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Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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F 1 LED 

U{liccd Scares CoY.rc of Appeals 

UNITED STATES COURT OF APPEALS Te~t~ Gr··:ni~ 

FOR THE TENTH CIRCUIT 

CONTINENTAL INSURANCE COMPANY, 

Plaintiff-CounterDefendant-Appellee, 

v . 

MICHAEL FAHEY, 

Defendant-CounterclaimantAppellant. 

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ORDER AND JUDGMENT* 

FEB 1 3 1990 

ROBERT L. HOECKER 

Clerk 

No. 88-2198 

(D.C . No. 86-71-SC) 

(D. N.M.) 

Before TACHA, BALDOCK, and BRORBY, 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); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

The case is therefore ordered 

This -litigation commenced as a declaratory judgment action 

f i led by the plaintiff insurance company. The defendant was an 

insured under both a workmen ' s compensation policy and uninsured 

motorist policy issued by the plaintiff. The plaintiff sought to 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 88-2198 Document: 01019963048 Date Filed: 02/13/1990 Page: 1 
have the court determine whether a setoff provision in the 

workmen's compensation policy was enforceable against any payment 

the defendant would otherwise receive under the uninsured motorist 

policy. 

Iri response to the plaintiff's complaint, the defendant filed 

a two-part counterclaim. First, the defendant sought recovery of 

the uninsured motorist policy proceeds that the plaintiff 

contended were unobtainable due to the subject setoff provision. 

Second, the defendant asserted a tort claim for bad faith delay of 

both arbitration and payment of his claim to the uninsured 

motorist policy proceeds. 

The issue of the enforceability of the setoff provision was 

certified to the New Mexico Supreme Court. Shortly after the 

state court returned a decision holding that the provision was 

unenforceable, the plaintiff paid to the defendant the full amount 

claimed under the uninsured motorist policy. Thus, only the bad 

faith tort claim was preserved for trial. 

Seven days prior to the scheduled start of the trial, the 

plaintiff made an oral motion to dismiss the defendant's remaining 

counterclaim pursuant to Fed. R. Civ. P. 12(b)(6). In arguing 

this motion, both parties submitted matters outside the pleadings 

so the district court construed the motion to dismiss as a motion 

for summary judgment. The district court concluded that, as a 

matter of law, the plaintiff was entitled to summary judgment on 

the defendant's counterclaim. The defendant appeals from the 

grant of summary judgment in favor of the plaintiff. 

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Appellate Case: 88-2198 Document: 01019963048 Date Filed: 02/13/1990 Page: 2 
On appeal, the defendant essentially makes two arguments. 

First, the def 0 ndant contends the district court erred in 

concluding that no bad faith delay of arbitration or payment of 

the defendant's insurance claim could be shown under the facts 

stipulated by the parties. Second, the defendant argues that the 

district court's decision must be reversed due to procedural 

irregularities involving the use of the summary judgment mechanism 

in this case. After review of the record on appeal in conjunction 

with consideration of the parties' appellate briefs, we hold that 

the district court committed no reversible error, and we affirm. 

The district court correctly concluded that no bad faith 

refusal ·to arbitrate or · pay on the defendant's insurance claim 

could be shown. Furthermore, the defendant's failure to move for 

a stay of the district court's proceedings pending arbitration, as 

well as th~ defendant's counterclaim which sought, in part, a 

judgment "declaring that all cases and controversys [sic] be 

adjudicated in this lawsuit," indicates that the defendant 

voluntarily waived arbitration in its first responsive pleading in 

this action. 

Although the district court failed to follow the proper 

procedure governing the entry of summary judgment in this matter, 

we conclude that this error is harmless. The defendant has failed 

to assert any actual prejudice resulting from the district court's 

actions. 

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Appellate Case: 88-2198 Document: 01019963048 Date Filed: 02/13/1990 Page: 3 
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The judgment of the United States District Court for the 

District of New Mexico entered on July 1, 1988, is AFFIRMED. 

ENTERED FOR THE COURT 

PER CURIAM 

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Appellate Case: 88-2198 Document: 01019963048 Date Filed: 02/13/1990 Page: 4