* This order and judgment is not binding precedent, except under the

doctrines of law of the case, res judicata, and collateral estoppel. The court

generally disfavors the citation of orders and judgments; nevertheless, an order

and judgment may be cited under the terms and conditions 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, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral
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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 Reinsurance 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 liability and damages.

In the present action, St. Paul sued its agent Charles Martin and Martin’s

employer, Club Services Corporation, for damages arising 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 coverage 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 attorney fees and costs associated

with the defense of the bad faith claim, St. Paul expended approximately

$305,406 on the Wilson matter.

St. Paul then brought this action against Mr. Martin and Club Services

alleging that their combined negligence caused the loss to St. Paul. In its
1

In the district court, St. Paul refused to allocate the attorney fees arising

from the Wilson litigation between the contract claim 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.

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instructions to the jury, the court, relying on Oklahoma 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. The jury apportioned negligence

at sixty-five percent to Mr. Martin and Club Services 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 remand 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 of damages incurred by St. Paul

as a result of Mr. Martin's and Club Services' negligence. 

The district court relied primarily on two cases establishing 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
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of the agent at the time of the application [are] not 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 agent, as

a stranger to an insurance contract, cannot be held to breach an implied covenant

of fair dealing). We agree with the district court that 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 the 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, or 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 actions 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, St. Paul, and its agents,

Mr. Martin and Club Services. As such, the law regarding 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 his 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).
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Because this is a tort action between a principal and an agent, the

traditional tort measure of damages applies. That remedy is an amount “which

will compensate for all detriment proximately caused [from the breach of an

obligation not arising from contract], whether it could have been anticipated or

not.” Okla. Stat. tit. 23, § 61. Should defendants be found to have been negligent

and should that negligence be found to have precipitated 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 negligence 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 was specifically prohibited by

the trial court from considering evidence about the bad faith claim and its

associated damages. We are unable to conclude that because defendants were

sixty-five percent responsible for the breach of contract 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 other issues, the possible respective

negligence of the parties which caused Ms. Wilson to bring her bad faith claim in
2 We note that such damages may include the costs and expenses along with

reasonable attorney fees incurred in the Wilson litigation. See Barnes v. Okla.

Farm Bureau Mut. Ins. Co., 11 P.3d 162, 181 (Okla. 2000).

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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 liability and

damages.

Entered for the Court

Mary Beck Briscoe 

Circuit Judge