* This order and judgment is not binding precedent, e xcept under the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

### OCT 14 1999 

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

BARBARA WARDRIP,

Plaintiff-Appellant,

v. DILLIS L. HART, M.D.,

Defendant.

CONTINENTAL INSURANCE COMPANY, Garnishee-Appellee. No. 98-3333 (D.C. No. 94-CV-1058-JTM)

(D. Kan.)

ORDER AND JUDGMENT *

Before BRORBY , EBEL , and HENRY , Circuit Judges.

After examining the briefs and appellate record, th is panel has determined unanimously that oral argument would not materiallyassist the determination-2-

of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). T he case is therefore ordered submitted without oral argument. Barbara Wardrip appeals from the district court’s d ismissal under Fed. R. Civ. P. 12(b)(6) of her garnishment action against Continental Insurance Company. See Wardrip v. Hart , 28 F. Supp. 2d 1213 (D. Kan. 1998). Wardrip contends that the district court erred in allowing Continental to file a late answer, and correspondingly, not granting her a default jud gment, and by holding that Continental was not liable to her for punitive dama ges awarded in her underlying action against Continental’s insured, Dr. Dillis Hart. Finding no error in the district court’s decisions, we affirm. Wardrip’s garnishment action arose from her medical malpractice lawsuit filed in the district court against Hart. In that case, a jury awarded her $900,000 in compensatory damages, reduced by the district co urt to $850,000, and $200,000 in punitive damages. The court also awarded her $2 ,000 as a sanction against Hart for failure to comply with a discovery order. As Hart’s insurer, Continental paid the $850,000 in compensatory damages. Wardrip then filed this garnishment action against Continental by serving an order of g arnishment on the Kansas Commissioner of Insurance, as provided by Kan. Stat . Ann. § 40-218. As allowed by the statute, Continental was ordered to file an answer within forty days. After the forty days had passed without an answer, Wardri p moved for a default-3-

judgment. The district court denied Wardrip’s moti on and granted Continental’s motion to file an answer out-of-time. Following Wa rdrip’s reply and traverse to its answer, Continental moved to dismiss the garnis hment action under Rule 12(b)(6) on the basis that Kansas law prohibited in surance coverage for both the punitive damages and the discovery sanction. The d istrict court agreed and granted Continental’s motion. On appeal, Wardrip first argues that the district c ourt should have granted her motion for default judgment. The district court found that Continental’s failure to timely answer was due to excusable neglect, see Fed. R. Civ. P. 6(b), because the responsible official at Continental did not have actual notice of the order of garnishment until after Wardrip filed her default motion (apparently due to Continental’s moving its offices and merging with another insurer), it timely thereafter moved to file an answer out-of-time, the re was no evidence of bad faith by Continental, and Wardrip had not shown she was p rejudiced by Continental’s delayed answer. We review the district court’s dec ision granting Continental’s motion to file its answer out-of-time because of ex cusable neglect for an abuse of discretion. See Panis v. Mission Hills Bank, N.A. , 60 F.3d 1486, 1494 (10th Cir. 1995); City of Chanute v. Williams Natural Gas Co., 31 F.3d 1041, 1045 (10th Cir. 1994).-4-

In determining whether neglect was excusable, court s consider four factors: “‘the danger of prejudice to [the nonmoving party], the length of the delay and its potential impact on judicial proceedings, the reaso n for the delay, including whether it was within the reasonable control of the movant, and whether the movant acted in good faith.’” Id. at 1046 (quoting Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. Partnership , 507 U.S. 380, 395 (1993)). Wardrip argues only that the reason for the delay--Continental’s n egligence--should not be excused. She does not demonstrate that she was pre judiced by the delay, that the delay caused any negative impact on the case, or th at Continental acted in bad faith. We see no abuse of discretion in the court’ s allowing Continental to file its answer out-of-time and denying her motion for d efault judgment. Wardrip’s other argument on appeal is that the dist rict court erred in concluding that Kansas law prohibited her from reco vering punitive damages from Continental. Hart assigned his rights againstContinental to Wardrip. Although Wardrip asserted her claim against Contine ntal in a garnishment action, she does not contend that the policy it issued to H art directly covered the punitive damages she seeks to recover, nor does she challeng e the district court’s conclusion that Kansas law generally prohibits insu rance coverage for punitive damages, see Hartford Accident & Indem. Co. v. American Red Ball Transit Co. , 938 P.2d 1281, 1292-93 (Kan. 1997). Instead, she c ontends that Continental1 Assertion of bad faith claims in garnishment action s is apparently

permissible under Kansas procedure. See Gilley v. Farmer , 485 P.2d 1284, 1290 (Kan. 1971); Bergeson v. Dilworth , 749 F. Supp. 1555, 1558 (D. Kan. 1990). -5- acted negligently and in bad faith in defending Hart, and that as a result, it can be liable for the punitive damages assessed against Hart. 1 Wardrip bases her argument on Magnum Foods, Inc. v. Continental Casualty Co. , 36 F.3d 1491, 1504-06 (10th Cir. 1994).
In Magnum , where we interpreted Oklahoma law, we held that “ where both compensatory and uninsurable punitive damages are s ought, and [the insurer has] assumed the defense of the entire suit under the ob ligations of the policies, the presence of the punitive claim did not absolve [the insurer] from its obligation of good faith in handling the entire case.” Id. at 1506 (footnote omitted). Magnum thus recognizes that an insurer’s duty of good faith covers situations in which punitive damages are sought from the insured. Howe ver, it further holds that recoverable damages cannot include the punitive damages awarded against the insured: [I]n our view there was error in the compensatory d amages award ($750,000) on the bad faith claim because it was based, inter alia , on consideration of the $600,000 amount that Magnum [t he insured] paid to settle the punitive damage award entered ag ainst it in the state court suit. This in effect shifted Magnum’s punitive liability to the insurer which, in the circumstances of this cas e, violated Oklahoma public policy. Accordingly, we reverse an d remand for a new trial on the bad faith claim at which Magnum may seek compensatory damages based on injury other than the $600,0002 In her complaint, Wardrip also requested interest o n the punitive damages

and costs and attorney fees related to the garnishm ent action. Although the district court addressed the $2,000 in sanctions aw arded against Hart, Wardrip did not mention them in her request for damages. -6- payment. This may compensate for alleged harm to M agnum’s business and reputation proximately caused by [the insurer’s] alleged breach of its duty of good faith in its handling of the defense of the entire case and in its conduct in the settlement ne gotiations. 36 F.3d at 1507 (citations omitted); see also id. at 1506 (“[T]he jury should be instructed at the new trial . . . that the jury sho uld not consider Magnum’s payment of $600,000 to settle the state punitive da mage judgment in determining any compensatory award on the bad faith claim, and the jury should be told that Oklahoma law prohibits shifting such a punitive liability to an insurance company.”). In this case, the only damages Wardrip is claiming is the amount of punitive damages assessed against Hart, plus some related items. 2 See Wardrip’s Reply and Traverse to Continental’s Answer, Appellant’s App. at 134 (requesting “remaining amount owed to the plaintiff”); Response to Continental’s Motion To Dismiss, Appellant’s App. at 18 (“This is a garnish ment action against an insurance company to collect the remaining unpaid judgment due the plaintiff.”) (emphasis added). Wardrip is not claiming that anybad faith on Continental’s part caused injury other than Hart’s incurrence of punitive damages. Thus, even if we concluded that Kansas law were similar to the Oklahoma law interpreted in-7-

Magnum , because the only damages Wardrip seeks are unreco verable, she has not stated a valid bad faith claim, and the district co urt correctly dismissed it. The judgment of the district court is AFFIRMED.

Entered for the Court

Robert H. Henry Circuit Judge