 366 (D.C. Cir. 1967);
    Claverie v. Am. Cas. Co. of Reading, 
    76 F.2d 570
    , 571–72 (4th Cir. 1935).
    Based on federal authorities, then—most notably our own—we would be
    inclined to predict that the Wyoming Supreme Court would adopt an estoppel
    doctrine like Pendleton on these facts. Our examination of germane Wyoming
    caselaw confirms our inclination and leads us to definitively predict that the
    Wyoming Supreme Court would apply a Pendleton-type estoppel exception here.
    b
    Fairness undergirds Wyoming’s general approach to estoppel. 8 See Birt v.
    8
    We express no view in this opinion as to whether the Wyoming Supreme
    Court would rely upon promissory estoppel or equitable estoppel on these facts. “The
    doctrines . . . are closely related and, as [the Wyoming Supreme Court has] impliedly
    recognized . . . , they often have been invoked together and interchangeably
    (continued...)
    23
    Wells Fargo Home Mortg., Inc., 
    75 P.3d 640
    , 654 (Wyo. 2003) (stating that
    estoppel “is to be applied to . . . promote the end of justice, where it would be
    inequitable not to do so”); B & W Glass, Inc. v. Weather Shield Mfg., Inc., 
    829 P.2d 809
    , 817 (Wyo. 1992) (recognizing that “the principle of fairness [is]
    implicit in recognizing the doctrine of . . . estoppel”). The Wyoming Supreme
    Court has delineated estoppel as a remedy that “flows from the actual
    consequences produced by the conduct of A on B regardless of whether A
    intended those consequences or not,” and the court has clarified that “[t]he
    [insurer] is estopped when the [individual] is deceived; the deception occurs when
    the [individual] is lulled into a false sense of security.” Bauer v. State ex rel.
    Wyo. Worker’s Comp. Div., 
    695 P.2d 1048
    , 1051 (Wyo. 1985); accord Parkhurst
    v. Boykin, 
    94 P.3d 450
    , 460–61 (Wyo. 2004).
    Wyoming’s general estoppel principles support our conclusion that a
    Pendleton-type estoppel exception should be applied to Cornhusker on these
    facts. Cornhusker’s conduct had the effect of lulling Vincent into the belief that
    Cornhusker was representing him pursuant to the Policy. Cornhusker specifically
    retained counsel to represent him in state court and subsequently rendered a
    defense. During that time period, when Cornhusker had a plausible basis for
    reserving its rights (due, inter alia, to the dispute concerning whether Vincent
    8
    (...continued)
    . . . . Reasonable reliance is an element common to both of these doctrines.” Davis v.
    Davis, 
    855 P.2d 342
    , 348 (Wyo. 1993) (citations omitted).
    24
    was a “permissive user” under the Policy), it never took that critical step.
    In particular, prior to the court’s imposition of liability on Vincent,
    Cornhusker did not “make specific reference to the policy defense[,] which the
    insurer [i.e., Cornhusker] [could] assert,” in any communication with him—which
    was a necessary predicate under Wyoming law for a finding that Cornhusker had
    reserved its rights. Doctors’ Co. v. Ins. Corp. of Am., 
    864 P.2d 1018
    , 1030 (Wyo.
    1993). Based upon Cornhusker’s silence in that regard, Vincent effectively ceded
    control of his defense to Cornhusker. And he cannot be viewed as unreasonable
    for doing so. Yet, later, upon entry of judgment, Cornhusker elected not to
    provide coverage. We cannot ignore the possibility (even if arguably remote)
    that, under these circumstances, Vincent “[had] a valid claim [which was] lost
    because of some action by . . . the insurance provider . . . reasonably relied upon
    by [him] to [his] detriment.” Picozzi v. State ex rel. Wyo. Workers’ Safety &
    Comp. Div., 
    304 P.3d 977
    , 981 (Wyo. 2013) (internal quotation marks omitted);
    accord 
    Bauer, 695 P.2d at 1052
    . This sort of unfairness, we predict, would be of
    significant concern to the Wyoming Supreme Court when considering the possible
    application of a Pendleton-type estoppel to Cornhusker. See 
    Bauer, 695 P.2d at 1052
    (concluding that analogous unfairness signaled that “relief should be
    granted” in the form of estoppel).
    Further, in assaying the relevant Wyoming caselaw, we find unavailing
    Cornhusker’s contention that “[t]he Wyoming Supreme Court has rejected the
    25
    estoppel theory advanced” here, Cornhusker Opening Br. at 25 (emphasis added),
    in Albany County School District No. 1. No doubt Cornhusker hopes we will
    seize upon language in that case discussing the baseline rule that “coverage
    afforded by [a] policy cannot be expanded by estoppel.”9 Albany Cnty. Sch. Dist.
    No. 
    1, 763 P.2d at 1262
    . However, we regard Albany County School District No.
    1 as readily distinguishable. That case concerned an insurance policy that
    required the insurer to indemnify a county school district for any judgment
    entered against the “insureds,” a term which was defined not to include the school
    district itself. See 
    id. at 1259.
    To be sure, Cornhusker is arguably correct that
    “[t]here, as here, the party claiming coverage was not an ‘insured’ as defined by
    the policy.” Cornhusker Opening Br. at 27. But Cornhusker misstates Albany
    County School District No. 1 as “parallel[ing] the theory of estoppel,” 
    id., advanced here
    in one vital respect: the existence of a reservation of rights.
    9
    After oral argument, by way of a letter submitted pursuant to Federal Rule
    of Appellate Procedure 28(j), Cornhusker notified this court of a recent Wyoming
    decision—Lewis Holding Co. v. Forsberg Engerman Co., 
    318 P.3d 822
    (Wyo.
    2014)—which it considers dispositive as to the estoppel issue presented. We disagree.
    Lewis Holding Co. relates only tangentially to these proceedings insofar as it sets forth
    the general state-law rule that estoppel cannot expand or create insurance coverage. 
    See 318 P.3d at 825
    –26. In that regard, Lewis Holding Co. adds nothing new to the relevant
    body of Wyoming law. And, in any event, the case is distinguishable because the fact
    that “the insurance agreement between [the parties] plainly and unambiguously
    exclude[d] coverage for damages,” 
    id. at 826
    (emphasis added), persuaded the court to
    apply the default rule that “estoppel cannot be used to extend the insurance coverage to
    include risks that are expressly excluded by the policy,” 
    id. We arguably
    have no such
    clarity here as to the exclusion vel non of Vincent from the ambit of the Policy. For these
    reasons, we ultimately do not view Cornhusker’s notice of supplemental authority as
    particularly helpful to our resolution of this question.
    26
    Notably, after an Albany County employee sued the school district, the
    insurer “agreed to defend the suit while retaining its full reservation of rights
    with respect to coverage.” Albany Cnty. Sch. Dist. No. 
    1, 763 P.2d at 1256
    (emphasis added) (internal quotation marks omitted). Judgment was entered
    against the school district, at which time the insurer denied coverage to the
    district and withdrew its defense of the action. The trial court ruled that the
    insurer was estopped from denying coverage, but the Wyoming Supreme Court
    reversed.
    In so doing, the court held that Wyoming’s basic rule—i.e., that estoppel
    cannot expand or create coverage where none exists—applied with equal force
    under those circumstances because
    [i]n a letter to the School District dated March 8, 1985, St. Paul
    [, i.e., the insurer,] advised that it conditionally agreed to provide
    a defense for the School District in the underlying case. In this
    letter St. Paul also stated: “Furthermore we have advised you
    that The St. Paul is reserving all its rights as to the issues of
    coverage . . . under the terms and conditions of your policy.” St.
    Paul, in this letter, further advised the School District of several
    possible grounds upon which it might deny coverage . . . .
    
    Id. at 1262
    (emphases added). That reservation-of-rights letter, the court
    reasoned, placed the school district on notice that it might not be covered under
    the policy notwithstanding the insurer’s assumption of its defense. See 
    id. (“St. Paul’s
    agreement to accept the defense of the case with ‘a full reservation of
    rights’ negates any intent to waive any objection to coverage.”). Thus, we
    27
    conclude with no difficulty that the insurer’s conduct in Albany County School
    District No. 1—which counseled against invoking estoppel—stands in stark relief
    to Cornhusker’s conduct here, which we have concluded strongly militates in
    favor of applying estoppel.
    In sum, our review of relevant Wyoming authorities strongly confirms, and
    establishes the soundness of, the provisional judgment that we formed from
    examining our own precedent (as well as other federal caselaw)—viz., under facts
    such as these, we predict that the Wyoming Supreme Court would apply a
    Pendleton-type estoppel exception to preclude Cornhusker from asserting
    Vincent’s alleged lack of coverage under the Policy. Consequently, we hold that
    the district court was correct in its invocation of the Pendleton exception to estop
    Cornhusker here. Like the district court, we believe that the facts before us
    present a “compelling” justification for using such an exception, J. App. at 1351,
    and we predict that the Wyoming Supreme Court would agree. Consequently, we
    uphold this aspect of the district court’s judgment.
    B
    We turn next to Vincent’s contention that the district court incorrectly
    dismissed his bad-faith claim and denied him punitive damages. We conclude
    that the district court did not err in either respect.
    1
    Vincent describes his bad-faith claim against Cornhusker as “truly simple”
    28
    in that it is “based upon Cornhusker’s first promising [him] a defense, then
    retaining counsel on his behalf to secure an extension to answer, and then
    obviously directing that counsel not to answer and allowing a default to be
    entered—all without warning [Vincent] of its decision to do so.” Rosty Br. at
    13–14 (citations omitted). Implicit in this recitation of the claim, in our view, is
    the invitation to infer bad faith on the part of Cornhusker. Insofar as Vincent’s
    argument can be read thusly, we do not find a significant basis for such an
    inference. Our determination in Part III.A, supra—that Cornhusker is estopped
    from denying coverage to Vincent—does not ineluctably lead to a finding of bad
    faith by Cornhusker. Entirely different standards govern the latter type of
    claim—ones Vincent has not met.
    Wyoming recognizes both substantive and procedural bad faith in the
    insurance context. See Sonnett v. First Am. Title Ins. Co., 
    309 P.3d 799
    , 806–07
    (Wyo. 2013) (stating that an insurer acts in bad faith where the substantive
    validity of a denied claim is “not fairly debatable,” and also “by the manner in
    which it investigates, handles, or denies a claim” (internal quotation marks
    omitted)); Hatch v. State Farm Fire & Cas. Co., 
    842 P.2d 1089
    , 1099 (Wyo.
    1992) (“Hatch I”) (observing that a defense to substantive bad-faith liability,
    which depends on an insurer having “[a] ‘fairly debatable’ reason to deny a
    claim,” is “not a defense” to procedural bad-faith liability, which “may flow from
    engaging in oppressive and intimidating claim practices”); see also Marathon
    29
    Ashland Pipe Line LLC v. Md. Cas. Co., 
    243 F.3d 1232
    , 1246 (10th Cir. 2001)
    (acknowledging that Wyoming law recognizes both varieties of bad faith). In
    Vincent’s estimation, Cornhusker committed both species of bad faith by denying
    him coverage under the Policy. We disagree.
    a
    First, with respect to whether Cornhusker’s denial of coverage amounted to
    substantive bad faith, we note Wyoming’s longstanding focus on “whether or not
    the validity of the denied claim was fairly debatable.” Darlow v. Farmers Ins.
    Exch., 
    822 P.2d 820
    , 823 (Wyo. 1991); accord First Wyo. Bank, N.A., Jackson
    Hole v. Cont’l Ins. Co., 
    860 P.2d 1094
    , 1101 (Wyo. 1993). “The validity of a
    claim is fairly debatable if a reasonable insurer would have denied or delayed
    payment of benefits under the facts and circumstances.” Harper v. Fidelity &
    Guar. Life Ins. Co., 
    234 P.3d 1211
    , 1221 (Wyo. 2010) (internal quotation marks
    omitted). Applying this objective standard requires us to determine if Vincent has
    established “(1) the absence of any reasonable basis for denying the claim and (2)
    [Cornhusker’s] knowledge or reckless disregard of the lack of a reasonable basis
    for denying the claim.” Ahrenholtz v. Time Ins. Co., 
    968 P.2d 946
    , 950–51 (Wyo.
    1998); accord Gainsco Ins. Co. v. Amoco Prod. Co., 
    53 P.3d 1051
    , 1058 (Wyo.
    2002). In our view, Vincent has failed to make such a showing.
    Vincent’s substantive bad-faith claim founders on the first prong of
    Wyoming’s test: the absence of any reasonable basis for denying his claim. To
    30
    satisfy this component of the standard, a litigant “must show that a reasonable
    insurer under the circumstances would not have acted as it did by denying . . . the
    claim.” 
    Sonnett, 309 P.3d at 806
    (quoting Matlack v. Mountain W. Farm Bureau
    Mut. Ins. Co., 
    44 P.3d 73
    , 81 (Wyo. 2002)) (internal quotation marks omitted).
    Wyoming caselaw makes clear that an insurer enjoys a wide berth in this
    regard—viz., “if a realistic question of liability does exist, the insurance carrier is
    entitled to reasonably pursue that debate without exposure to a [bad-faith] claim.”
    Gainsco Ins. 
    Co., 53 P.3d at 1062
    (quoting McCullough v. Golden Rule Ins. Co.,
    
    789 P.2d 855
    , 860 (Wyo. 1990)) (internal quotation marks omitted). Moreover,
    the Wyoming Supreme Court has clarified that the realistic-question aspect of the
    “fairly debatable” standard “is not the same as asking whether there actually was
    coverage under the policy.” 
    Id. at 1063.
    This means that, under Wyoming law,
    “it is not necessarily an act of bad faith for an insurer to deny . . . payment of
    benefits where the underlying incident objectively may be seen as being covered
    by a policy exclusion, particularly where there is no controlling authority within
    the jurisdiction.” 
    Id. While the
    district court resolved the substantive bad-faith issue without
    much explication, its decision comports with Wyoming’s standards. The court
    identified two potentially reasonable bases supporting Cornhusker’s denial of
    coverage: (1) the uncertainty as to whether the Wyoming Supreme Court would
    employ an estoppel doctrine, like the one established in Pendleton, to broaden the
    31
    Policy’s coverage, and (2) Vincent’s status under the Policy (i.e., whether he was
    a “permissive user” of R&R’s dump truck). Both of these grounds for denial are
    eminently reasonable.
    The first—which we have thoroughly discussed above—presents a
    significant potential for disagreement regarding the propriety of an insurer’s
    denial of coverage. As to the second, record evidence suggests that Cornhusker
    had a reasonable basis to conclude that Vincent was not a permissive user.
    Although Vincent certainly had permission to operate R&R’s vehicles in the
    course and scope of his employment, R&R did maintain at least an unofficial
    policy discouraging personal use of company vehicles. Indeed, Vincent
    acknowledged that he “didn’t really have R&R’s permission” to use its vehicles
    for personal use, J. App. at 707, and R&R did not direct him to travel to the
    Skajs’ home on the date of the accident. It is true that Vincent also indicated that
    he had driven to the Skajs’ residence in R&R’s vehicles on numerous occasions,
    that “[t]he whole crew knew [he] went there,” and that Steven and Randy had
    “seen” him do so but never reprimanded him. 
    Id. at 709–10.
    But we cannot
    definitively conclude, based on this conflicting testimony, that Vincent had
    permission to use the truck for personal reasons—and as long as the extent of his
    permissive use remained “fairly debatable,” Cornhusker’s decision to deny him
    coverage on that basis was reasonable.
    In sum, we are satisfied that the district court properly identified a
    32
    reasonable basis for Cornhusker’s denial of coverage as to Vincent. It naturally
    follows that the district court’s determination that Cornhusker had a fairly
    debatable justification for denying coverage was sound. We thus conclude that
    Cornhusker did not act in substantive bad faith in its dealings with Vincent, and
    we affirm that aspect of the court’s ruling.
    b
    Turning next to the issue of procedural bad faith, we note that “[e]ven if a
    claim for benefits is fairly debatable, the insurer may breach the duty of good
    faith and fair dealing by the manner in which it investigates, handles, or denies a
    claim.” 
    Matlack, 44 P.3d at 81
    ; accord 
    Sonnett, 309 P.3d at 807
    . Under
    Wyoming law, it is “appropriate [in this procedural inquiry] to determine whether
    a claim was properly investigated and whether the results of the investigation
    were subjected to a reasonable evaluation and review.” Hatch 
    I, 842 P.2d at 1093
    . A party may argue that “failure to investigate or evaluate a claim” supports
    a finding of procedural bad faith. State Farm Mut. Auto. Ins. Co. v. Shrader, 
    882 P.2d 813
    , 828 (Wyo. 1994) (emphasis added).
    In applying this failure-to-investigate rubric, the Wyoming Supreme Court
    has required a “compelling” factual showing and has declined to find even a
    “cursory examination of the case” or a “delay . . . showing [the insurer] drug its
    heels” sufficient to establish procedural bad faith. 
    Matlack, 44 P.3d at 81
    . Stated
    otherwise, unless it is evident that the insurer performed no form of satisfactory
    33
    investigation, a procedural bad-faith claim will not be viable. See 
    Sonnett, 309 P.3d at 807
    (rejecting a procedural bad-faith claim when the record
    unambiguously demonstrated at least a passable investigation).
    The Wyoming Supreme Court’s decision in Hatch I is instructive. It
    powerfully demonstrates the egregious level of misconduct that typically gives
    rise to liability for procedural bad faith—a level of insurer misconduct that is not
    even arguably present here. Put another way, Hatch I unequivocally shows the
    high hurdle that must be surmounted to succeed on this ground. In that case, the
    Wyoming Supreme Court found a sufficient factual basis for procedural bad faith
    concerning the investigation of a house-fire claim. The court found that the
    insurer’s handling of the claim—notwithstanding its suspicion of arson—was
    beyond the pale: notably, the insureds were required to file a 275-page inventory
    of household items and “were told that they must list how many cornflakes were
    left in the cereal box before the fire, and how much salt was in the salt shaker.”
    Hatch 
    I, 842 P.2d at 1098
    . Apparently these requirements were only the tip of the
    proverbial iceberg of the insurer’s egregious conduct:
    Appellants      were       threatened     by State         Farm
    representatives . . . . Appellants were required to make
    unreasonable reports, statements and inventories, even after State
    Farm had decided to reject their claim.
    State Farm took over the Hatch house, ousted the Hatch family
    from possession, and searched the house from top to bottom.
    State Farm conducted several unsupervised searches of the home
    and . . . would not allow appellants to have free access to their
    34
    house for eight days after the fire . . . . [The] Hatches were given
    an unrealistic deadline in which to file this inventory. A team of
    five State Farm representatives interviewed Mrs. Hatch four
    different times. One interview lasted five hours with no break
    for lunch.      Mrs. Hatch characterized the State Farm
    representatives as rude, abrupt, sarcastic, unprofessional, and
    hostile. Additionally, the sworn statements of the [Hatches’]
    twin boys, ten years old, were taken.
    
    Id. The insurer
    also hid exculpatory information from the prosecutor in the
    related arson case, demanded mental-health records for one of the insureds’
    children, and contacted the insureds’ creditors. 
    Id. We would
    be hard-pressed to find Cornhusker’s conduct even remotely
    comparable to that of the insurer in Hatch I. As the district court observed,
    Cornhusker “immediately investigated the accident,” defended Vincent when his
    whereabouts were unknown, and “ma[de] an attempt to locate [him] at his
    mother’s house” before ultimately denying coverage. J. App. at 1354–55.
    Cornhusker’s handling of the claim was certainly not perfect; for instance, we do
    not gainsay that heeding Mr. Brando’s suggestions for contacting Vincent could
    have benefitted all parties involved during the course of the Skajs’ lawsuit.
    However, even under the most charitable framing (i.e., in the light most favorable
    to Vincent), the evidence merely demonstrates that Cornhusker could have
    intensified its efforts to locate Vincent during the pendency of the state-court
    proceedings and failed to make a timely reservation of rights. Based upon our
    assessment of Wyoming law, this conduct does not constitute “oppressive” or
    35
    “unreasonable” claims practices, or ones undertaken “to gain an unfair advantage”
    over Vincent. Hatch 
    I, 842 P.2d at 1099
    ; see also 
    Ahrenholtz, 968 P.2d at 951
    (rejecting a bad-faith claim where, unlike in Hatch I, there was no record
    evidence that the insurer “deliberately misrepresented policy provisions,” “made
    oppressive demands,” or “retaliated against the insureds in any way”).
    In the end, we find factually dubious Vincent’s contention that Cornhusker
    “[sat] quietly . . . , and after acting as unfairly as it pleased through the claims
    process, . . . rais[ed] coverage questions for the first time in a motion for
    summary judgment.” Rosty Br. at 19 (emphasis added). To be sure, there were
    fairness concerns implicated by Cornhusker’s arguably flawed handling of the
    claim, but (as Wyoming law instructs) bad-faith liability was not the means to
    redress them. In this regard, we have 
    upheld supra
    the district court’s application
    here of estoppel principles to Cornhusker, which was triggered by Cornhusker’s
    handling of the claim; that approach (as opposed to one predicated on a dubious
    finding of procedural bad faith) was suitable and proper. Thus, on this record,
    without more, we do not find that Cornhusker engaged in procedural bad faith.
    We consequently reject Vincent’s bad-faith claim in full.
    2
    Because Vincent’s claim for punitive damages is predicated upon a finding
    36
    of bad faith, it is also unavailing.10 “Punitive damages should not be awarded
    for . . . mere thoughtlessness or inadventure, or simple inattention.” 
    Shrader, 882 P.2d at 837
    (quoting Danculovich v. Brown, 
    593 P.2d 187
    , 191 (Wyo. 1979))
    (internal quotation marks omitted). On the contrary, such damages “are to be
    awarded only for conduct involving some element of outrage similar to that
    usually found in a crime.” Hatch v. Walton, 
    343 P.3d 390
    , 399 (Wyo. 2015);
    accord Alexander v. Meduna, 
    47 P.3d 206
    , 218 (Wyo. 2002).
    Vincent limits his appellate argument for punitive damages to a handful of
    unsubstantiated and conclusory assertions: notably, that Cornhusker’s behavior
    (1) was “the very essence of the type of conduct exemplary damages must
    address”; (2) involved “willful actions”; and (3) placed him in “manifest” danger.
    Rosty Br. at 23. Statements of this kind make clear that Vincent has “failed to
    contest in any meaningful way the district court’s dismissal of” his claim for
    punitive damages. Gray v. Univ. of Colo. Hosp. Auth., 
    672 F.3d 909
    , 915 (10th
    Cir. 2012). In any event, as we alluded 
    to supra
    , we have thoroughly reviewed
    the record and see no evidence of conduct by Cornhusker that would warrant an
    10
    Even assuming arguendo that Cornhusker had acted with bad faith as to
    Vincent, we would not be compelled to reverse the district court’s denial of punitive
    damages. The Wyoming Supreme Court has underscored this point by noting, “We do
    not conclude . . . that the proof of a bad faith cause of action necessarily makes punitive
    damages appropriate. . . . For punitive damages to be awarded in addition to
    compensatory damages for the tort, there must be a showing of an evil intent . . . .”
    
    McCullough, 789 P.2d at 861
    (second omission in original) (internal quotation marks
    omitted); see also 
    id. (noting that
    an award of punitive damages “require[s] wanton or
    willful misconduct”).
    37
    award (under the operative legal standards) of punitive damages. Put another
    way, we are satisfied that the district court soundly applied Wyoming’s punitive-
    damages standard when it concluded that Cornhusker cannot be said to “have
    been guilty of oppression, fraud or malice.” Farmers Ins. Exch. v. Shirley, 
    958 P.2d 1040
    , 1051 (Wyo. 1998) (internal quotation marks omitted); see Hatch v.
    State Farm Fire & Cas. Co., 
    930 P.2d 382
    , 397 (Wyo. 1997) (“Hatch II”)
    (affirming the district court’s denial of punitive damages after determining that
    “the conduct by State Farm did not reach the requisite heights to be described as
    outrageous, extreme, atrocious, utterly intolerable, nor beyond all possible bounds
    of decency”); see also J. App. at 1358 (characterizing Cornhusker’s behavior as
    “fall[ing] well short of the conduct” described in Hatch II). As a result, we
    uphold the district court’s ruling on Vincent’s punitive-damages claim.
    C
    Finally, we address the Skajs’ contention that the district court incorrectly
    granted summary judgment to Cornhusker on the issue of attorneys’ fees. The
    Skajs contest the substantive and procedural aspects of the court’s decision.
    Finding no error in either regard, we uphold the district court’s summary-
    judgment ruling on this point.
    1
    As part of their counterclaim, the Skajs sought to recover attorneys’ fees
    pursuant to Wyoming’s insurance code. The relevant statute provides:
    38
    In any actions or proceedings commenced against any insurance
    company on any insurance policy or certificate of any type or
    kind of insurance, or in any case where an insurer is obligated by
    a liability insurance policy to defend any suit or claim or pay any
    judgment on behalf of a named insured, if it is determined that
    the company refuses to pay the full amount of a loss covered by
    the policy and that the refusal is unreasonable or without cause,
    any court in which judgment is rendered for a claimant may also
    award a reasonable sum as an attorney’s fee and interest at ten
    percent (10%) per year.
    Wyo. Stat. Ann. § 26-15-124(c) (emphasis added). Third-party (i.e., non-insured)
    claimants (such as the Skajs) generally receive compensation under § 26-15-
    124(c) “under limited circumstances.” 
    Shrader, 882 P.2d at 835
    .
    The Wyoming Supreme Court has explained that “[t]he purpose of this
    statute . . . is to encourage the prompt settlement of justifiable claims by
    providing redress for an insurer’s wrongful refusal to pay.” Herrig v. Herrig, 
    844 P.2d 487
    , 495 (Wyo. 1992); see also Stewart Title Guar. Co. v. Tilden, 
    181 P.3d 94
    , 103 (Wyo. 2008) (“Tilden II”) (indicating that the purpose of the statute is to
    “protect an insured who has suffered a loss from annoying and expensive
    litigation” (internal quotation marks omitted)). More recently, the Wyoming
    Supreme Court has clarified that a claim brought under § 26-15-124(c) requires
    proof, inter alia, “that in [an] action or proceeding it was determined that the
    [insurer] refused to pay the full amount of loss covered by the policy . . . and that
    a determination was made in that action or proceeding that the refusal was
    unreasonable or without cause.” Stewart Title Guar. Co. v. Tilden, 
    110 P.3d 865
    ,
    39
    873 (Wyo. 2005) (“Tilden I”).
    As relevant here, the district court determined that the Skajs’ situation did
    not fall within the universe of “limited circumstances” warranting an award of
    attorneys’ fees. The district court reasoned that the “unreasonable or without
    cause standard” was materially identical to the standard utilized in Wyoming for
    bad-faith insurance claims. Thus, by way of overview, the court grounded its
    denial of attorneys’ fees here on its conclusions that (1) Cornhusker’s denial of
    coverage was reasonable and fairly debatable, and (2) Cornhusker’s conduct did
    not rise to the level of bad faith. For the reasons explicated below, we discern no
    error in this reasoning.
    2
    One procedural issue must be addressed before we reach the merits of the
    district court’s determination—namely, the Skajs’ insistence that they possess
    evidence that they need to put before us on appeal that raises a genuine issue of
    material fact on the attorneys’-fees issue. They have sought leave to file a
    supplemental appendix, the contents of which they have described as “legitimate
    discovery materials that would have been presented if the rules of procedure had
    been followed” in the district court. Mot. for Leave to File Supp. App., No. 13-
    8004, at 5 (10th Cir., filed Apr. 26, 2013).11 In other words, they seek to put
    11
    The Skajs represented in their motion that the materials to be included were
    (1) depositions of three Cornhusker employees and associated exhibits; (2) a letter
    (continued...)
    40
    before us materials that were not submitted to the district court for its
    consideration in ruling on the summary-judgment motions. Our clerk’s office
    provisionally granted this motion, pending the merits panel’s (i.e., our) final
    determination.
    We undoubtedly have discretion to deny a motion to supplement the record
    on appeal when the materials sought to be added to the record were never before
    the district court. See, e.g., Estate of B.I.C. v. Gillen, 
    710 F.3d 1168
    , 1176 (10th
    Cir. 2013) (“We DENY Plaintiffs’ amended motion to file a supplemental
    appendix as the material was not before the district court.”); United States v.
    Kennedy, 
    225 F.3d 1187
    , 1191, 1193 (10th Cir. 2000) (holding, as to materials
    “not a part of the record before the district court,” that “the circumstances in the
    present case do not lead us to believe the interests of justice would best be served
    by exercising our inherent equitable power to allow Mr. Kennedy to supplement
    the record on appeal”); see also Allen v. Minnstar, Inc., 
    8 F.3d 1470
    , 1475 n.4
    (10th Cir. 1993) (collecting cases). And we in fact exercise that discretion to
    deny the Skajs’ motion. Furthermore, because we deny the Skajs’ motion, we
    also deny as moot Cornhusker’s pending motion to seal the Skajs’ proposed
    supplemental appendix.
    11
    (...continued)
    informing the district court “that Cornhusker had not moved for summary judgment on
    the [attorneys’-fees] claim”; and (3) a Wyoming Supreme Court opinion of which the
    district court actually took judicial notice. Mot. for Leave to File Supp. App. at 4 n.1.
    41
    More specifically, we reach our conclusion regarding the Skajs’ motion
    because the procedural history of this case demonstrates that the Skajs could have
    presented the contents of their proposed supplemental appendix to the district
    court, but neglected to do so. Consequently, given the Skajs’ failure to introduce
    those documents, the supplemental appendix containing them should not be added
    to the record on appeal in this eleventh hour. In this regard, on November 29,
    2012, the district court held a hearing on the parties’ cross-motions for summary
    judgment. Neither Cornhusker nor the Skajs had argued the issue of attorneys’
    fees in their summary-judgment briefing, and apparently they were similarly
    silent on the issue at the hearing before the district court. At the end of the
    motions hearing, the district court orally granted summary judgment to the Skajs
    on the estoppel issue and to Cornhusker on Vincent’s various claims. The court
    announced its intent to issue a written ruling by Christmas and stated that no trial
    would be necessary. The very next day, the Skajs filed a notice with the district
    court requesting that the trial remain on the court’s calendar so that they could
    litigate the attorneys’-fees issue.
    Cornhusker responded on December 4, 2012, contending that the Skajs had
    failed to present evidence in support of their claim for attorneys’ fees. Moreover,
    Cornhusker noted that the Skajs’ purported statutory basis for attorneys’ fees
    required any award to be based on a finding of unreasonable conduct or conduct
    that is without cause. See Wyo. Stat. Ann. § 26-15-124(c). According to
    42
    Cornhusker, the district court’s determination that Cornhusker had not acted in
    bad faith precluded such a finding and obviated the need to consider the fees
    matter further.
    On December 5, 2012, the district court entered a text-only minute order
    stating that “the granting of Cornhusker’s motion for summary judgment with
    respect to Vincent[’s] claim for bad faith [was] likewise dispositive of the Skajs’
    claim for attorneys’ fees” and that all legal issues would be resolved by the
    court’s forthcoming written ruling. Dist. Ct. Doc. 188 (Min. Entry, dated Dec. 5,
    2012). The district court’s docket contains no entries with filing dates between
    this minute order and the district court’s summary-judgment order, which issued
    on December 11, 2012. In other words, as particularly germane here, the docket
    indicates that the Skajs did not file anything before the written summary-
    judgment decision—much less a formal objection to the district court’s minute-
    order resolution of their attorneys’ fees claim.
    In our view, the foregoing procedural history eviscerates the Skajs’
    argument for why they should be allowed to supplement the record—namely, that
    “[t]he district court prevented [them] from presenting any evidence on their claim
    for attorneys’ fees.” Skajs’ Br. at 36 (emphasis added). We find it beyond
    peradventure that the Skajs did not avail themselves of the opportunity to request
    this relief (which could have been explicitly conditioned on their merits success)
    before December 5, 2012, when the district court entered the minute order
    43
    signaling the impending end of its involvement in the summary-judgment
    proceedings. Moreover, after that date, the onus rested squarely on the Skajs to
    object to the contents of the court’s minute order and preserve their rights to
    develop facts concerning the attorneys’-fees claim. Our caselaw unmistakably
    holds that a party’s failure to timely challenge “purported errors—be they
    instructional or otherwise—ordinarily [means] he cannot ‘prevail unless he could
    successfully run the gauntlet created by our rigorous plain-error standard of
    review.’” United States v. Banks, 
    761 F.3d 1163
    , 1185 (10th Cir.) (quoting
    United States v. McGehee, 
    672 F.3d 860
    , 876 (10th Cir. 2012)), cert. denied, ---
    U.S. ----, 
    135 S. Ct. 308
    (2014); see United States v. Wardell, 
    591 F.3d 1279
    ,
    1309–10 (10th Cir. 2009) (explaining that “[a] forfeiture implicating plain error
    review” occurs when a litigant “fail[s] to make the timely assertion of a right”
    (second alteration in original) (emphasis omitted) (quoting United States v.
    Olano, 
    507 U.S. 725
    , 733 (1993)) (internal quotation marks omitted)).
    Simply put, our general rule is that “a litigant must lodge an objection to a
    purported error while the district court still has an opportunity to fix it.” 
    Banks, 761 F.3d at 1186
    ; see also 
    Wardell, 591 F.3d at 1310
    (deeming it “too late” when
    a litigant’s objection “was not made known at the time that the court [wa]s
    making its decision to act” (alteration in original) (internal quotation marks
    omitted)); United States v. Walsh, 
    75 F.3d 1
    , 6 (1st Cir. 1996) (“[T]he usual rule
    is that an objection must be made known at the time that the court is making its
    44
    decision to act. . . .”). The Skajs did not lodge an objection to the district court’s
    minute-order resolution of their attorneys’ fees claim, which likely would have
    given the district court an opportunity to consider their purported need for
    additional evidence and to conceivably shift course. Accordingly, the Skajs
    forfeited the claim that they were prevented from presenting evidence. And, on
    appeal, they do not argue for our review of this forfeited claim under the plain-
    error standard; ordinarily, this “surely marks the end of the road” for such claims.
    Richison v. Ernest Grp., Inc., 
    634 F.3d 1123
    , 1131 (10th Cir. 2011). Indeed, we
    would be hard-pressed to find a good reason to permit them to file their proposed
    appendix now.
    To be sure, we have occasionally examined (in an abundance of caution)
    whether the evidence of a party—heading toward defeat—would have created a
    genuine issue of material fact. See, e.g., Holmes v. Utah, Dep’t of Workforce
    Servs., 
    483 F.3d 1057
    , 1068 (10th Cir. 2007) (“Having reviewed the deposition
    excerpts [that were not presented to the district court] ourselves . . . even if
    plaintiff’s counsel had tendered these deposition excerpts to the trial court they
    would not have provided evidence of any specific harassing act during the filing
    period.”). However, we are not obliged to do so. We do not believe this would
    be the prudent and appropriate course here, especially in view of the Skajs’ patent
    failure to seize the opportunities available to them to put their evidence before the
    district court.
    45
    3
    Thus, considering the same record as the district court, we conclude that
    the court did not err in finding in Cornhusker’s favor regarding the Skajs’ claim
    for attorneys’ fees. It is well-settled Wyoming law that “[t]he policy behind [the
    attorneys’-fees] statute is not to penalize insurance companies,” but, rather, to
    “chill any tendencies upon the part of insurance companies to unreasonably reject
    claims.” State Sur. Co. v. Lamb Constr. Co., 
    625 P.2d 184
    , 188 (Wyo. 1981);
    accord Tilden 
    II, 181 P.3d at 103
    ; 
    Herrig, 844 P.2d at 495
    . And, according to the
    Wyoming Supreme Court, establishing one’s entitlement to statutory attorneys’
    fees “requires” proving that “a determination was made in [the relevant] action or
    proceeding that the [insurer’s] refusal was unreasonable or without cause.”
    Tilden 
    I, 110 P.3d at 873
    (emphasis added); accord Principal Life Ins. Co. v.
    Summit Well Serv., Inc., 
    57 P.3d 1257
    , 1265 (Wyo. 2002). Indeed, the court has
    explained that “[a]n element of the claim is that a finding of unreasonableness
    was made in a prior proceeding or action (if not, then in the current action).”
    Tilden 
    I, 110 P.3d at 873
    . No such finding has been made here, and we decline to
    make this finding sua sponte.
    Moreover, though we do not expressly hold that one claim necessarily
    resolves the other, we believe the district court properly looked to the bad-faith
    standard for guidance in addressing the Skajs’ attorneys’-fees claim. This
    approach is appropriate, given Wyoming’s position that its attorneys’-fees
    46
    “statute complements and enforces the duty of good faith and fair dealing that an
    insurer owes to its insured.” 
    Herrig, 844 P.2d at 495
    . Cornhusker had a
    reasonable basis for its chosen course of conduct in these proceedings. Having so
    concluded, we will not reverse course here and find that the Skajs are nonetheless
    entitled to attorneys’ fees based on unreasonableness. We instead adhere to our
    usual view that “awards of attorney fees . . . under Wyoming case and statutory
    law are matters directed to the court’s discretion.” Bruegger v. Nat’l Old Line
    Ins. Co., 
    529 F.2d 869
    , 870 (10th Cir. 1976) (per curiam); accord Smith v.
    Equitable Life Assurance Soc’y, 
    614 F.2d 720
    , 724 (10th Cir. 1980). That
    discretion was rightly exercised here.
    Accordingly, we uphold the district court’s denial of attorneys’ fees to the
    Skajs based upon its antecedent determinations that Cornhusker (1) had a
    reasonable basis for denying coverage, and (2) committed no bad faith.
    IV
    For the reasons stated herein, we AFFIRM the decision of the district court
    in full, DENY the Skajs’ motion to file a supplemental appendix, and DENY AS
    MOOT Cornhusker’s motion to seal the proposed supplemental appendix.
    47