Osgood v. State Farm Mut. Auto. Ins. Co., No. 86-1427

• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)
• Writing for the Court: Before MOORE and BALDOCK, Circuit Judges, and O'CONNOR; EARL E. O'CONNOR
• Citation: 848 F.2d 141
• Parties: Patricia M. OSGOOD, Administratrix With-Will-Annexed of the Estates of Delbert A. Stroud and Gertrude Evelyn Stroud, Deceased, Plaintiff-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.
• Docket Number: No. 86-1427
• Decision Date: 26 May 1988

Page 141

848 F.2d 141 Patricia M. OSGOOD, Administratrix With-Will-Annexed of the
Estates of Delbert A. Stroud and Gertrude Evelyn
Stroud, Deceased, Plaintiff-Appellant,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee. No. 86-1427. United States Court of Appeals,
Tenth Circuit. May 26, 1988.

Page 142

Kevin D. Buchanan (Denzil D. Garrison, with him on the brief), Garrison, Brown, Carlson & Buchanan, Bartlesville, Okl., for plaintiff-appellant.

Joseph F. Glass of Best, Sharp, Thomas, Glass & Atkinson (Joseph A. Sharp; and Jody R. Nathan of Thomas, Glass, Atkins, Haskins, Nellis & Boudreaux, with him on the brief), Tulsa, Okl., for defendant-appellee.

Before MOORE and BALDOCK, Circuit Judges, and O'CONNOR, District Judge. ^*

EARL E. O'CONNOR, District Judge.

Appellant, Patricia M. Osgood, appeals from a district court order granting a motion for partial summary judgment filed by the appellee, State Farm Mutual Automobile Insurance Company [hereinafter "State Farm"]. Count II of the appellant's complaint, which alleged fraud and requested punitive damages, was dismissed on the ground that it failed to state a cognizable claim under Kansas law. On appeal, the appellant contends that the fraud claim was an independent tort entitling her to seek punitive damages from State Farm.

The facts, viewed in the light most favorable to the appellant, are as follows. On October 3, 1982, Delbert A. and Gertrude Evelyn Stroud [hereinafter "the Strouds"] were killed in an automobile accident in Osage County, Oklahoma, as a result of the negligence of another driver, Eugene Wells. At the time of their deaths, the Strouds were insured by State Farm. During negotiations with Wells' liability insurance carrier, representatives of the estates contacted State Farm, inquiring about the limits of the underinsured motorist coverage contained in the Strouds' State Farm policy. Agents of State Farm allegedly indicated that the Strouds only had the minimum underinsured motorist coverage; in Kansas, the minimum coverage was $25,000.00 per person and $50,000.00 per accident. Based on this information, the Strouds' estates settled with Wells for the full amount of his liability coverage. State Farm received payment from the settlement through its subrogation rights. Since the Strouds' underinsured coverage purportedly equaled or was less than Wells' liability coverage, the estates made no claim on the State Farm policy.

In March of 1984, the heirs of the estates discovered information indicating that the Strouds' State Farm policy provided more underinsured motorist coverage than originally represented by the insurance company; the policy provided coverage of $100,000.00 per person and $300,000.00 per accident. The estates made a demand upon State Farm for proceeds under the underinsured provisions of the policy, which State Farm refused to pay. The appellant, as administratrix of the estates, filed the action which is the subject of this appeal. Her complaint first alleged a contract claim under the underinsured motorist provisions of the Strouds' policy for damages totaling $187,526.80. ¹ In Count II, the appellant alleged that representatives of State Farm made "fraudulent, intentional, false and material misrepresentations" pertaining to the underinsured motorist coverage. Appellant further alleged that the misrepresentations were made to induce the estates to settle all their claims under Wells' liability coverage and to forego their rights under the underinsured motorist provision of the State Farm policy. The appellant claimed compensatory damages of $187,526.80, plus punitive damages.

State Farm filed a motion for partial summary judgment. In its motion, State Farm argued that Count II asserted a claim of "bad faith" and that Kansas law ² did not recognize such a claim. The appellant

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responded, asserting that Count II alleged a claim of fraud or misrepresentation and that Kansas law permitted such actions against insurance companies. The trial court ruled in favor of State Farm and dismissed Count II of the complaint. After a jury trial commenced, the parties reached a settlement on the claim for proceeds under the policy. Appellant then filed a timely notice of appeal with respect to the dismissal of Count II and her claim for punitive damages.

In reviewing a summary judgment order, the appellate court applies the same standard employed by the trial court under Rule 56(c) of the Federal Rules of Civil Procedure. Ewing v. Amoco Oil Co., 823 F.2d 1432, 1437 (10th Cir.1987). When a motion for summary judgment is granted, it is the appellate court's duty to examine the record to determine if any genuine issue of material fact was in dispute; if not, the court must decide if the substantive law was correctly applied. APC Operating Partnership v. Mackey, 841 F.2d 1031, 1033 (10th Cir.1988); Franks v. Nimmo, 796 F.2d 1230, 1235 (10th Cir.1986). During this review, the court must examine the record in the light most favorable to the party opposing the motion. Ewing v. Amoco Oil Co., 823 F.2d at 1437. In this case, the facts as alleged in Count II were strenuously disputed. However, the trial court determined that any factual disputes were not material, and that the allegations failed to state a claim under Kansas law. In this situation, we are left to determine if the district court correctly applied the substantive law.

The district court dismissed Count II of the complaint on the ground that Kansas law "does not permit plaintiff to bring an action sounding in fraud ... since all damages (save the punitive damages) flow from State Farm's alleged breach of its contractual duties and since plaintiff has alleged no independent or additional injury." In dismissing the claim on this ground, the trial judge implicitly determined that appellant's claims arose from the insurance contract between the Strouds and State Farm. Inasmuch as appellant does not dispute this assumption, her claim of fraud and request for punitive damages must be judged on the basis of Kansas law as it pertains to the availability of punitive damages for contract-based claims.

Kansas has long applied the rule that in actions for breach of contract, damages generally are limited to the pecuniary losses sustained; exemplary or punitive damages are not recoverable in the absence of an independent tort which causes additional injury to the complaining party. Plains Resources, Inc. v. Gable, 235 Kan. 580, 593-94, 682...