Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-94-08069/USCOURTS-ca10-94-08069-0/pdf.json

Nature of Suit Code: 350
Nature of Suit: Motor Vehicle Personal Injury
Cause of Action: 

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Patrick Pisher 

Clerk 

OBITBD STATBS COURT OP APPEALS 

Office of the Clerk 

Byron White united states Courthouse 

1823 stout street 

Denver, co 80257 

January 23, 1996 

Elisabeth Shumaker 

Chief Deputy Clerk 

TO: ALL RECIPIENTS OF THE CAPTIONED OPINION 

RB: 94-8069, 84-8077, Ford v. Allied Mutual Insurance 

Filed January 3, 1996, by Judqe owen, Senior District 

Judqe for the u.s. District Court for the Southern 

District of New York 

Please be advised of the followinq correction to the 

captioned decision: 

Counsel for the defendant-appellant as listed on the 

caption paqe, has been corrected to read "Thomas J. 

Klepperich". 

Please make this correction to your copy. 

Very truly yours, 

Patrick Fisher, 

Clerk 

syVhL~~ Barbara Schermerhorn 

Deputy Clerk 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 1 
( 

• 

' . 

.. 

PUBLISH 

FILED 

United States Court of Appeals 

Tenth Circuit 

JAN - 31996 

. UNITED STATES COURT OF APPEALS PATRICK ~ISHER FOR THE TENTH CIRCUIT Cler 

STEVEN E. FORD; C. LYNN FORD; ) 

MICHAEL G. FORD, a Minor; and ) 

BEATRICE MEIERSTEIN, ) 

) 

Plaintiffs-Appellees/ ) 

Cross-Appellants, ) 

) 

v. ) 

) 

ALLIED MUTUAL INSURANCE ) 

COMPANY, an Iowa corporation; ) 

) 

Defendant-Appellant/ ) 

Cross-Appellee. ) 

No. 94-8069 

No. 94-8077 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF WYOMING 

(D.C. No. CIV 93-201-J) 

Stephen H. Kline, Kathryn A. Jenkins (Kline & Jenkins), Cheyenne, Wyoming, for PlaintiffsAppellees. 

Thomas J. Lepperich, Jeffrey J. Gonda, (Lonabaugh and Riggs), Sheridan, Wyoming, for 

Defendant-Appellant. 

Before BRORBY and McKAY, Circuit Judges, and OWEN,* District Judge. 

*The Honorable Richard Owen, Senior District Judge for the United States District Court for 

the Southern District of New York, sitting by designation. 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 2 
.. • • 

OWEN. District Jud~e 

Appellant Allied Mutual Insurance Company ("Allied") raises substantial questions as to 

Steven Ford and his family's entitlement to receive from Allied, as his insurer, "underinsured" 

motor vehicle payments ("UIM") following an accident with serious injuries. The appeal 

essentially involves the propriety of certain rulings by the district court on two summary 

judgment motions prior to trial. By those rulings, the court dismissed one defendant, United 

States Fidelity and Guaranty Co. ("Fidelity" or "USF&G"), a potential insurer, and thereafter 

held as a matter of law that Allied, the Fords' insurer, was liable under its UIM provisions for 

certain excess damages. A detailed recital of the facts and chronology of events places the 

issues in clear perspective. 

On July 12, 1989, Steven Ford was driving his family in Yellowstone National Park in 

Wyoming. It had been raining. Rounding a bend in a narrow two-lane road, their car was 

struck by the trailer portion of a tractor-trailer rig, and the four occupants of the car sustained 

bodily injuries, two quite seriously. A jury later determined those damages to total $670,000. 

It was stipulated that the tractor-trailer driver, Leland Blatter, was the only negligent party in 

the accident. 1 

Ford, with considerable experience in the insurance field, personally undertook to obtain 

reimbursement for his and his family's injuries and property loss. He immediately got in touch 

with Allied, his insurance company, for reimbursement for the property damage to his car and 

the medical payments his policy provided. Both were promptly paid by Allied, $7,225 for the 

car and $5,000 (the policy limits) each to Ford and his wife. 

It was early established that the tractor, which was owned by Blatter's family corporation 

1 The accident occurred in Yellowstone National Park, a federal territory. In such circumstances, the applicable 

law is that of the state, Wyoming, in which the national park is located. 16 U.S.C. § 457 (1995). The Wyoming 

choice of law rule in this situation provides that the construction and validity of a contract is to be determined by 

the place where the contract was made. J.W. Dento Milling Co. v. Malin, 165 P. 1113, 1116 (Wyo. 1917), cited 

with approval in Isaac v. Isaac, 406 P.2d 898, 898 (Wyo. 1965). The parties do not disagree that apart from the 

place of the accident, all other relevant facts are connected to Iowa and that the law of Iowa should apply when even 

state law is applicable. 

1 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 3 
under the name Farmer's Creamery, had a liability insurance policy with the Farmers' Insurance 

Group and specifically the Truck Insurance Exchange,2 with total coverage of $300,000. 

Investigation in the months after the accident further developed that the trailer was owned by 

Rollins Leasing and was under lease to Gallatin Dairies, Inc. d/b/a "Darigold". Accordingly, 

both Allied and Ford tried to ascertain any coverage that Rollins and Darigold might have 

applicable to the Fords' injuries. Inquiries by Allied into Rollins' or Darigold's coverage were 

eventually met with one form or another of declination, and, as appears to be the practice in the 

trade, neither Rollins nor Darigold supplied Ford or Allied with their policies for examination. 3 

Getting toward the end of the first year after the accident, with the full extent of the 

Fords' injuries becoming determinable and with the Fords' need to obtain monies to deal with 

this, Ford began to pressure Allied to consider making the payments he and his family needed 

from its underinsured motorist clause with a right of subrogation against any other insurance, 

ascertained or yet to be ascertained.4 Allied declined to do this, advising Ford that it was only 

liable in the event it was determined that no other insurance was available to cover the Fords' 

losses. Allied, however, continued to work with Ford to endeavor to ascertain the existence and 

applicability of any other insurance. 

On May 28, 1990, Ford wrote to Allied asking if it had any information on policies 

2 The names "Farmers Insurance" and "Truck Insurance" are hereafter sometimes used interchangeably in this 

opinion depending on whether the parties used one or the other in contemporaneous writings or testimony. 

3 As is discussed hereafter, the customary way to get disclosure of such a policy, as Allied advised Ford, was 

to sue the insured trailer owner or lessee thereby forcing disclosure of the policy and its coverage. 

4 The terms of Allied's UIM provisions read: 

We [Allied] will pay damages which a covered person is legally entitled 

to recover from the owner or operator of an underinsured motor vehicle because 

of bodily injury: 

1. sustained by a covered person; and 

2. caused by an accident . 

••• 

"Underinsured motor vehicle" means a land motor vehicle or trailer of any type 

to which a bodily injury liability bond or policy applies at the time of the 

accident but its limit for bodily injury liability is ... not enough to pay the full 

amount the covered person is legally entitled to recover as damages . . . . 

The policy limits of the Allied policy were $250,000 per person and $500,000 per accident or occurrence. 

2 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 4 
~ covering the trailer. On June 6, 1990, Allied wrote back telling Ford that it was still trying to 

get from the insurance carriers the coverage available on the trailer which Ford had requested, 

and until such coverage, if any, was known, no possible discussion of settlement of Allied's 

underinsured motorist insurance could be had. 

In the summer of 1990, Blatter's insurance representative offered Ford the whole Truck 

Insurance $300,000 policy with the expectation that Leland Blatter and Farmers Creamery would 

thereupon be released from future liability. Ford, in need of funds, followed up on this. 

Farmer's Insurance sent him a form release which he took to a lawyer and had the lawyer edit, 

reserving Ford's "rights against any other entities that he hadn't identified." Ford then wrote 

to Allied on July 6, 1990 asking Allied's permission to settle with Truck Insurance for "their 

portion of our claims." In the same letter, Ford made a claim for the entire underinsured 

motorist limit of the Allied policy. Ford acknowledged that Allied neither "encouraged" nor 

"discouraged" him from settling with Farmers. Allied did, however, set about to make an asset 

check on Blatter. This consisted of a property search and a check to see if there had been any 

filing of financial documents under the UCC. This was completed within approximately a 

month, and Allied then wrote Ford: 

Allied Mutual Insurance Company has obtained an assets check on Mr. Blatter 

and have determined that there [are] no funds from which to collect any 

subrogation claim against him. Therefore, you have Allied's permission to enter 

into a release with Mr. Blatter and Farmer's Insurance for your claim as well as 

those of your wife, son and Beatrice Meierstein. 

In the immediately following paragraph, however, Allied further wrote: 

Allied is still waiting for confirmation from Rol[l]ins Leasing Company as to their 

insurance limits. Any insurance per Rol[l]ins would come into effect prior to the 

UIM Coverage under your Allied policy. f] 

Thus, it continued to be Allied's stated position that if there were other insurance it had to be 

looked to before Allied could consider UIM payments. Upon receipt of Allied's letter, Ford 

signed the release he had tailored releasing Leland Blatter and Truck Insurance Exchange 

s [Court's footnote] While Darigold's policy was not mentioned in this letter, other contemporaneous writings 

reveal that both Ford and Allied were increasingly aware of the Darigold policy both before and after Allied's 

"permission" letter. In any event, Allied's constant interest in pursuing other insurance was clearly supported by 

much competent evidence. 

3 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 5 
• reserving, however, his right: 

[t]o pursue claims against any and all other parties responsible for his injuries, 

including, but not limited to, Rollins Leasing, Gallatin Dairies, Country Classic 

Dairy, and Allied Insurance, which pursuant to the terms of an automobile 

liability policy has provided underinsurance coverage to Steven Ford. 

Ford delivered this release to Blatter and Truck Insurance Exchange and received the $300,000. 

Both Ford and Allied thereafter continued to pursue possible Rollins or Darigold coverage 

without success. Finally, according to a memorandum of Allied's Tim Jones in June 1991: 

I advised Mr. Ford that there did not appear to be anything that we could do at 

this time [regarding UIM] since there is coverage available. 

Mr. Ford indicated that he would possibly have to go to an attorney in order to 

make Rollins Leasing, or USF&G respond to him as to who the primary carrier 

should be. He stated that he would probably request for a declaratory judgment 

to get one or both of those companies into the picture and respond to his 

claim.rl 

At this time, it appears that his efforts are going to be directed toward Rollins 

Leasing and USF&G. 

He stated he would keep me advised as to what progress he is able to make, and 

that he might not have an underinsured motorist claim against Allied if he can get 

one or both of these companies to commit to some coverage. 

Ford did commence that suit, and in discovery obtained the Rollins and Darigold policies. The 

Rollins' policy appeared not to provide coverage for Blatter because its coverage only extended 

to employees of a lessee, here Darigold. The Darigold policy, though, which was with USF&G 

(Fidelity), with coverage up to $1,000,000, provided in relevant parts: 

We will 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 the . 

. . . use of a covered 'auto'. 

A "covered 'auto"' was defined as: 

[T]hose 'autos' you [the insured, Darigold] lease, hire, rent, or 

borrow. 

Finally, an "insured" was defined as: 

b. Anyone else while using with your permission a covered 'auto' 

you own, hire or borrow. . . . 

6 [Court's footnote] Allied was also made a defendant in the suit which is the subject of this appeal. 

4 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 6 
Since coverage under the Fidelity policy was purchased for the trailer, and Blatter was using the 

trailer with Darigold's permission, therefore, Blatter fit the language as an insured vis-a-vis the 

Fords. 

Given the foregoing, the case appears strong that had Blatter not been released, there was 

up to an additional $1,000,000 available to cover the Fords under the Darigold policy.7 

However, absent some hard-to-imagine independent negligence by Darigold, Ford, by releasing 

"permissive user" Blatter, closed off the only realistic avenue of reimbursement from the 

Darigold policy, notwithstanding the reservation of rights against Darigold in the release. 8 

From hindsight, everybody in this action, the parties, the court below, and certainly this Court 

recognizes that the release of Blatter was a mistake where both Ford and Allied were specifically 

looking to the availability of further insurance to cover the Fords' injuries. 

Prior to the trial below, the district judge granted summary judgment dismissing Rollins 

from this action because its policy provided that Blatter had to be an employee of its lessee 

Darigold to be covered, and he was not. The district judge next granted summary judgment 

dismissing Darigold on the ground that Blatter was an "independent contractor", though the court 

recognized some question as to whether the policy might or might not provide coverage to Ford 

because Blatter was a "permissive user" under the policy. 9 Having done that, as to Ford's 

summary judgment motion on Allied's contract liability, the district judge found in favor of 

Ford, holding Allied liable for whatever the jury should thereafter determine to be the excess 

7 The subsequent jury verdict established that over the $300,000 Farmers Creamery policy, the Fords' injuries 

were $375,000 more. 

8 Both Ford and Allied were aware of the doctrine of "permissive user" coverage in many policies, which 

happened to be in the Darigold policy's definition of an "insured", ~supra. 

9 THE COURT: I have had an opportunity to, again, review the cross motions for summary judgment ... 

*** I would say that the [Rollins] policy flatly does not provide coverage in this situation by its very language. 

And secondly, that it is doubtful, in my view, whether the [Fidelity] policy would provide coverage in that there 

is language that bas been pointed out by the plaintiff that would suggest that the [Fidelity] policy does not cover 

injuries that occurred as a result of the operation of a borrowed or hired vehicle. 

I realize that there is a real question that might exist in all of that . . . . 

5 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 7 
of the Fords' damages over $300,000, because on the record before him, the district judge found 

Blatter to be an "underinsured" motorist. The district judge then commenced the trial and 

submitted to the jury two issues: 1) the total damages sustained by the Fords; and 2) whether 

Allied dealt with Ford in "bad faith". The jury found total damages to be $675,000 and Allied 

not to be in "bad faith". 

The crucial focus of our analysis of the issues raised on this appeal is upon two of the 

district court's grants of summary judgment; the first, dismissal of Darigold,10 and the second, 

the ruling declaring Allied liable as a matter of law to the Fords for any excess over the Farmers 

Creamery policy. We review these rulings de novo and apply the same standard as used by the 

district court, Panis v. Mission Hills Bank. N.A .. 60 F.3d 1486, 1489-90 (lOth Cir. 1995)_11 

Thus, if a jury could have found that Darigold's one million dollar policy would have been 

applicable to Blatter's negligence, that policy would have provided full coverage to the Fords 

had it not been for Ford's execution of the release to Blatter. The district court's dismissal 

flowed, we conclude, from the court's focusing on the fact that Blatter was an independent 

contractor and not taking cognizance of the material fact issue as to whether a jury could have 

found Blatter to have been a "permissive user" within the terms of the policy. The "permissive 

user" issue should have been submitted to the jury, and had the jury concluded that Blatter was 

such a user, and therefore, that there had been adequate coverage for the Fords at the time of -

the accident, the next issue for the jury to decide would have been, who bore the responsibility 

for Ford's unfortunate signing of the release of Blatter that destroyed that coverage. 

Under the law of Iowa, Ford and Allied were, under normal circumstances, dealing at 

10 · The Rollins policy at this point is irrelevant in any event because the jury by its verdict concluded the 

Ford's damages were only $375,000 above the Farmers Creamery policy. Therefore, the Darigold policy was more 

than enough to cover this and therefore, Allied's UIM coverage would not have been reached. 

11 Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and 

admissions on file, together with the affidavits, if any, show 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). We view the factual 

record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment. 

Deepwater Invs. Ltd. v. Jackson Hole Ski Com., 938 F.2d 1105, 1110 (lOth Cir. 1991); Panis, supra, at 1490. 

6 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 8 
, 

arm's length with each other, thus putting upon Ford, as the insured, the duty of establishing 

his claim before Allied was required to make payment under the policy. Pirkl v. Northwestern 

Mutual Insurance Asso., 348 N.W.2d 633 (Iowa 1984). Allied maintains that an arms-length 

relationship did exist here, notwithstanding its efforts to help Ford. Some of Ford's conduct, 

writings and testimony, a jury could find, supports this position. Ford, however, contends that 

the circumstances were not normal -- that Allied had taken over Ford's responsibility of 

establishing his claim by its efforts to obtain Rollins' and Darigold's policies, and by giving him 

"permission" to settle with Truck Insurance and execute a release to Blatter. These are material 

fact issues. Allied, as to this, asserts that while it tried to assist its insured, it advised him that 

it could not consider payment under its UIM provisions until all other avenues of insurance had 

been pursued without success. There is competent evidentiary support for this in the 

correspondence with Ford prior to Ford's asking permission to settle, and in Allied's letter of 

"permission" to settle with Farmers containing the statement that the Rollins policy must still 

be pursued prior to any consideration of UIM. It also appears that Ford himself, having hired 

an attorney to polish the release supplied him by Farmers, instructed the attorney to preserve 

his rights as against Darigold and Rollins. 

Accordingly, on this record, there is first a major issue of material fact as to Darigold's 

coverage of Blatter at the time of the accident. If such coverage were found to exist by the jury, 

there is then the second major issue of fact as to whether Ford was in an arm's length 

relationship with Allied, and thus whether the sole responsibility for the release was his, or 

whether any conduct of Allied misled him or constituted a waiver or estoppel against Allied 

under such authorities as Scheetz v. IMT Ins. Co., 324 N.W.2d 302 (Iowa 1982), with 

particular reference to that court's observation at 304: 

The issue of waiver is generally one of fact for the jury, in particular where acts 

and conduct are relied upon as the basis for the waiver. 

Given all this, with such essential material facts in issue, we conclude that it was error for the 

district judge, by his pre-trial grants of summary judgment, to have withdrawn these ultimate 

7 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 9 
.. issues bearing on Allied's UIM responsibilities from the jury. This requires a remand for a trial 

on those issues. 

The jury's award of $675,000 as total damages is not an issue on this appeal. We have 

carefully examined plaintiffs cross-appeal for a new trial on the issue of Allied's "bad faith" 

as to which the jury found in favor of Allied. We find no merit in Ford's position, which is 

essentially the claim that an expert witness for Allied was permitted to testify to impermissible 

and inaccurate propositions of law. This claim, upon examination of the testimony cited in 

support, proves unfounded. What Allied's expert testified to went to the issue of bad faith, not 

to contract liability. The testimony was allowable in order to show the basis upon which Allied 

had declined payment under the UIM provisions of this policy. In that regard, the expert 

testified that Allied was relying on industry practice that before there is payment under UIM, 

one looks at the total coverage available at the time of the accident. This is supported under 

Iowa law by Rucker v. National General Ins. Co., 442 N.W.2d 113 (Iowa 1989). The expert 

also testified that the industry regards the insured as being in an arm's length relationship vis-avis the company in this type of situation. This general principle, too, flows from Iowa law as 

stated in Pirkl, supra, at 635}2 Ford does not explain why the witness' testimony as to the 

customary practice in the industry of regarding a tractor and trailer coupled together as one 

vehicle is an erroneous statement either factually or legally. 

Ford also contends that jury instruction #23 concerning the release signed by Ford was 

confusing to them. That charge reads: 

The releases signed by the plaintiffs in favor of Leland Blatter and Truck 

Exchange are contracts. In interpreting the effect of these Release Agreements, 

the primary consideration is ascertaining the intent of the parties to the Release 

Agreements. In ascertaining the intention of the parties, you must consider the 

12 We note that the district court's jury charge #28 is a paraphrase of language from Pirkl, supra. It reads: 

Allied bad no clearly defined duty to investigate the plaintiffs' claim for 

underinsured motorist benefits, and was entitled to require the plaintiffs to 

present adequate proof of loss before paying the claim. 

This specific language was not objected to at the charge conference below, and is not the subject of question on this 

appeal. 

8 

Appellate Case: 94-8069 Document: 01019279838 Date Filed: 01/03/1996 Page: 10 
t 0 

plain meaning of the words used by the parties in the Release Agreements in light 

of all other facts and circumstances then existing. 

Whether the parties to the Release Agreements between Leland Blatter and Truck 

Insurance Exchange intended to preserve plaintiffs' right to pursue claims for 

their injuries against other insurers of Leland Blatter is for you to decide based 

upon the intention of the parties to the Release Agreements signed by the 

plaintiffs. 

However, notwithstanding appellees' attack, that instruction appears to be proper guidance on 

the issue of the good or bad faith of Allied and is otherwise an unexceptionable instruction on 

the law governing inferences to be drawn from the release. 

Ford's final contention is that the jury should have been advised that the court had 

granted summary judgment to Ford on his contract claim against Allied. This, however, could 

well have been a prejudicial factor for the jury to have before it when deciding the bad faith 

issue. We find no error in the district court's refusal to so advise the jury. 

In sum, the jury's damage award of $670,000 stands unassailed. We affirm the jury's 

determination and resulting judgment in favor of Allied on the issue of its alleged bad faith. We 

remand to the district court for a trial of all other issues, first with regard to Darigold's 

coverage, and, if such would have existed, then a determination of which party must suffer the 

consequences of the release of Blatter. 

9 

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