* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### FEB 11 2002 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

ST. PAUL REINSURANCE COMPANY, LTD., a foreign corporation, Plaintiff-Appellant,

v. CLUB SERVICES CORPORATION, a/k/a Automobile Club Insurance Agency, a/k/a AAA Insurance, a/k/a Automobile Club Insurance Company; CHARLES MARTIN, an individual,

Defendants-Appellees. No. 01-5029 (D.C. No. 00-CV-243-B) (N.D. Okla.)

ORDER AND JUDGMENT *

Before EBEL , KELLY , and BRISCOE , Circuit Judges.

After examining the briefs and appellate record, th is panel has determined unanimously to grant the parties’ request for a dec ision on the briefs without oral-2-

argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. In this negligence action, plaintiff St. Paul Reins urance Co., Ltd., appeals after a jury verdict in its favor, seeking a remand for new trial on damages only. We reverse, but remand for new trial on both liabil ity and damages. In the present action, St. Paul sued its agent Char les Martin and Martin’s employer, Club Services Corporation, for damages ar ising from the mishandling of the insurance application of Ms. Ethel Wilson. Ms. Wilson had applied for coverage for her home from St. Paul and thought she was fully covered. Unbeknownst to her, however, St. Paul had refused c overage and returned the premium to defendants who did not, in turn, refund it to Ms. Wilson or inform her that coverage had been denied. Ms. Wilson’s garage was later completely destroyed by fire. When St. Paul denied coverage, Ms. Wilson sued St. Paul for contractual damages and for failure to act in good faith and with fair dealing. St. Paul settled the contract claim early in the litigation for $17,921 and later settled the bad faith claim for $216,000. Including attorn ey fees and costs associated with the defense of the bad faith claim, St. Paul e xpended approximately $305,406 on the Wilson matter. St. Paul then brought this action against Mr. Marti n and Club Services alleging that their combined negligence caused the loss to St. Paul. In its1 In the district court, St. Paul refused to allocate the attorney fees arising

from the Wilson litigation between the contract cla im and the bad faith claim, thus forcing the district court to restrict the jury’s consideration to that of the dollar amount of the contract claim only. -3- instructions to the jury, the court, relying on Okl ahoma law regarding bad faith insurance claims, imposed a ceiling on the verdict of $17,921, the amount St. Paul paid to settle the contract claim, 1 and instructed the jury to ignore the other evidence it had heard about St. Paul’s damages. Th e jury apportioned negligence at sixty-five percent to Mr. Martin and Club Servic es and thirty-five percent to St. Paul. St. Paul was awarded damages of $11,648. 65 plus prejudgment and post-judgment interest. On appeal, St. Paul argues that the district court incorrectly applied Oklahoma law when it limited St. Paul's damages to those attributable solely to the contract claim and that this court should reman d for a new trial on damages only. We agree that damages, if any, arising from Ms. Wilson's bad faith claim should have been considered by the jury as a part o f damages incurred by St. Paul as a result of Mr. Martin's and Club Services' negl igence. The district court relied primarily on two cases es tablishing that, in Oklahoma, agents like Mr. Martin and Club Services cannot be liable for breach of the covenant of fair dealing. See Hays v. Jackson Nat’l Life Ins. Co. , 105 F.3d 583, 590 (10th Cir. 1997) (“Under Oklahoma law, the alleged knowledge and acts-4-

of the agent at the time of the application [are] n ot imputed to the principal for purposes of determining whether the principal acted in bad faith.”); Timmons v. Royal Globe Ins. Co. , 653 P.2d 907, 912 (Okla. 1982) (holding that an a gent, as a stranger to an insurance contract, cannot be heldto breach an implied covenant of fair dealing). We agree with the district courtthat Mr. Martin and Club Services cannot be held liable for any bad faith attributable to St. Paul in its dealings with Ms. Wilson. That, however, is not th e theory upon which this case was brought. St. Paul’s complaint states that “St. Paul Reinsurance Company, Ltd. would not have incurred attorney fees, costs, expenses, o r ultimately have paid any money as a result of the insurance claim submitted by Ethel Wilson, but for the neglect, negligence, breach of duty, and wrongful a ctions of Defendants, Club Services Corporation and Charles Martin.” Appellant’s App., Vol. I at 12. This case is a simple tort action between a principal, S t. Paul, and its agents, Mr. Martin and Club Services. As such, the law reg arding bad faith suits between insureds and insurers is inapposite, and, instead, the long-established principles of agency law apply. “An agent in the discharge of hi s duties as such must exercise ordinary care, and for negligence in failing to do so he will be liable to his principal.” Washington v. Mechanics & Traders Ins. Co. , 50 P.2d 621, 624 (Okla. 1935) (quotation omitted).-5-

Because this is a tort action between a principal a nd an agent, the traditional tort measure of damages applies. That remedy is an amount “which will compensate for all detriment proximately cause d [from the breach of an obligation not arising from contract], whether it c ould have been anticipated or not.” Okla. Stat. tit. 23, § 61. Should defendant s be found to have been negligent and should that negligence be found to have precipi tated Ms. Wilson’s bad faith claim, St. Paul will be entitled to recover damages from defendants for the injury it suffered as a result of that claim. Finally, St. Paul urges this court to remand for a new trial on the issue of damages only, arguing that the comparative negligen ce percentages already determined by the jury should be left in place and applied to the damages emanating from the bad faith claim. We are unable to agree with this approach. While it is true that the jury found defendants sixty-five percent responsible for the breach of contract damages, the same jury w as specifically prohibited by the trial court from considering evidence about the bad faith claim and its associated damages. We are unable to conclude thatbecause defendants were sixty-five percent responsible for the breach of co ntract damages they were also necessarily sixty-five percent responsible for the bad faith damages. Any new trial of this case will have to examine, among othe r issues, the possible respective negligence of the parties which caused Ms. Wilson t o bring her bad faith claim in2 We note that such damages may include the costs andexpenses along with

reasonable attorney fees incurred in the Wilson lit igation. See Barnes v. Okla. Farm Bureau Mut. Ins. Co., 11 P.3d 162, 181 (Okla. 2000). -6- the first place. Only after that determination is made will an appropriate award of damages be possible. 2
REVERSED and REMANDED for a new trial on both liabi lity and damages.

Entered for the Court

Mary Beck Briscoe Circuit Judge