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

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PUBLISH FILED 

United States Court of Appeals Tentb Circuit 

UNITED STATES COURT OF APPEALS 

JUL - 8 1996 

TENTH CIRCUIT 

PATRICK FISHER 

Clerk 

CHERYL L. REEDER, 

Plaintiff- Appellant, 

vs. 

AMERICAN ECONOMY INSURANCE 

COMPANY, a foreign corporation, 

Defendant - Appellee. 

No. 95-5085 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF OKLAHOMA 

(D.C. No. 93-C-991-B) 

David H. Sanders of Sanders, Sanders & Daffern, Tulsa, Oklahoma, for DefendantAppellant. 

Eugene Robinson (John B. DesBarres with him on the brief) of McGivern, Scott, Gilliard, 

Curthoys & Robinson, Tulsa, Oklahoma, for Plaintiff-Appellee. 

Before KELLY, LOGAN and ENGEL, 1 Circuit Judges. 

KELLY, Circuit Judge. 

This diversity case arising in Oklahoma stems from a jury verdict against PlaintiffThe Honorable Albert J. Engel, Senior Circuit Judge, Sixth Circuit Court of 

Appeals, sitting by designation. 

Appellate Case: 95-5085 Document: 01019280250 Date Filed: 07/08/1996 Page: 1 
Appellee American Economy Insurance Company ("AEIC") awarding DefendantAppellant Cheryl Reeder $612,000 in damages. Reeder filed post-trial motions for 

judgment as a matter of law, or in the alternative, a new trial, requesting that the court 

award her $1,500,000 and alleging various errors. The district court denied Reeder's 

motions. We have jurisdiction under 28 U.S.C. § 1291 and affirm. 

Backwund 

On June 2, 1989, Ms. Reeder was involved in a motor vehicle accident with an 

uninsured motorist, Johnny Lewis.2 At the time, Reeder was insured by an AEIC policy 

which covered three motor vehicles and which provided uninsured motorist coverage of 

$500,000. 

In the spring of 1993, Reeder's attorney notified AEIC that Reeder was making an 

uninsured motorist claim under her AEIC policy. On November 5, 1993, AEIC filed a 

complaint for declaratory judgment to determine whether Reeder was entitled to recover 

from AEIC under the uninsured motorist coverage. Reeder counterclaimed for 

compensatory damages and damages for bad faith on the part of AEIC for failing to 

timely and promptly investigate and pay her claim. The parties both moved for summary 

judgment, and on August 26, 1994, the district court ruled that the AEIC policy covered 

2 Johnny Lewis was actually underinsured, but the term "uninsured" includes 

underinsured vehicles whose liability limits are less than the amount of the claim. See Okla. 

Stat. Ann. tit. 36, § 3636C (West 1990). 

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Reeder's claim but that AEIC had not acted in bad faith. The court scheduled a jury trial 

on the issue of damages for December 19, 1994. 

On December 5, 1994, AEIC offered to settle the case for $1 million, which 

Reeder refused. The jury eventually awarded Reeder $612,000 for her bodily injuries. 

On December 21, 1994, the court entered judgment on the verdict, as well as granting 

partial summary judgment in favor of Reeder on the issue of liability and granting 

summary judgment to AEIC on the issue of bad faith. 

Reeder filed post-judgment motions contending that the district court should enter 

judgment against AEIC for $1,500,000 because $612,000 was wholly inadequate and 

because the undisputed facts revealed damages of $1,500,000. Reeder also alleged 

numerous errors by the trial court. On March 24, 1995, the district court denied Reeder's 

post-judgment motions. This appeal followed. 

Discussion 

I. AEIC's Offer to Settle 

Reeder claims that the district court erred in failing to try the case in accordance 

with Oklahoma public policy. Specifically, Reeder claims that AEIC's offer to settle the 

suit for $1 million made the sole issue in the case whether the $1 million offer fully 

compensated her or whether she was entitled to $1.5 million. Reeder applied to the 

district court to amend the pre-trial order and submit this question to the jury. The district 

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court denied Reeder's motion, ruling that the offer to settle was inadmissible under 

Federal Rules ofEvidence 408 and 403. Aplt. App. at 73-74, 91. We review de novo 

both the interpretation of the Federal Rules of Evidence, United States v. Medina-Estrada, 

81 F.3d 981, 986 (lOth Cir. 1996), and the interpretation of the law and public policy of 

Oklahoma, Horace Mann Ins. Co. v. Johnson, 953 F.2d 575, 576 (lOth Cir. 1991). 

Under Oklahoma law, "if the underinsurer does not conduct an investigation, or 

after investigation, determines that the likely worth of the claim exceeds the liability 

limits, prompt payment must be offered." Buzzard v. Farmers Ins. Co .. Inc., 824 P.2d 

1105, 1112 (Okla. 1991). Reeder claims that there is a distinction between an offer of 

payment in this context and an offer to settle a lawsuit under Rule 408. Reeder notes that 

Oklahoma public policy, as announced by the Buzzard case, requires an underinsurer to 

make an offer of payment, while there is no duty imposed by Rule 408 to make any 

settlement offer. 

Buzzard imposes a duty upon an underinsurer to investigate and evaluate claims 

and offer payment if the claim so warrants. ld... at 1108-09. In this case, AEIC lived up to 

its duties as an underinsurer by evaluating Reeder's claim and offering payment of$1 

million. Reeder attempts to claim that the $1 million offer was not a settlement offer but 

an "evaluation" and thus admissible as such, citing Massey v. Farmers Ins. Group, 986 

F.2d 1428 (lOth Cir.), cert. denied, 508 U.S. 911 (1993), an unpublished Order and 

Judgment. Besides lacking precedential value, ~ 1Oth Cir. R. 36.3, Massey is also 

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clearly distinguishable. In Massey, an evaluation was admitted into evidence because it 

was only an evaluation and nothing more, and the court specifically noted that the 

insurance company had "never furnished, offered, or promised to furnish [the evaluation 

amount] to settle Plaintiffs claim." Massey, 986 F.2d 1428, 1993 WL at *9. In this case, 

the evaluation was also the offer and clearly denoted as such; Reeder's attempt to classify 

it as solely an "evaluation" is directly contrary to the undisputed evidence. Reeder also 

attempts to claim that the "evaluation" would be admitted for a purpose other than to 

prove the amount of her claim, but this argument is specious. Reeder's admitted purpose 

in attempting to introduce the "evaluation" was to determine whether it was adequate 

compensation for her claim, which is inexorably linked with proving the amount of the 

claim. 

Simply because the offer of payment is made pursuant to AEIC's responsibilities 

as an underinsurer does not mean that it is not an offer to settle under Rule 408; the two 

situations are not mutually exclusive. Rule 408 provides: 

Evidence of (1) furnishing or offering or promising to furnish ... a valuable 

consideration in compromising or attempting to compromise a claim which 

was disputed as to either validity or amount, is not admissible to prove 

liability for or invalidity of the claim or its amount. 

Fed. R. Evid. 408. 3 Although AEIC's settlement offer may also qualify as an evaluation 

made in light of Oklahoma public policy, the offer falls squarely within the confines of 

3 The amount of Reeder's claim was the only issue in dispute; the parties stipulated 

as to liability. 

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Rule 408, and thus the district court properly ruled evidence of the offer inadmissible. 

Rule 408 does not distinguish between settlement offers made pursuant to a company's 

statutory or public policy responsibilities and offers made for other reasons. Both types 

of offers advance the policy behind Rule 408, namely, to promote the out-of-court 

settlement of claims. Contrary to Reeder's assertion, the fact that an evaluation also 

serves as a settlement offer in this case in no way forces the insurance company to settle 

because the underinsurer need only offer payment where its investigation reveals liability 

on its part; the insurer is not required to make any offer of payment where it has 

determined that it is not liable. 

II. Stacking 

Reeder's single AEIC insurance policy covered three vehicles, and she paid a 

separate premium for each vehicle. The uninsured motorist liability limit under the policy 

was $500,000. Reeder contends that the district court erred in aggregating, or "stacking," 

the three coverages and instead should have considered each policy separately and 

allowed her to recover against each "policy," resulting in a total recovery of$1.5 million. 

This is a question of law which we review de novo, applying state law. See Benns v. 

Continental Casualty Co., 982 F.2d 461,462 (lOth Cir. 1993). 

In Richardson v. Allstate Ins. Co., 619 P.2d 594 (Okla. 1980), the Oklahoma 

Supreme Court squarely addressed this stacking issue. In Richardson, the insurance 

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company issued Richardson a single policy covering three vehicles with an uninsured 

motorist limit of$25,000 per person or $50,000 per accident, and Richardson paid a 

separate premium for each of the vehicles. The Oklahoma Supreme Court held: 

[W]here an insured had paid three premiums for uninsured motorist 

insurance contained in a single policy covering three vehicles, the extent of 

uninsured motorist coverage is the aggregate limit of coverages 

corresponding to the number of separate uninsured motorist insurance 

premiums paid by the insured. Under the record presented, the coverage of 

$25,000.00 for each person injured in an accident, not to exceed $50,000.00 

in any one accident, will be "stacked" or aggregated to provide limits of 

$75,000.00 and $150,000.00 respectively. 

ld. at 598; cf. Aetna Casualty and Surety Co. v. Craig, 771 P.2d 212,213-14 (Okla. 1989) 

(Class 1 insured may stack uninsured motorist coverage on a fleet of commercial vehicles 

covered by a single insurance policy). 

Despite this direct Oklahoma Supreme Court authority on point, Reeder argues 

against stacking and urges that the policy should be "collateralized," attempting to 

support this theory by relying on a line of Oklahoma cases which have held that 

uninsured motorist coverage cannot be offset by workers' compensation benefits. ~ 

Barfield v. Barfield, 742 P.2d 1107, 1112-13 (Okla. 1987); Chambers v. Walker, 653 

P.2d 931,934-36 (Okla. 1982). These cases reason that uninsured motorist coverage is 

separate from workers' compensation protection, and thus the two may co-exist. 

Barfield, 742 P.2d at 1112. However, in this case we are not faced with an attempt to 

offset Reeder's uninsured motorist judgment with another type of insurance payment; 

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rather Reeder is attempting to collect three times on the same uninsured motorist policy. 

This is clearly not allowed under Oklahoma law. We reject, as we must, Reeder's 

contention that the policy limits on each vehicle are independant collateral sources. 

The jury determined Reeder's damages to be $612,000, but Reeder is now 

attempting to collect $1.5 million for these injuries. As a matter of equity and fairness, 

we find Reeder's position untenable. The fact that Reeder paid separate premiums for the 

three vehicles covered under her single policy allows her to stack the policies and recover 

the full $612,000 as opposed to only the $500,000 policy limit, but the separate premiums 

do not create a collateral source situation. 

III. Bad Faith 

After AEIC filed suit for declaratory judgment, Reeder counterclaimed alleging 

bad faith on the part of AEIC for failing to investigate, evaluate and pay her claim within 

90 days after it was filed. The district court determined that the 90-day time limit did not 

apply to uninsured motorist insurance carriers and entered summary judgment in favor of 

AEIC on the issue. Reeder subsequently moved to amend or vacate this judgment and for 

leave to file an amended counterclaim for bad faith, again on the basis of AEIC's "delay." 

The district court denied these motions. Following the trial, Reeder raised these same 

issues in another motion, which the district court again denied. We review the district 

court's decision to deny leave to file an amended complaint only for abuse of discretion. 

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Phelps v. Wichita Ea~le-Beacon, 886 F.2d 1262, 1274 (lOth Cir. 1989); Foman v. Davis, 

371 u.s. 178, 182 (1962). 

"[A] party may amend the party's pleading only by leave of court or by written 

consent of the adverse party; and leave shall be freely given when justice so requires." 

Fed. R. Civ. P. 15(a). However, leave need not be granted where the amendment would 

be futile, as in this case. The district court explained its rationale for denying leave in its 

October 20, 1994 Order, to which it referred in its March 24, 1995 Order denying 

Reeder's second motion for leave. Aplt. App. at 71; Aplee. Supp. App. at 245-46 (Order 

filed October 20, 1994). The district court determined that AEIC's coverage defense was 

"legitimate" and therefore not in bad faith, stating: 

The Plaintiff [AEIC] had the right to timely litigate the issue of untimely 

notice of the insured (approximately four years after the subject accident) as 

it impacted Plaintiffs contractual right of subrogation against the tortfeasor. While the ruling on that issue was adverse to Plaintiff, it still had 

the right to in good faith litigate same. The Plaintiff also has the right to 

litigate disputed elements of damages claimed such as pain and suffering 

and permanent disability. 

Aplee. Supp. App. at 245 (Order filed October 20, 1994). The district court properly 

explained the basis for its denial of Reeder's motion for leave to amend. We find the 

district court's reasoning persuasive, and even if we did not, the district court's 

thoroughly reasoned explanation would not constitute an abuse of discretion. 

Reeder contends that her bad faith claim is predicated on events that occurred after 

the filing of her initial counterclaim and the district court's judgments should be 

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correspondingly altered to reflect this. Specifically, Reeder claims that AEIC acted in 

bad faith by failing to promptly investigate and evaluate her claim, or in the alternative, 

that the evaluation was untimely. We find these arguments disingenuous. 

AEIC's liability was not established until the district court's Order filed August 

26, 1994. Once its liability was established, AEIC promptly took steps to investigate and 

evaluate Reeder's claim, culminating in the $1 million offer on December 5, 1994. This 

offer constituted an evaluation and assignment of a dollar value to Reeder's claim, as well 

as an offer to settle the lawsuit. We have held that the two are not mutually exclusive. 

Further, we find that this evaluation was timely as a matter of law; the offer was made 

just over three months from the district court's determination of liability. The fact that 

the evaluation was completed twenty-one months after Reeder's claim was initially filed 

is irrelevant because AEIC's liability was in serious dispute until August 26, 1994. Thus, 

AEIC's "delay" was hardly a delay and certainly not in bad faith. 

While we sympathize with Ms. Reeder's injuries, this is a court oflaw, not of 

sympathy. It is unfortunate that Ms. Reeder and her attorney failed to have the foresight 

to accept AEIC's settlement offer, but they elected to take their chances with a jury and 

must abide by the jury's decision. 

AFFIRMED. 

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