Applegate v. State Farm Mutual Automobile Insurance

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This order and judgment is not binding precedent, except under the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

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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.

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 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

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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,

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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

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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

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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.

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 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

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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

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