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

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

ERNEST DALE THOMPSON and KELLY THOMPSON, ) 

husband and wife; and ERNEST DALE THOMPSON, ) 

father, guardian, and next friend of ) 

JASON THOMPSON, a minor, ) 

) 

Plaintiffs-Appellees, ) 

) 

v. ) 

) 

SHELTER MUTUAL INSURANCE, a Missouri ) 

corporation, ) 

) 

Defendant-Appellant. ) 

FILED 

United States Court of Appeals 

Tenth Circ11it 

MAY 2 21989 

ROBERT L. HOECKER 

Clerk 

Nos. 85-1960 

& 85-2189 

Appeal from the United States District Court 

for the Northern District of Oklahoma 

(D.C. No. 84-C-8-B) 

Joseph F. Clark, Jr., of Williams, Clark, Baker & Earl, Tulsa, 

Oklahoma, for Defendant-Appellant. 

Richard E. Elsea (Kevin A. Schoeppel with him on the briefs) of 

Schoeppel, McAtee & Elsea, Tulsa, Oklahoma, for PlaintiffsAppellees. 

Before LOGAN, BARRETT and MOORE, Circuit Judges. 

LOGAN, Circuit Judge. 

'cz 

Appellate Case: 85-2189 Document: 01019963526 Date Filed: 05/22/1989 Page: 1 
The dwelling and personal property of the family of Ernest 

~ Dale Thompson (collectivel¥ Thompson) were covered by a fire 

insurance policy issued by Shelter Mutual Insurance Co. (Shelter) 

when an arson fire damaged the property. Shelter admitted 

coverage under the policy, but only provided $500 of additional 

living expense money to Thompson immediately after the fire--

enough for one month's subsistence--plus another $1500 about five 

and a half months later. The policy had a limit of $5,000 on 

additional living expense payments. Shelter also disputed the 

amount of Thompson's claim, and Thompson refused to accept the 

estimates of Shelter's contractors as the basis for a settlement. 

Eventually, Thompson brought this diversity suit against 

Shelter, alleging breach of contract, intentional infliction of 

emotional distress, and bad. faith conduct by Shelter. The case 

was tried to a jury, which awarded Thompson damages of $35,000 for 

dwelling repair, $27,500 for personal property damage, and $3,000 

for additional living expenses. The jury found no intentional 

infliction of emotional distress, but awarded Thompson $29,500 

d~mages on the bad faith claim. The district court also awarded 

Thompson attorney's fees. 

In these consolidated appeals, Shelter argues that (1) the 

evidence was insufficient to submit the claim of bad faith to the 

jury, (2) there was insufficient evidence to support the jury's 

awards for dwelling repair and per~onal property damage, and 

(3) the fee awarded to Thompson's attorneys was erroneous. We 

affirm, except that we condition affirmance of the personal 

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property award on a partial remittitur of it. 

I 

Under Oklahoma law, which the parties agree controls this 

case, every insurance contract contains an implied duty of good 

faith and fair dealing. See,~, Timmons v. Royal Globe Ins. 

Co., 653 P.2d 907, 914 (Okla. 1982). The insurer does not breach 

this duty by refusing to pay a claim or by litigating a dispute 

with its insured if there is a "legitimate dispute'' as to coverage 

or amount of the claim, and the insurer's position is "reasonable 

and legitimate." Manis v. Hartford Fire Ins. co~, 681 P.2d 760, 

762 (Okla. 1984); see also Christian v. American Home Assurance 

Co., 577 P.2d 899, 903-04 (Okla. 1978). Rather, to prove a breach 

of the duty of good faith and fair dealing the insured must show 

by a preponderance of the evidence that the insurer failed to 

treat the i~sured fairly or that it tried to make the insured 

"surrender his policy or disadvantageously settle a nonexistent 

dispute." Fletcher v. Western Nat'l Life Ins. Co., 10 Cal. App. 

3d 376, 89 Cal. Rptr. 78, 92 (1970), quoted in Christian, 577 P.2d 

at 901; see also Timmons, 653 P.2d at 913. Viewing the evidence 

in the light most favorable to the plaintiff, as we must, Mccorkle 

v. Great Atl. Ins. Co., 637 P.2d 583, 586 (Okla. 1981), we hold 

that Thompson's evidence meets the minimum standard necessary for 

submission of the question of bad faith to the jury and to support 

the jury's finding for Thompson. 

Thompson introduced evidence that Shelter's adjuster tried to 

intimidate Thompso~ when investigating the fire, that Shelter 

refused to give Thompson a copy of his current declaration sheet, 

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Appellate Case: 85-2189 Document: 01019963526 Date Filed: 05/22/1989 Page: 3 
that Shelter refused to pay Thompson sufficient living expense 

-money .even -though.Shelter-admitted coverage and knew that Thompson 

would need approximately three to five months of additional living 

expense money while the house was repaired, that Shelter refused 

to negotiate with Thompson's agent, and that Shelter unreasonably 

rejected Thompson's proof of loss forms. Although the focus of 

the bad faith claim was on the failure to pay additional living 

expenses, all this evidence is probative and relevant because "the 

jury may be shown the entire course of conduct between the parties 

to arrive at a determination of whether [the good faith] standard 

had been breached or not." Timmons, 653 P.2d at 917. 

Shelter asserts that it could not have acted in bad faith 

because it had no duty to pay any living expense money until the 

parties agreed upon Shelter's liability for repair costs, and, 

because the district court found a bona fide dispute between the 

parties as to such costs, Shelter's refusal to make the living 

expense payments was reasonable and in good faith as a matter of 

law. This argument does not impress us, first, because the jury 

was entitled to consider conduct other than the withholding of 

living expenses as evidence of Shelter's bad faith. Also, 

"[u]nwarranted delay precipitates the precise economic hardship 

the insured sought to avoid by purchase of the policy." 

Christian, 577 P.2d at 903. This especially is true with 

additional living expense payments, the function of which is to 

enable the insured to maintain, insofar as possible, the pre-fire 

standard of living during the period of repair and replacement. 

An unresolved dispute as to other policy claims does not as a 

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Appellate Case: 85-2189 Document: 01019963526 Date Filed: 05/22/1989 Page: 4 
matter of law excuse the failure of the insurer to pay living 

-e~pensebenefits,_.when the - liability for.· such benefits is 

undisputed. The evidence presented was sufficient to create a 

jury question on bad faith. See Mccorkle, 637 P.2d at 587 (if 

there is conflicting evidence regarding reasonableness of conduct, 

question of bad faith is for jury); see also Buzzard v. McDanel, 

736 P.2d 157, 159 (Okla. 1987). 

II 

Shelter also argues that the dwelling repair and personal 

property awards were not supported by competent evidence. As for 

the dwelling repair award of $35,000, competent testimony 

indicated that the dwelling damages totalled approximately 

$47,000, see IV R. 293-94; plaintiffs' exhs. C-8, N-1, and that 

the lower estimates offered by Shelter did not cover particular 

repairs or were unreasonably low and designed by the contractor to 

gain entry into the insurance repair business. IV R. 168-69, 173; 

VI R. 801-02. Thus, the award given was within the parameters of 

the testimony and supported by competent evidence. 

The award of $27,500 for personal property damage, however, 

is excessive. The proofs of loss detailed personal property with 

a value of $22,419.21, and Thompson at no time proved or even 

argued for a personal property award greater than this amount. 

See IV R. 293-94; VII R. 844; plaintiffs' exhs. C-8, N-1. 

Thompson attempts to justify the jury's larger award, which equals 

the policy limits on personal property, by pointing to photographs 

int~oduced as evidence that show the fire damage to the home. 

Shelter argues that the figure on the proof of loss forms must be 

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depreciated since it is apparent that the figure represents the 

~urchase price .of the personal property, while_the-policy provides 

only for reimbursement of the property's actual value at the time 

of loss. Both arguments must fail. It is true that Thompson's 

policy was for actual value, not replacement cost. Yet, Shelter's 

only specific evidence about depreciation on Thompson's property 

was a "guess'' by one of its employees as to the proper amount of 

the total personal property award. VI R. 632; cf. plaintiffs' 

exh. J-17. To reduce Thompson's award based on this testimony 

would sanction an award based on "mere speculation, conjecture or 

surmise" which, of course, is improper. Great w. Motor Lines, 

Inc. v. Cozard, 417 P.2d 575, 578 (Okla. 1966). Similarly, a 

valuation of more than $22,419.21 would be based on nothing more 

than a guess about the damage depicted in the photographs. When 

the damages awarded are unsupported by competent evidence, we may 

order the plaintiff to remit the amount above that which is 

supported by the evidence. Davon Drilling co. v. Ginder, 467 P.2d 

470, 474 (Okla. 1970). Thus, we order a remittitur of $5,180.79 

($27,500.00 less $22,419.21 proved value, plus the policy's 

$100.00 deductible) of the personal property award, and condition 

affirmance of the award of $22,319.21 upon Thompson's agreement to 

the reduction. In the absence of such agreement, Shelter is 

entitled to a new trial on the issue of the amount of Thompson's 

personal property damages. 

III 

In Oklahoma, an insured may recover costs and attorney's fees 

incurred in suing the insurer if the judgment recovered exceeds 

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( all written settlement offers made by the insurer. Okla. Stat. 

tit. 36, § 3629(8). Shelter concedes that.Thompson is entitled to 

a fee award because the verdict in the instant case exceeded any 

written settlement offer it made. 

Thompson's attorneys petitioned for fees totalling 

$94,212.24, which they calculated based on 716.85 hours of 

preparation time at $85 an hour and 115.5 hours of trial time at 

$125 per hour, plus a twenty-five percent enhancement. In 

addition, they asked for reimbursement of $1,615.55 in expenses. 

The district court awarded expenses in the amount claimed. The 

court, however, found that only 350 hours of preparation time and 

50 hours of trial time were reasonably expended, and that this 

time should be compensated at $85 and $110 per hour, respectively. 

Thus, it awarded a fee of $35,250. The court also refused to 

segregate the fees and award only those attributable to the 

contract claim, holding that no clear delineation could be made 

between the time spent on the contract claim and the tort claims. 

Shelter does not challenge the expense award or the district 

court's setting of $85 and $110 per hour as reasonable rates of 

compensation. Nevertheless, Shelter argues that the $35,250 fee 

is erroneous for two reasons. First, it asserts that the 

attorneys' time spent preparing and trying the bad faith claim is 

not compensable under the statute, and the court should have 

segregated and disallowed the time spent on that claim. Second, 

Shelter argues that the court's award is not supported by evidence 

introduced at the fee hearing. We reject both contentions. 

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Even if Shelter is correct that some delineation could 

rationally be made in this case between .. time .spentc.on the contract 

and the tort claims, see Hensley v. Eckerhart, 461 U.S. 424, 434-

35 (1983), such a determination would be irrelevant in this case 

because we hold that § 3629(B) allows fees for time spent 

preparing and trying a claim of bad faith, provided the plaintiff 

succeeds on his claim of bad faith and also meets the statutory 

requirement of obtaining a total judgment larger than the greatest 

settlement offer made by the insurer. The American· rule that 

generally prohibits the award of attorney's fees to the prevailing 

party does not apply when a statute, here§ 3629(B), provides for 

the award of fees. An-Son Corp. v. Holland-America Ins. Co., 767 

F.2d 700, 703 (10th Cir. 1985). We have noted that Oklahoma's 

courts have read this statute broadly, see id._, and find no 

indication in the statute that an insured who otherwise qualifies 

as a "prevailing party" should not be allowed fees for attorney 

time spent successfully prosecuting a claim of bad faith. Indeed, 

it would be anomalous to read§ 3629(B) to allow fees for the 

prosecution of a suit when the insurer had acted reasonably, 

albeit erroneously--with the insured obtaining a judgment greater 

than the largest settlement offer--while denying fees to a 

plaintiff who successfully sued an insurer to redress unreasonable 

or oppressive conduct and obtained a judgment greater than any 

settlement offer. 

In addition, the Oklahoma Supreme Court has upheld the award 

of fees under § 3629(B), without mentioning their segregation 

between tort and contract claims, in cases in which the plaintiffs 

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( recovered both for breach of contract and for bad faith conduct. 

See McCorkl·e., 637- P. 2d at 586; Oliver's Sports Center, Inc. v. 

National Standard Ins. co., 615 P.2d 291, 295 (Okla. 1980). In 

Oliver's Sports, the court specifically mentioned the attorneys' 

efforts in trying a complicated bad faith suit. Id. 

Shelter's argument that the district court's actual fee award 

is unsupported by the evidence similarly is without merit. As a 

matter of Oklahoma law, the district court's award of an 

attorney's fee must be upheld if reasonable, and can be modified 

or vacated only if the court has abused its discretion. 

Southwestern Bell Tel. Co. v. Parker Pest Control, Inc., 737 P.2d 

1186, 1189 (Okla. 1987). We find no such abuse here. Thompson's 

attorneys claimed a total of 832.35 hours of compensable time, but 

the court awarded fees for only 400 hours, citing as some of the 

reasons for its reduction the inexperience of Thompson's 

attorneys, excessive time spent in research and preparation, 

unreasonable client demands that more experienced counsel could 

have squelched, and time spent preparing meritless claims. The 

district court carefully followed the rationale of this court in 

Ramos v. Lamm, 713 F.2d 546 (10th Cir. 1983), and that of the 

Oklahoma Supreme Court in State ex rel. Burk v. City of Oklahoma 

City, 598 P.2d 659 (Okla. 1979), in considering the relevant 

factors and determining a reasonable fee. Its decision is 

supported by the evidence and we find no abuse of discretion. 

The judgment is AFFIRMED in all respects, except as to the 

award of personal property damages, to which we attach the 

condition of a remittitur reducing the judgment to $22,319.21. rf· 

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, Thompson agrees to the remittitur, then that award also is l 

AFFIRMED. If not, Shelter is entitled to a new trial limited to 

the issue of the amount of Thompson's personal property damages. 

IT IS SO ORDERED. 

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