## F I LED United States C ourt of Appeals Tenth Circuit 

### A p ril10,2007 Elisab eth A. Shumaker C l erk of C ourt PU BL I SH UNI TED S TATES CO URT O F AP PEALS

T E N T H C IR C U IT
J E RR Y L . WADE , I I a n d NI NH NGUYE N, P l ai nti ffs - A pp el l ants , v. N os . 05- 3044 and 05- 3054 EM CAS CO I NSURANCE CO M P ANY, D efe ndant- A ppel l ee. AP P EA L F ROM THE UNI TE D S TA TE S DI S TR I CT COURT

F OR THE DI S TR I CT OF KANS AS ( D . C . N O . 0 3 - C V - 1 2 7 6 - J T M) P a trick B . H u g h e s o f

A d a m s & Jo n e s, C h a rte re d , W ich ita, K a n sa s (N . R u ss e ll H azl ew ood of G r aybi l l & H azl ew ood L . L . C . , W i chi t a, K ans as w i th hi m on the br i efs ) forPl ai nt i ff- A ppel l antN i nh N guy en. W i l l i am J. G r aybi l l of G r aybi l l , W i t cher& A m br os i er , E l khart , K ans as for P lai n ti ff-A p p ell an t JerryL . W ad e, II . St ephen E. R obi s on ( L yndon W . V i x w i th hi m on the br i ef) of Fl ees on, G ooi ng, Co u l s o n & K i t c h , L. L. C. , W i c h i t a , Ka n s a s fo rDe fe n d a n t - Ap p e l l e e EM CAS CO I n s u r a n c e C o m p a n y. B efo re M UR P HY , EBEL , and M c CO NNELL , C i rcui tJudg es. M c CO NNELL , C i r cui tJ udge.-2-

I ti s w el l s et t l ed i n K ans as thatan i ns ur ance companyow es t o i t s i ns ur ed a d u tyto a c t in g o o d fa ith a n d w ith o u t n e g lig e n c e in th e se ttl e m e n t o f th ird -p a rty cl ai m s . W hen an i ns ur ernegl i gent l yori n bad fa i th decl i nes a s et t l ementoffe r w i t hin the p oli cyl i m i t s, t akes t he case to tri al , and a verdi cti s r end ered against t he i ns ur ed i n exce s s of pol i cyl i m i t s , the i ns ur eri s l i abl e t o the i ns ur ed forthe e x c e s s ju d g m e n t. See B oll i ng er v. Nuss , 4 4 9 P .2 d 5 0 2 , 5 0 8 (K a n . 1 9 6 9 ). T h is cas e i nvol ves t he appl i cat i on of thi s pr i nci pl e t o an i ns ur er ’ s del ayi n acc ept ance of a s et t l ementoffe r , and ar i s es underw hatw e trus ti s an unus ual s etof u n d i s p u t e d fa c t s : t h e p l a i n t i ff i n a t o r ts u i ta g a i n s tth e i n s u r e d d e m a n d e d a p o l i c yl i m i t s s et t l ements hor t l yaft eran aut om obi l e ac ci dentw her e l i abi l i tyand caus at i on w er e vi gor ous l ydi s put ed, offe r ed butdi d notpr ovi de r el evantm edi cal r ecor ds , w i t hdr ew t he s et t l ementoffe rbefor e gi vi ng the i ns ur ance companythe m edi cal r ecor ds orpr ovi di ng m edi cal r el eas es , and then r ej ect ed the i ns ur ance company ’ s pol i cy - l i m i t s s et t l ementoffe r— t ender ed the dayaft erthe i ns ur ance c o m p a n yre c e iv e d th e m e d ica l re c o rd s— so lelyb e c a u se th e p lain tiff h o p e d to rec o v er a m u ch large r aw ard o n a b ad -fa ith claim . W e h o ld tha t th e d istri ct co u rt wa s c o r r e c tt o g r a n ts u mma r yj u d g me n ti n fa v o ro f th e i n s u r e ro n s u c h a c l a i m, b o th a s to th e in su re d a n d a s to th e to rt p lain tiff, to w h o m th e in su re d a ss ig n e d h is ri g h ts a g a in s t th e in s u re r.-3- I . Backg r ound B eca us e thi s cas e ar i s es on s um m aryj udgm ent , w e mustr es ol ve al l fac tual d is p u te s a n d d ra w a ll r e a s o n a b le in fe re n c e s in fa v o r o f th e n o n m o v in g p a rt y . R ober ts v. P r i nt up , 4 2 2 F . 3 d 1 2 1 1 , 1 2 1 4 (10 th C ir . 2 0 0 5 ). T h e fo ll o w ing fa cts are undi s put ed. T hi s cas e ar os e fr om a tr agi c aut om obi l e ac ci denti n w hi ch a ve hi cl e dr i ven byJ err yL . W ade, I I , col l i ded w i th a mi ni van dr i ven byL oan V u, i n w hi ch her hus band, N i nh N guy en, w as a pas s enger . T he ac ci dentoccurr ed on February23, 2001, ata four - l ane i nt er s ect i on contr ol l ed bya tr aff i c s i gnal . M s . V u w as pr ocee di ng nor t hbound t hr ough the i nt er s ect i on and M r . W ade w as headi ng eas tbound. O ne dr i verm us thave fai l ed t o s t op ata r ed l i ght . M s . V u m ai nt ai ned th a t sh e d id n o t sto p a t th e in ter se c tio n b e c a u se sh e h a d a g re e n lig h t. S h e c o u ld nots ay , how ever , w hethert her e w as t r aff i c comi ng i n the oppos i t e di r ect i on beca us e s he does “notpayat t ent i on t o the otherdi r ect i on of the s tr eet . ” V u D ep. 64–65, A pp. 607. M r . W ade c l ai m ed thathe w as s t opped ata r ed l i ghtand p ro c e e d e d th ro u g h th e in ter se c tio n o n lya f ter th e lig h t tu rn e d g re e n . W itn e ss e s to t he ac ci dental s o di s agr eed a s t o w ho had the gr een l i ght . Susa n Schr ag r epor t ed t hatM r . W ade e nt er ed the i nt er s ect i on agai ns ta r ed l i ght , butShel don ( Seth) T u rne r, a f

ri en d an d co -w o rke r of M r. W ad e w h o h ap p en ed to b e in a n ea rbyca r, cl ai m ed thatM r . W ade e nt er ed the i nt er s ect i on on a gr een l i ght . B eca us e the c a u s e o f th e a c c id e n t w a s c o n te s te d , n e ith e r p a rt yre c e iv e d a c ita tio n .T he di s t r i ctcour ts t at ed thatM r . N guy en w as r ender ed t etr apl egi c; at 1 v a r i o u s p o i n t s i n th e r e c o r d h e i s d e s c r i b e d a s q u a d r i p l e g i c o rp a r a p l e g i c . We w ill u se w h ich e v e r te rm is u se d in th e re c o rd a t th e re lev a n t p o in t. N o th in g in th is c a s e tu rn s o n th e p re c is e n a tu re o f M r. N g u y e n ’s c o n d itio n . -4- A f ter th e a c c id e n t, M r. W a d e , M s. V u , an d M r. N g u y e n w e re tak e n to W es l eyM edi cal C ent er . M s . V u and M r . W ade w er e tr eat ed forr el at i vel ym i nor inju rie s. M r. N g u y e n w a s h o sp italiz e d fo r tw o w e e k s b e fo re b e in g tra n sfe rre d to W esleyR eh ab il it ati o n H o sp it al, w h ere h e re m aine d an ad d it ion al five w ee k s. M r. N guy en s uffe r ed a s pi nal cor d i nj uryr ender i ng hi m t etr apl egi c orquadr i pl egi c. 1 S h o r t l ya f

t e rt h e a c c i d e n t , M r . W a d e fi l e d a c l a i m u n d e rh i s EM CAS CO i ns ur ance pol i cyform edi cal t r eatm entand damage t o hi s car . H i s pol i cy pr ovi ded a t ot al of $100, 000 cover age foral l cl ai m ant s i n an ac ci dent . M r . W ade w as pl ace d i n cont actw i t h R us s Shr eves , an EM C A SC O adj us t er . H e compl et ed a cl ai m form i n w hi ch he s t at ed thathe had a gr een l i ghtand the mi ni van r an the re d lig h t. L es s t han a w eek a ft ert he ac ci dent , w hi l e M r . N guy en w as s t i l l i n W es l ey H os pi t al , M s . V u r et ai ned G aryPat t er s on t o r epr es entM r . N guy en. O n M ar ch 13, 2001, M r . Pat t er s on s entM r . Shr eves a l et t eri n w hi ch he a dvi s ed M r . Shr eves that h e re p rese n ted M r. N g u y en an d that M r. N g u y en h ad su ffere d a sp inal co rd inju rya n d m a yb e p e rm a n e n tlyinju re d , o p in e d th a t M r. N g u y e n ’s d a m a g e s w o u ld exce ed one mi l l i on dol l ar s , and i nqui r ed as t o the l i m i t s of M r . W ade’ s i ns ur ance-5-

p o lic y . M r. P a tte rs o n fo llo w e d u p h is le tte r w ith a p h o n e c a ll to M r. S h re v e s . M r. S h re v e s a s s ig n e d th e in v e s tig a tio n to a n o u ts id e a dju s te r, K y le B u c k . A s p a rt o f

h is in v e stig a tio n , M r. B u c k w a s in stru c ted to g a th e r sta tem e n ts f ro m th e in s u re d a n d w itn e s s e s . H e in te rv ie w e d M r. W a d e a n d M r. T u rn e r. D ur i ng hi s i nt ervi ew , M r . W ade e xpl ai ned thatw hi l e he w as atthe hos pi t al , he as ked a hos pi t al chapl ai n aboutt he condi t i on of the mi ni van’ s occupa nt s and that t he cha pl ai n i nform ed hi m t hatt heyw er e okayand w oul d be r el eas ed. T hi s gave rise to su sp icio n th a t M r. N g u y e n ’s q u a d rip leg ic c o n d iti o n w a s n o t attrib u tab le to t he ac ci dent . M r . B uck al s o at t empt ed, uns ucce s s ful l y , t o obt ai n a s t at ementfr om M s . Schr ag. H e ca l l ed M s . Schr ag el even t i m es betw een A pr i l 4, 2001, and J une 2 9 , 2 0 0 1 , an d lef

t se v e n m e ss a g e s fo r h e r. A lth o u g h sh e re tu rn e d o n e o f h is p h o n e c a lls w h e n h e w a s o u t o f th e o ffic e , th e tw o d id n o t c o n n e c t. M eanw hi l e, M r . Pat t er s on obt ai ned an a uthor i zat i on forr el eas e of medi cal info rm ati o n fro m M r. N g u y en o n M arc h 2 9 , 2 0 0 1 . O n A p ri l 6, 20 0 1 , M r. P att erso n req u ested fro m W esleyM ed ical C en ter a co m p let e it em izati o n o f M r. N g u y en ’s m ed ical ex p en ses. B yM ay1 , 2 0 0 1 , M r. P att erso n h ad fo rw ard ed M r. N guy en’ s m edi cal bi l l s t o M r . Shr eves . I n a l et t ert o M r . Shr eves dat ed M ay1, 2001, M r . Pat t er s on al s o offe r ed t o “s et t l e al l cl ai m s agai ns t[the] i ns ur ed for pr om ptpaym entof [the] i ns ur ed’ s pol i cyl i m i t s ” and e xpl ai ned thathe had “or der ed the medi cal r ecor ds fr om W es l eyH os pi t al and W es l eyR ehabi l i t at i on H os pi t al and [w oul d] forw ar d s ame t o [M r . Shr eves ] upon r ece i pt . ” Id. a t 7 9 3 .-6-

B a se d o n M r. P a tters o n ’s p ro m ise to se n d th e m e d ica l re c o rd s, M r. S h re v e s d id notat t empt t o obt ai n M r . N guy en’ s r ecor ds hi m s el f. M r . Pat t er s on r ece i ved M r . N guy en’ s m edi cal r ecor ds fr om W es l ey R ehabi l i t at i on H os pi t al , r evi ew ed them, and forw ar ded them t o M r . Shr eves on M ay21, 2001. I n a l et t ers enton M ay21, 2001, M r . Pat t er s on s ai d, w i thout q u a lific a tio n , “I a m a lso e n c lo sin g th e m e d ica l re c o rd s fo r N in h N g u y e n w ith th is l et t er , ” and a dvi s ed M r . Shr eves “thatthe pol i cyl i m i t s s et t l ementoffe rw i l l be w i t hdr aw n on J une 15, 2001. ” Id. a t 7 9 4 . A lth o u g h th is le tter p u rp o rte d to i ncl ude al l of M r . N guy en’ s m edi cal r ecor ds , none of M r . N guy en’ s r ecor ds fr om h is tw o -w ee k stayat th e W esleyM ed ical C en ter w ere inclu d ed . In fac t, M r. Pat t er s on di d notr ece i ve M r . N guy en’ s m edi cal r ecor ds fr om W es l eyM edi cal C ent erunt i l J une 28, 2001, near l ytw o w eeks aft erthe s et t l ementoffe rexpi r ed. A nd M r . Pat t er s on di d notforw ar d thos e r ecor ds t o M r . Shr eves aft erhe r ece i ved t hem on June 28. I ns t ead, M r . Pat t er s on w ai t ed fourm onths , unt i l al l s et t l ement offers had exp i red, befo re s end i ng the W esl eyM edical C enterrecor ds. M r. P att erso n ’s M ay2 1 , 2 0 0 1 , let ter also info rm ed M r. S h rev es th at M r. Pat t er s on had s ucce s s ful l ycont act ed M s . Schr ag, w ho m ai nt ai ned thatM r . W ade had ent er ed the i nt er s ect i on agai ns ta r ed l i ght . A l though M r . Pat t er s on v o l u n t e e r e d t o s e tu p a me e t i n g wi th M s . S c h r a g a n d a n EM CAS CO rep rese n tat ive, M r. S h rev es d ec li n ed M r. P att erso n ’s offe r, p referring that M r. B u ck m ak e ind ep en d en t arrang em en ts t o interview M s. S ch rag . A lth o u g h M r.-7-

B uck cont i nued hi s at t empt s t o cont actM s . Schr ag, al l att empt s t o cont acther b e fo r e t h e J u n e 1 5 , 2 0 0 1 , s e t t l e me n td e ma n d d e a d l i n e we r e u n s u c c e s s f u l . On ei t herJ une 5 orJ ul y5, 2001, M r . Shr eves s enta l et t ert o M r . W ade i nform i ng hi m t hatM r . N guy en had f i l ed a c l ai m i n exce s s of the pol i cyl i m i t s . M r . Shr eves expl ai ned that“[t ] he ac ci denti s s t i l l underact i ve i nves t i gat i on” and that E M C A SC O had thus farbeen una bl e t o obt ai n a s t at ementfr om one of the w itn e s s e s . Id
. at757. O n A ug ust2, 20 01 , M r. P at t ers on sentM r. S hreves a cop yof a w i tness s t at ementobt ai ned fr om M s . Schr ag on J une 25, 2001. A tthatt i m e, M r . Shr eves t ol d M r . B uck t o s t op at t empt i ng t o cont actM s . Schr ag, as he had a l r eady r ece i ved a s t at ement . M r . Pat t er s on di d notexpl ai n w hyhe w ai t ed fi ve w eeks b efo re fo rw ard ing the s tat em en t t o E M C A S C O . In th e A u g u st 2 lett er, M r. P a tte rs o n a g a in o ffe re d to s e ttle M r. N g u y e n ’s c la im fo r t h e p o lic ylim its . O n A ugus t7, 2001, M r . Shr eves cal l ed att orneyD avi d C ooper , w ho had been hi r ed t o defe nd M r . W ade a tE M C A SC O ’ s expens e. O n A ugus t20, 2 0 0 1

— less than three w ee k s af ter th e se co n d sett lem en t offe r an d b efo re M r. C o o p er h ad an o p p o rtu n ityto rev iew M r. N g u y en ’s m ed ical reco rds— M r. P a tters o n se n t M r. S h re v e s a lette r w ith d ra w in g h is s e c o n d p o licylim its s et t l ementdemand. M r . Pat t er s on al s o encl os ed a c opyof the Pet i t i on fi l ed a g a in st M r. W a d e a n d “ a g re e [ d ] to d e lay se rv in g th [ e ] P e tit io n o n [ M r. W a d e ] to g iv e [ E M C A S C O ] tim e to m a k e a se ttl e m e n t o ffe r o n th is c a se sh o u ld-8-

[EM C A SC O ] deci de t o do s o. ” Id. at765. M r . Shr eves pr om pt l yforw ar ded that l et t ert o M r . C ooperw i t h a not e expl ai ni ng that“[t ] hi s i s one of thos e s i tuat i ons t hat m ayno tal l ow us t o w ai tfor al l of the fact s [becau se] t he thr eatof ex cess ju d g m e n t an d ‘b a d fa ith ’ m a yfo rc e u s to p ro c e e d m o re h a stilyth a n w e w o u ld pr efe r . ” Id
. a t 7 6 7 . A lth o u g h b yA u g u st 20 0 1 ith ad b ec o m e re lat ivelyclea r, d esp it e M r. W ade’ s di s cl ai m erof l i abi l i t y , t hatt her e w as a 50- 50 chanc e thatM r . W ade r an th e re d lig h t, as q u e stio n s a b o u t th e c a u se o f M r. N g u y e n ’s inju rie s s tar ted to e m e rg e . In p a rticu lar , M r. C o o p e r w a s c o n c e rn e d th a t M r. N g u y e n ’s q u a d rip leg ia w as caus ed bys om ethi ng ot hert han the col l i s i on. M r . C ooperexpl ai ned thathe

“ d id n o t h a v e th e re p o rt o f th e a m b u lan c e se rv ice f ro m th e site o f

th e a c c id e n t to t he hos pi t al , nordi d [he] have a nyof the r ecor ds of the emer gencyr oom tre a tm e n t o r th e im m e d iate sta ya t th e h o sp ital b e fo re [ M r. N g u y e n ’s] tra n sfe r to t he r ehab hos pi t al ” and ther efor e he “ di dn’ tknow w hati nform at i on ther e w as t hat c a u sa llyc o n n e c ted th e a c c id e n t to th e p a ra p leg ia [ a n d ] w h e th e r o r n o t th e re c o u ld h av e b ee n an yclaim fo r ne g li g en ce o r m alpra cti ce b yeith er the em erg en cyca re pr ovi der s , ei t heri n t he ambul ance oratt he hos pi t al ori n the cour s e of the s t ayat t he hos pi t al . ” C ooperD ep. 66–67, A pp. 695. T o cur e thi s l ack of i nform at i on, M r. C o o p e r a sk e d M r. P a tters o n fo r m e d ica l re lea se s s o th a t M r. C o o p e r c o u ld obt ai n t he mi s s i ng m edi cal r ecor ds . M r . C oopers entM r . Pat t er s on a l et t eron O c to b e r 2 2 , 2 0 0 1 , ex p lain in g h is u n d e rsta n d in g th a t M r. P a tters o n a g re e d to-9-

“w i t hhol d s ervi ce upon M r . W ade pe ndi ng col l ect i on of m edi cal r ecor ds fr om t he i ni t i al t r eat i ng hos pi t al and emer gencym edi cal s ervi ce” and expl ai ni ng the nece s s i t yof “a s s ur [i ng] t hatM r . N guy [e] n’ s i nj ur i es w er e a r es ul tof the mot or vehi cl e ac ci dentand nott he r es ul tof anym edi cal negl i gence oracc i dent s that m ayhave ha ppened a ft erhe w as tr ans por t ed fr om the s cene of the ac ci dent . ” A p p . 8 1 8 . M r . Pat t er s on s entM r . C oopera medi cal r el eas e, w hi ch M r . C ooper s ubm i t t ed t o W es l eyH os pi t al . B utthe r el eas e w as s i gned byM r . Pat t er s on r ather t han the pat i ent . T he hos pi t al appar ent l yfound the r el eas e i nval i d, and di d not furni s h t he r ecor ds . U nabl e t o obt ai n the medi cal r ecor ds di r ect l yfr om W es l ey H o sp ital, M r. C o o p e r c a lled M r. P a tters o n o n O c to b e r 3 0 , 2 0 0 1 , an d a sk e d h im w hetherhe had the emer gencyt r eatm entr ecor ds . M r . Pat t er s on l ocat ed the emer gencyr ecor ds i n hi s ow n fi l es and agr eed t o s end them t o E M C A SC O . U pon l earni ng t hatM r . Pat t er s on w oul d forw ar d the medi cal r ecor ds , M r . C oopers ent an e- m ai l t o an EM C A SC O s upervi s or , J oel M cFadden, s t at i ng thatM r . Pat t er s on “di d have the ER r ecor ds and w oul d be s endi ng copi es t oday ” and r emar ki ng that “i f [M r . Pat t er s on] had done thi s i n the fi r s tpl ace , thi s fi l e w oul d be cl os ed by now . ” Id. at819. U pon r ece i vi ng the emer gencym edi cal r ecor ds , M r . C ooper s enta s um m aryt o M r . M cFadden, w ho i m m edi at el yauthor i zed a s et t l ementoffe r of the pol i cyl i m i t . M r . W ade, w hi l e mai nt ai ni ng thathe w as notatfaul t , agr eed-10-

t o t he s et t l ement . M r . C ooperconvey ed the s et t l ementoffe rt o M r . Pat t er s on on N o v e m b e r 1 , 2 0 0 1 . B eca us e M r . C ooperi nt erpr et ed M r . Pat t er s on’ s A ugus t20, 2001, l et t eras s ol i ci t i ng a pol i cyl i m i t s offe r , he bel i eved M r . Pat t er s on w oul d acc eptthe pol i cy l i m i t s offe r“as s oon as [EM C A SC O ] had author i zat i on t o ext end the . . . offe r . ” C ooperD ep. 153, A pp. 714. B utbythi s t i m e, M r . N guy en’ s att orneyw as c o n tem p latin g p u rsu in g a b a d fa ith c laim a g a in st E M C A S C O , w h ich c o u ld a m o u n t to m ill io n s, in ste a d o f th e p o licy -lim its o ffe r o f $ 1 0 0 ,0 0 0 . A lth o u g h h is A ugus t20 l et t eri nvi t ed EM C A SC O t o m ake a s et t l ementoffe r , M r . Pat t er s on admi t t ed i n hi s l at erdepos i t i on t hathe w oul d nothave a cce pt ed a s et t l ementfor t he pol i cyl i m i t s on A ugus t20. M r . Pat t er s on expl ai ned thatbyA ugus t20, he

“ w a s fa irlyc e rta in th a t th e yh a d b e e n a c tin g in b a d fa ith ” a n d th a t a “ p o licylim it [s et t l ement ] w oul d nothave done i t , buts om e amountw oul d have s et t l ed i tat [that ] poi nt i n t i m e. ” Pat t er s on D ep. 95, A pp. 741. A ccor di ngl y , w i thout expl i ci t l ydi s cl ai m i ng an i nt ent i on t o s et t l e fort he pol i cyl i m i t s , M r . Pat t er s on n e v e r r e s p o n d e d to E M C A S C O ’s N o v e m b e r 1 , 2 0 0 1 , s e ttle m e n t o ffe r. I ns t ead, M r . Pat t er s on enl i s t ed new co- couns el , J acob G r aybi l l , an att or ney w i t h exper i ence i n bad fa i t h cl ai m s agai ns ti ns ur ance compani es . M r . Pat t er s on admi t t ed i n hi s depos i t i on t hathe di d notr eca l l anyaddi t i onal w or k havi ng been done betw een A ugus tand N ovembert hatuncover ed addi t i onal i nform at i on re lev a n t to M r. N g u y e n ’s c laim a g a in st M r. W a d e . N o n e th e les s, M r. G ra yb ill-11-

r ej ect ed the s et t l ementon behal f of M r . N guy en. T he pl an w as t o r ej ectthe s et t l ementoffe rand negot i at e an e xces s j udgm entdi r ect l yw i th M r . W ade on the under s t andi ng t hatM r . W ade w oul d conveyt o M r . N guy en hi s r i ghtt o pur s ue a bad fa i t h cl ai m agai ns tE M C A SC O , i n excha nge forbei ng hel d harm l es s on the j udgm ent . O n N ovember19, 2001, M r . G r aybi l l s enta l et t ert o M r . C ooper rejecti n g the s ett lem en t offe r: T he l egal t es tforw hetherw e ca n r ecomm end thatM r . N guy en ac cept $100, 000 t o s et t l e M r . W ade’ s l i abi l i tyforhi s i nj ur yi s w hetherfr om t he fa ct s and ci r cumst ance s a p rim a fa c ie cas e emer ges thatE M C , as a r es ul tof negl i gence orl ack of good fai th, fai l ed t o acc eptei therof M r. N gu y en’s offers. W i t h all du e res pect, i tapp ears i n thi s case t hati s exac t l yw hathas occurr ed. . . . [O ] ne mustr ecogni ze the sc e n a rio p re se n ts a p a ttern o f d e lay, w h ich E M C h a s a ttem p ted to obs cur e w i t h t r ans par ent l ydi s i ngenuous excus es . V i ew ed fr om that per s pect i ve, i ti s pos s i bl e, and i n m yopi ni on pr obabl e, a fa ctfi nder w i l l fi nd t hatE M C act ed w i th l i t t l e, i f any , r egar d forthe i nt er es tof M r. W a d e , an d e n g a g e d in a re c k les s, m in d les s, re f u sa l to a p p ly re a so n in its re f

u sa l to tim e lya c c e p t M r. N g u y e n ’s p o licylim it se ttl e m e n t o ffe rs. C o n se q u e n tly , M r. P a tters o n a n d I w o u ld b e g u ilty of m al pr act i ce i f w e w er e t o advi s e M r . N guy en t o acc ept$100, 000 th a t h a s b e e n o ffe re d o n M r. W a d e ’s b e h a lf . . . . A pp. 833. I n t he l et t er , M r . G r aybi l l al s o s ugges t ed thatE M C A SC O , M r . W ade, and M r . N guy en negot i at e a fai rs et t l ement , w i thoutr egar d t o w ho w i l l payi tand i r r es pect i ve of the pol i cyl i m i t s , and al l ow M r . W ade t o confe s s j udgm entand as s i gn hi s contr actual r i ght s t o M r . N guy en. M r . G r aybi l l pr opos ed a s et t l ement in th e a m o u n t o f

$ 3 m illio n . A t th is tim e , M r. W a d e h a d v irtu a llyn o a ss e ts o th e r th a n h is p o ten tial c laim agai ns tt he i ns ur ance company . H e had gone bankruptfi ve y ear s befor e the-12-

acc i dent . Subse quent l y , he pur chas ed a home w i th an appr ai s ed val ue of $ 4 9 ,3 0 0 , o n w h ic h h e h a d a $ 4 5 ,4 0 0 m o rt g a g e . B eca us e M r . C oopercoul d notagr ee t o ent eri nt o negot i at i ons on behal f of E M C A SC O , he bega n t o pr epar e M r . W ade’ s cas e fortr i al . O n J une 20, 2002, on M r . C ooper ’ s advi ce, M r . W ade c onfes s ed j udgm enti n the amountof $3, 150, 000 an d assig n ed h is r igh ts t o M r. N g u y en fo r an yb ad -fa ith claim , in ex ch an g e fo r a covena ntfr om M r . N guy en nott o exec ut e the j udgm ent . Fol l ow i ng entryof the $ 3 , 1 5 0 , 0 0 0 j u d g me n t , EM CAS CO p a i d i t s p o l i c yl i mi to f $ 1 0 0 , 0 0 0 . Of

t h i s s u m, $ 2 5 , 0 0 0 w en t t o M s. V u , the d ri v er o f th e o ther v eh icl e, an d $ 7 5 , 0 0 0 w en t t o M r. N g u y e n . M r. N g u y e n , in h is c a p a c itya s a ss ig n e e o f M r. W a d e ’s c o n tra c tu a l rig h ts a g a in st th e in su ra n c e c o m p a n y , file d a law su it ag a in st E M C A S C O in sta te c o u rt. E M C A SC O pr om pt l yr emoved t he ca s e t o the U ni t ed St at es D i s tr i ctC our tfort he D i s t r i ctof K ans as bas ed on di ver s i tyof ci t i zens hi p. M r . N guy en cl ai m ed that E M C A SC O br eac hed i t s dut yof good fa i th ow ed t o M r . W ade unde rhi s i ns ur ance p o licyb yfa ili n g to u se d u e c a re in in v e stig a tin g a n d se ttl in g M r. N g u y e n ’s c laim a n d fa ilin g to g iv e M r. W a d e ’s in te re s t e q u a l c o n s id e ra tio n to its o w n in te re s t. M r . N guy en cl ai m ed that“[a ] s a for es eea bl e and di r ectcons equenc e of E M C A S C O ’s” b rea ch , a jud g m en t i n ex ce ss o f $ 3 m il li o n w as e n tered ag ains t M r. W a d e . Id. a t 5 3 .-13-

O n t he r ecomm endat i on of M r . Pat t er s on and M r . J acob G r aybi l l , M r . W ade hi r ed M r . W i l l i am G r aybi l l t o r epr es enthi m agai ns tE M C A SC O . M r . W ade f i l ed a mot i on forj oi nderi n M r . N guy en’ s s ui tagai ns tE M C A SC O , w hi ch the di s tr i ct c o u rt g ra n ted . In h is c o m p lain t, M r. W a d e a rg u e d th a t E M C A S C O b re a c h e d its contr actbyfai l i ng t o car eful l yand di l i gent l yi nves t i gat e M r . N guy en’ s cl ai m , by notkeepi ng M r . W ade i nform ed of r el evantfac t s , and bynotpr ovi di ng an adequa t e defens e dur i ng t he pende ncyof M r . N guy en’ s l aw s ui tagai ns tM r . W ade. H e furt hercl ai m ed thatt he s ame conductw as a br eac h of EM C A SC O ’ s dutyof g o o d fa ith a n d fa ir d e a lin g . M r. W a d e a d d e d th a t E M C A S C O w a s n e g lig e n t in fa i l i n g t o a d e q u a t e l yr e s p o n d t o M r . Ng u y e n ’ s s e t t l e me n to ffe r s ; t h a tEM CAS CO comm i t t ed fr aud byi nt ent i onal l yfai l i ng t o di s cl os e thatM r . C ooper , t he l aw y er a ss ig n e d to re p re se n t M r. W a d e , h a d a lo n g sta n d in g e m p lo ym e n t re latio n sh ip w ith E M C A S C O , the re b yc re a tin g a c o n flict o f in ter e st; a n d th a t E M C A S C O to rtio u sly interfe red w ith M r. W ad e’s a tt o rne y -cli en t r elati o n sh ip w ith M r. C o o p er. A l t hough M r . W ade ha d vi r tual l yno as s et s and ther efor e s uffe r ed no di r ect pecuni aryl os s fr om entr yof the exc es s j udgm ent , t he Pl ai nt i ff’ s t heoryof damages w as t hatt he j udgm enti nj ur ed M r . W ade’ s cr edi tand pr event ed hi m fr omA l t hough hi s fi r s tm or t gage w as onl ys l i ght l yundert he appr ai s ed val ue of 2 hi s hom e and he had fi l ed forbankrupt cyfi ve y ear s ear l i er , M r . W ade appl i ed t o a b an k fo r a se co n d m o rt g ag e o f $ 2 5 , 0 0 0 . T h e b an k d en ied th e a p p li ca ti o n fo r a s econd mor t gage be caus e of s om ethi ng on M r . W ade’ s cr edi tr eport . M r . W ade di d noti nqui r e as t o t he r eas on fort he deni al , buts t at ed i n hi s depos i t i on thathe “ a ss u m e d ” th a t th e p ro b lem w a s th e ju d g m e n t ag a in st h im in th e a u to m o b ile a c c id e n t c a s e . W a d e D e p . 1 1 8

– 1 9 , A p p . 6 2 9 . -14- obt ai ni ng a s econd m or t gage on hi s hom e and fr om s el l i ng hi s hom e, and ca us ed 2 h im to e x p e ri e n c e “ fe a r, d re a d , a n x ie ty an d u n e a s in e s s .” E M C A SC O fi l ed a mot i on fors um m aryj udgm enton al l cl ai m s , w hi ch the di s t r i ctcourtgr ant ed. T he di s t r i ctcourtfound that“[t ] he demand fors et t l ement ear l yi n t he di s put e, i t s s hor tdur at i on, the cont empora neous exi s t ence of sig n ifica n t q u e stio n s a s [ to ] liab ili ty , an d th e fa ilu re o f p lain tiff ’s c o u n se l to fol l ow t hr ough on comm i t m ent s t o s uppl ynece s s arym edi cal evi dence s uppor t i ng h is c lien t[ ’]s c laim ” c o m p e lled a fin d in g th a t E M C A S C O d id n o t ac t n e g lig e n tly ori n bad fa i t h i n w ai t i ng t o s et t l e M r . N guy en’ s cl ai m unt i l i thad obt ai ned al l of the m ed ical i n fo rm ati o n . M em . O p . 1 6 . A s to M r. W ad e’s c lai m s, the c o u rt r ej ect ed al l of the t or tcl ai m s , fi ndi ng thatK ans as l aw does notal l ow t or tact i ons prem i sed on an insur er’ s breach of it s contr actual dut yt o d efen d. T he co urtal so r ej ect ed M r . W ade’ s br eac h of contr actand br eac h of i m pl i ed cove nantof good fai t h cl ai m s beca us e M r . W ade i s nott he r eal partyi n i nt er es t , as he as s i gned t hos e cl ai m s t o M r . N guy en. B oth M r . N guy en and M r . W ade appeal fr om t he d is tr ic t c o u rt ’s o rd e r.-15-

I I . T he B ad F ai t h C l ai m A gai nst E M C A SC O B rought B y A s s i gnee N guy en A . I nsurance B ad F ai t h C l ai m s U nder K ansas L aw I n cas es ar i s i ng underdi ver s i tyj ur i s di ct i on, t he fe der al court ’ s t as k i s not to re a c h its o w n ju d g m e n t re g a rd in g th e su b sta n c e o f th e c o m m o n law , b u t sim p ly t o “‘ as cert ai n and appl yt he s t at e l aw . ’ ” Wanki erv. C r ow n E qui p. C or p. , 353 F. 3d 8 6 2 , 8 6 6 (1 0 th C ir. 2 0 0 3 ) (q u o ting Huddl es t on v. D wyer , 322 U . S. 232, 236 (1 9 4 4 )); s ee als o E r i e R. R . C o. v. Tompki ns , 304 U . S. 64, 78 ( 1938) . T he fe der al c o u rt m u s t fo llo w th e m o s t r e c e n t d e c is io n s o f th e s ta te ’s h ig h e s t c o u rt . Wanki er , 3 5 3 F . 3 d at 86 6 . “W h ere n o co n tr o ll ing stat e d ec isi o n ex ist s, the fed era l cou rt m us tat t empt t o pr edi ctw hatt he s t at e’ s hi ghes tcourtw oul d do. ” Id. I n doi ng s o, i tm ays eek gui dance fr om deci s i ons r ender ed byl ow ercourt s i n the r el evant s ta te , P r ogr es s i ve Cas. Ins . C o. v. E ngem ann , 2 6 8 F . 3 d 9 8 5 , 9 8 8 (10 th C ir . 2 0 0 1 ), a p p e lla te d e c is io n s in o th e r s ta te s w ith s im ila r l e g a l p ri n c ip le s , Uni t ed Stat es v. D eG asso , 369 F. 3d 1139, 1148 ( 10th C i r . 2004) , di s tr i ctcourtdeci s i ons in te rp re tin g th e la w o f th e s ta te in q u e s tio n , Sapone v. G r and Targhe e, Inc. , 308 F. 3d 1096, 1100, 1104–05 ( 10t h C i r . 2002) , and “the gene r al w ei ghtand tr end of a u th o ri ty” i n th e re le v a n t a re a o f la w , Mi dA m er i ca C ons tr . M gm t . , Inc. v. Mas t ec N. A m . , Inc. , 436 F. 3d 1257, 1262 ( 10th C i r . 2006) ( i nt ernal quot at i on m arks o m itt e d ). U lti m a tely , h o w e v e r, th e C o u rt’s ta sk is to p re d ict w h a t th e sta te su p re m e c o u rt w o u ld d o . O u r re v iew o f th e d istric t co u rt’s in terp re tatio n o f sta te l aw i s de novo . R ober ts v. P r i nt up , 4 2 2 F . 3 d 1 2 1 1 , 1 2 1 5 ( 1 0 th Ci r . 2 0 0 5 ) . No-16-

par t yt o t hi s cas e has as ked us t o cert i fyanyques t i on of l aw t o the K ans as S u p re m e C o u rt. T he l eadi ng cas e i n K ans as defi ni ng bad fa i th cl ai m s i n the cont extof an i nsurer ’s fai l ure t o set t l e a t hir d-partycl ai m againstthe insur ed is B ol l i ngerv. Nuss , 449 P. 2d 502 ( K an. 1969) . T he K ans as Supr eme C our texpl ai ned the rat i on al e for t he d octr i ne as fo l l ow s: W hen a c l ai m i s m ade a gai ns tthe i ns ur ed foran amounti n exce s s of t he p oli cycov erage, t he insur er’ s obli gati on t o d efen d creat es a c o n flict o f

in ter e st o n its p a rt. O n th e o n e h a n d , it s in ter e sts lie in m inim izi n g the a m o u n t t o b e p aid; o n the o ther, th e ins u red ’s i nt er es t s , w hi ch the i ns ur eri s s uppos edl ydefe ndi ng, l i e i n keepi ng r ecove r yw i t hi n pol i cyl i m i t s , s o thathe w i l l s uffe rno per s onal fin a n c ial lo ss . T h e c o n flict b e c o m e s p a rticu lar lya c u te w h e re th e re is an o ffer o f se tt lem en t app rox im ati n g p o li cyli m it s. T h e ins u red ’s des i r e t o avoi d t he r i s k of a l ar ge j udgm entbys et t l i ng w i thi n the lim its o f th e p o licy , reg a rd les s o f th e m e rits o f

th e c laim , w o u ld compel hi m , w er e he i n char ge of s et t l ementnegot i at i ons , t o acc ept t he offer . T he i ns ur er ’ s i nt er es t s , on the otherhand, ar e pr om pt ed by i t s ow n eval uat i on of the l i abi l i tyas pect s of the l i t i gat i on and a d e sire n o t to e x p o se itse lf to p a ym e n ts w h ich d o n o t ad e q u a tely re flec t th e d a n g e rs th a t m ig h t b e in v o lv e d in p u rsu in g th e c a se to t r i al . W hen the s et t l ementoffe rappr oache s pol i cyl i m i t s , the i ns ur er has a gr eatdeal l es s t o r i s k fr om goi ng t o tr i al than does the i ns ur ed, beca us e the ext entof i t s pot ent i al l i abi l i tyi s fi xed. Id. at510. T he “r eal ques t i on, ” ac cor di ng t o the court , i s “the degr ee of cons i der at i on w hi ch an i ns ur erm us tgi ve t o thos e i nt er es t s of the i ns ur ed w hi ch confl i ctw i t h i t s ow n. ” Id. A ft ercanva s s i ng the al t ernat i ves , the B ol l i ngerco u rt determ i ned t hat “the insur er m ayproperl ygive con si derat i on t o it s ow n int eres t s, buti tm us tal s o gi ve atl eas tequal cons i der at i on t o the i nt er es t s of the i ns ur ed. ”-17-

Id. “ T h e re su lt, ” th e c o u rt e x p lain e d , is th a t “th e in su re r m u st c o n d u c t it se lf w ith t hatdegr ee of

car e w hi ch w oul d be us ed byan or di nar i l yprudentper s on i n the m anage m entof hi s ow n bus i nes s , w i th no pol i cyl i m i t s appl i cabl e t o the cl ai m . ” Id. a t 5 1 1 . “S o m e th in g m o re th a n m e re e rro r o f ju d g m e n t is n e c e ss a ryto cons t i tut e bad fai t h. ” Id. at514. A l though the courthel d thatan i ns ur eri s bound t o conducti t s el f both i n good fai th and w i thoutnegl i gence , i tcons i der ed the di ffe r ence i n t hes e tw o form ul at i ons “more a di ffe r ence i n verbi age than r es ul t s . ” Id. at50 9. T hu s, m anyof “the sam e factor s ar e gen eral l yrel i ed u po n in tho se cas es fi ndi ng a br eac h of good fa i th as i n thos e fi ndi ng negl i gence on the partof t he i ns ur er . ” Id. at511. T h e in su re r’s d u tyin th e se c a se s ru n s o n lyto its in su re d ; ith a s n o d u tyto t he thi r d- par t ypl ai nt i ff. T he K ans as Supr eme C our t , how ever , has hel d thatthe in s u re d m a ya s s ig n h is c la im a g a in s t th e in s u ra n c e c o m p a n yto a n o th e r p a rt y . G l enn v. F l em i ng , 7 9 9 P . 2 d 7 9 , 9 0

– 9 1 (K an . 1 9 9 0 ). H ere , the in su red , Jerry W a d e , as sig n e d h is rig h ts to su e th e in su ra n c e c o m p a n yfo r a n yb a d -fa ith c laim to N inh N g u y en , the th ir d -pa rtytortp lai n ti ff, in ex ch an g e fo r a c o v en an t from M r. N g u y en n o t t o ex ec u te th e jud g m en t. T h u s, itis M r. N g u y en — n o t M r. W a d e — w h o is a s s e rt in g M r. W a d e ’s ri g h ts a g a in s t E M C A S C O . T he B ol l i ngercour ts t r es s ed that“the ques t i on of l i abi l i tydepends upon t he c irc u m sta n c e s o f

th e p a rticu lar c a se a n d m u st b e d e ter m in e d b ytak in g in to acc ountt he var i ous fac t or s pr es ent , r atherthan on the bas i s of anygener al-18-

s t at ementordefi ni t i on. ” Id. at512. T he courtthen l i s t ed ce r t ai n fac t or s that sh o u ld b e c o n sid e re d in “ d e c id in g w h e th e r th e in su re r’s re f u sa l to se ttl e cons t i tut ed a br eac h of i t s dut yt o exer ci s e good fa i th, ” i d. : “( 1) t he s t r ength of the i nj ur ed cl ai m ant ’ s cas e on the i s s ues of l i abi l i t yand damages ; ( 2) att empt s bythe i ns ur ert o i nduce the in su re d to c o n trib u te to a se ttl e m e n t; (3 ) fa ilu re o f th e in su re r to pr oper l yi nves t i gat e the ci r cumst ance s s o as t o as cert ai n the evi dence a g a i n s tt h e i n s u r e d ; ( 4 ) t h e i n s u r e r ’ s r ej e c t i o n o f a d v i c e o f

i t s o wn at t or neyoragent ; ( 5) fai l ur e of the i ns ur ert o i nform the i ns ur ed of a compromi s e offer ; ( 6) t he amountof fi nanci al r i s k t o w hi ch ea ch par t yi s expos ed i n t he eve ntof a r efus al t o s et t l e; ( 7) the fa ul tof the i ns ur ed i n i nduci ng t he i ns ur er ’ s r ej ect i on of the compr om i s e offer b ym isle a d in g it as to th e fa c ts; a n d (8 ) a n yo th e r fa c to rs te n d in g to e s ta b lis h o r n e g a te b a d fa ith o n th e p a rt o f th e in s u re r.” Id. ( quot i ng B r ow n v. G uar ant ee Ins . C o. , 319 P. 2d 69, 75 ( C al . D i s t . C t . A pp. 1 9 5 7 )). S ign ifi ca n tl y , the c o u rtn o ted th at “[ s]ev era l” of the list ed fa ctors w ere n o t r e le v a n t to th e c a s e a t h a n d , i d. , and i n l i ghtof the ei ghth, cat ch- al l fac t or ( “anyot herfac t or s t endi ng t o es t abl i s h ornegat e bad fai th on the partof the in su re r” ), itis e v id e n t th a t th e list o f fa c to rs is n e ith e r e x c lu siv e n o r n e c e ss a rily per t i nenti n everycas e. B ol l i ngeri nvol ved an i ns ur ance company ’ s deci s i on t o t ake a cas e t o tr i al ra th e r th a n to a c c e p t a p o licy -lim its se ttl e m e n t o ffe r. T h is c a se , b yc o n tra st, i nvol ves an i ns ur ance company ’ s del ayi n acc ept i ng a pol i cy - l i m i t s s et t l ement offe r . A ppr oxi m at el yt w o m ont hs aft erM r . N guy en’ s l as tcl ears et t l ementoffe r a p p a r e n t l ye x p i r e d , a n d we l l b e fo r e th e c a s e wo u l d h a v e g o n e t o tr i a l , EM CAS CO-19-

offe r ed t o s et t l e fort he pol i cyl i m i t s . M r . N guy en dec l i ned t o acc eptthe offerat t hatt i m e. W hi l e the fi r s ts even B ol l i ngerfac t or s appl yt o cas es i nvol vi ng del ay i n acc ept ance of a s et t l ementoffe ras w el l as cas es i nvol vi ng r efus al t o s et t l e, R o b e rts , 4 2 2 F .3 d a t 1 2 1 9 & n .5 , d e layed a c c e p tan c e c a se s n e c e ss a rilyim p lica te “otherfac t or s t endi ng t o es t abl i s h ornegat e bad fai th on the partof the i ns ur er , ” B ol l i nger , 4 4 9 P .2 d a t 5 1 2 . I n G l enn v. F l em i ng , 7 9 9 P . 2 d 7 9 (K an . 1 9 9 0 ), the K an sas S u p rem e C o u rt appl i ed the B ol l i ngerbad fa i t h doctr i ne t o a del ay ed ac cept ance cas e. T he thi r dpar t ypl ai nt i ff i n thatcas e made a pol i cy - l i m i t s offe rear l yi n the l i t i gat i on p ro c e s s , w h e n d is c o v e ry h a d s c a rc e ly b e g u n . Id. at82. E ar l yi nves t i gat i ve r epor t s s ugges t ed thatt he pl ai nt i ff, r atherthan the i ns ur ed, had ca us ed the a c c id e n t. Id. at81. T he i ns ur ance companyr eques t ed the pl ai nt i ff’ s m edi cal r e c o r d s a n d t h e p l a i n t i ff ’ s a t t o r n e ys a i d th a th e wo u l d s e n d th e m, b u ta tth e t i me o f th e o ffe r h a d n o t d o n e s o . Id. at86. T he i ns ur ance companyr ej ect ed the s e ttle m e n t o ffe r a n d m a d e a m u c h s m a lle r c o u n te r- o ffe r. Id. at82. W hen a d d iti o n a l ev id e n c e late r su rfa c e d , the in su ra n c e c o m p a n ym a d e a p o licy -lim its o ffe r, w h ic h th e p la in tiff re f u s e d . Id. at83. Fol l ow i ng a s ubs t ant i al ver di ctat tr ia l, th e in s u re d a s s ig n e d h is b a d fa ith c la im to th e th ir d -p a rt yp la in tiff. Id. at 8 4 . T h e t r i a l c o u r tg r a n t e d s u m m a ry j u d g m e n ti n fa v o ro f th e i n s u r a n c e c o m p a n y, w h ic h th e K a n s a s S u p re m e C o u rt a ffir m e d . Id. at84, 86. T he tr i al courthel d t hat “t here w as no b ad fa i t h in r efusi ng t o acce pt the [sett l em ent] offer unde r these-20-

ci r cumst ance s . ” Id. a t 8 6 . “T h e o ffe r w a s fo u n d to b e u n re a so n a b le b e c a u se it w as pr ematur e, had condi t i ons at t ache d t o i t , and w as onl yopen fortw o w eeks . ” Id. Si m i l ar l y , i n C ovi l lv. P hi l l i ps , 452 F. Supp. 224 ( D . K an. 1978) , the di s t r i ctcourt , appl y i ng t he B ol l i ngerfac t or s , hel d thatan i ns ur ance companyw as n o t li a b le in a b a d fa ith c laim b a se d u p o n its re f u sa l o f a n e a rlyp o licy -lim its s e ttle m e n t o ffe r. Id. at231–33. I n C o v ill , the liab ili tyo f th e in su re d w a s n o t in doubt , butt he i ns ur ance companyques t i oned the amountof damages s uffe r ed by th e th ir d -p a rt yp la in tiff. Id. at228, 231. A s i n G l enn , the p lai n ti ff ’s l aw y ers p ro m ise d to p ro v id e th e c o m p a n yth e p lain tiff ’s f u ll m e d ica l re c o rd s, b u t fa iled to d o s o . Id. at228, 231–32. T he courtfound that“i tw as notunr eas onabl e for St at e Farm , havi ng voi ced i t s r eas onabl e and s peci fi c r eques t s forthe medi cal i nform at i on i tfel tw as nece s s aryt o ver i fythe cl ai m ant ’ s i nj ur i es , t o r el yupon t he as s ur ance s of the pl ai nt i ff’ s att orney s thats uch i nform at i on w oul d be for t hcomi ng. ” Id. at232. U nderthe ci r cumst ance s , the courthel d thatthe i ns ur er ’ s fai l ur e t o acc eptt he pol i cy - l i m i t s s et t l ementoffe r“ca n i n no w aybe vi ew ed as a br eac h of i t s dut yt o i t s i ns ur ed. ” Id. T he courthel d, how ever , t hatthe company ’ s s ubs equentconductdi d gi ve ri s e to a b a d fa ith c la im . Id. at 23 3

– 4 0 . D u ri n g the m o n ths a fter S tat e F arm ’s i ni t i al r efus al of the offer , t he companybeca m e “i ncr eas i ngl yaw ar e of the se rio u sn e ss o f

[ th e p lain tiff ’s] inju rie s,” b u t itm a d e n o a ttem p ts to in iti a te-21-

s e ttle m e n t. Id. at234. I ndeed, l ong aft erthe companyi t s el f conc l uded thatthe c laim w a s w o rth m o re th a n th e p o licylim it, a n d a f ter th e law y e r it h ire d to r epr es entt he i ns ur ed had r epea t edl ypl eade d w i th the companyt o author i ze a p o lic y -l im its o ffe r, t h e c o m p a n yc o n tin u e d to o ffe r l e s s th a n th e p o lic ylim its . Id. at236. T he courtconcl uded: [ T ]h e re is c o m p e lli n g e v id e n c e th a t b ye a rlyN o v e m b e r, 1 9 7 5 , S tate Far m di d notbel i eve a nd coul d nothave hone s t l ybel i eved thati thad a r eal i s t i c cha nce of

defe at i ng L arryC ovi l l ’ s cl ai m orkeepi ng any pos s i bl e j udgm entw i t hi n the l i m i t s of the pol i cy . Fur therm or e, the e v id e n c e stro n g lysu g g e sts th a t if S tate F a rm h a d m o re a g g re ss iv e ly in v e stig a ted L a rry ’s c laim in ste a d o f re ly in g p a st th e p o in t o f a ll r eas on on [pl ai nt i ff’ s couns el ] t o vol unt ar i l yfurni s h al l of the in fo rm a tio n a lleg e d lyn e c e ss a ryfo r a d e q u a te e v a lu a tio n o f th e c laim i tw ou l d h ave k no w n m uch earl i er than N ov em ber, 19 75 , that the ri sk o f a n e x c e s s ju d g m e n t w a s g re a t. Id. a t 2 3 8 . A nd i n Wi l l i am s v. A m er i can Fam i l y Mut ualIns ur ance Co. , 101 F. Supp. 2d 1 3 3 7 (D . K an . 2 0 0 0 ), the d istri ct co u rt , ap p ly ing K an sas law , g ran ted s u m m ary j udgm enti n favorof the i ns ur ance companyi n a bad fai th cl ai m , des pi t e r efus al of a s et t l ementoffe rand an a t t endantexce s s j udgm ent , w her e the i ns ur erm ade a r eas onabl e r eques tforaddi t i onal document at i on and the pl ai nt i ff’ s att orneyfai l ed to s u p p ly it. Id. a t 1 3 4 2 ; se e a lso Sm ith v . B la c kw e ll , 791 P. 2d 1343, 1347–49 ( K an. C t . A pp. 1990) ( uphol di ng bad fa i th cl ai m w her e pl ai nt i ff’ s couns el “furni s hed al l r eques t ed medi cal r eport s , agr eed t o ext end t i m e i f s i gni fi cant-22-

p rog ress tow ard sett lem en t w as b eing m ad e, an d d id n o t fi le su it‘pre cipitou sly , ’” b u t i n su rer d id n o t offe r t o sett le un ti l after su itw as fil ed ). C our t s i n ot hers t at es have r ender ed s i m i l ardeci s i ons . I n Miel v . S ta te Far m Mut ualA ut om obi l e Ins ur ance Co. , 912 P. 2d 1333, 1336 ( A r i z. C t . A pp. 1995) , a l aw s ui tagai ns tt he i ns ur ed r es ul t ed i n an exc es s j udgm ent . T he i ns ur er w as t hen s ued fordel ay i ng acc ept ance of the pl ai nt i ff’ s s et t l ementoffe runt i l aft er it h a d e x p ir e d . Id. T he A r i zona Courtof A ppeal s r ever s ed a de ci s i on agai ns tt he i ns ur er , hol di ng t hati tw as err orforthe tr i al courtt o r efus e t o al l ow evi dence re g a rd in g th e p la in tiff ’s m o tiv e s in s e ttin g a tim e lim it fo r t h e s e ttle m e n t o ffe r. Id. at1339–40. T he courtexpl ai ned that“the r eas ons the Pl ai nt i ff a dher ed t o t he deadl i ne ar e r el evantt o w hetherthe i ns ur eract ed unr eas onabl y . ” Id. a t 1 3 3 9 . T h e c o u rt e m p h a s iz e d th a t “ [ w ]h a t is re a s o n a b le o n th e p a rt o f th e in s u re r . . . m us tbe j udged i n l i ghtof al l t he fa ct s s urr oundi ng the demand. ” Id. “Even t hough [the i ns ur er ] does notcl ai m thatthe dea dl i ne w as s o s hor tthati tcoul d not have be en met , t he r eas ons fora s peci fi c dea dl i ne maybe r el evantt o w hethert he cl ai m anthas ‘ s etup’ t he i ns ur erfora cl ai m of bad fai th. ” Id. Si m i l ar l y , i n A dduciv. Vigi lantIns ur ance Co. , 424 N . E . 2d 645 ( I l l . A pp. C t. 19 8 1 ), th e Illino is C o u rt o f A p p e a ls u p h e ld d ism iss a l o f a b a d fa ith c laim w her e the i ns ur erat t empt ed t o acc epta s et t l ementoffe rfor tyday s aft erthe offer e x p ir e d . Id. at649. T he courtexpl ai ned:-23-

N o fa c ts s u fficie n tlyin d ica te w h yth e c laim a n ts fo u n d it i m p o ss ib le t o acc eptt he offeratt hi s t i m e, s o as t o fai r l ypl ace the bl ame for fai l ur e of s et t l ementupon I ns ur er . T he al l egat i ons of the compl ai nt s i m pl ydo nots how w hyt he offerw oul d have be en good on M ay7, 1976, butw as notacc ept abl e on J une 18, 1976. Id. a t 6 4 9 ; s ee als o Haugh v. A l ls tat e Ins . C o. , 3 2 2 F . 3 d 2 2 7 , 2 3 2

– 3 3 (3d C ir . 2003) ( r ever s i ng s um m aryj udgm enti n favorof i ns ur erw her e del ayi n s et t l ement im p o se d su b sta n tial liti g a tio n c o sts u p o n th e p lain tiff, lea d in g th e p lain tiff to rejec t th e late r o ffe r); A ssoci ated Who l esal e G rocers, Inc. v. A m eri cold C orp ., 9 3 4 P .2 d 6 5 , 9 2 (K a n . 1 9 9 7 ) (“ A c laim a n t m a yb e m o re w ill in g to n e g o tiate w ith the in su red b efo re u n d ertak ing the risk a n d ex p en se o f a tr ial . ”). I n l i ghtof thes e dec i s i ons , w e agr ee w i th the di s tr i ctcour t ’ s obs ervat i on t hatcour t s s houl d exer ci s e ca ut i on “w hen the gr avamen of the compl ai nti s not t hat the insur er has r ef us eda set t l em ent offer, bu tthat i thas delayedi n acc ept i ng one. ” M em. O p. 14 ( ci t i ng A dduci , 424 N . E . 2d at649; P a v ia v . S ta te Fa rm Mu t. A ut o. Ins . C o. , 626 N . E . 2d 24, 28–29 ( N . Y . 1993) ) . T hi s caut i on “ar i s es fr om t he des i r e t o avoi d cr eat i ng t he i ncent i ve t o m anufa ctur e bad fai th cl ai m s by s hor t eni ng t he l ength of the s et t l ementoffe r , w hi l e s t arvi ng the i ns ur erof the i nform at i on neede d t o m ake a fai rappr ai s al of the ca s e. ” Id. at15 . A s the F i rs t C i r cui tcomm ent ed i n P eckham v. C ont i nentalC as ual t y Ins ur ance Co. , 895 F. 2d 8 3 0 , 8 3 5 (1 st C ir. 1 9 9 0 ):B yt he s ame t oken, w e do nothol d thatan i ns ur er ’ s att empt t o acc eptan 3 expi r ed offers erves t o abs ol ve the i ns ur erof anyl i abi l i tyfordamages t o the in s u re d c a u s e d b yth e in s u re r’ s e a rl ie r b a d fa ith fa ilu re to s e ttle . S. G en. Ins . C o. v . Ho lt , 4 0 9 S .E .2 d 8 5 2 , 8 5 8 (G a . C t. A p p . 1 9 9 1 ), vacated on othergr ounds by S. G e n . In s. C o . v. Ho lt , 4 1 6 S . E. 2 d 2 7 4 ( Ga . 1 9 9 2 ) . Un d e rt h e Ka n s a s S u p r e me C our t ’ s m ul t i - fac t orappr oach i n B ol l i nger , t he j urys houl d cons i deral l r el evant fa ctors b ea ri n g o n the g o o d fa ith o f th e ins u rer, an d o n lyw h en n o rea so n ab le j u ry coul d concl ude thatt he i ns ur ance companyact ed negl i gent l yori n bad fa i th i s t he c o m p a n ye n tit led to su m m a ryju d g m e n t. -24- [T]he doctr i nal i m petus fori ns ur ance bad fa i th cl ai m s der i ves fr om th e id e a th a t th e in su re d m u st b e tre a ted fa irlya n d h is le g iti m a te in ter e sts p ro tec ted . . . . In o th e r w o rd s, th e ju stifica tio n fo r b a d fa ith j ur i s prudence i s as a s hi el d fori ns ur eds

— notas a s w or d for cl ai m ant s . C our t s s houl d notperm i tbad fa i th i n the i ns ur ance m i l i eu to b ec o m e a g am e o f c at-an d -m o u se b etw ee n claim an ts an d insu rer, let ti n g claim an ts i n d u ce d am ag es th at th eythen see k to rec o v er, w h ilst re leg a tin g th e in su re d to th e sid e lin e s a s if o n lya m ild ly cu ri o u s sp ec tat o r. In p a rticu lar , in lig h t o f th e p u rp o se s o f

th e b a d fa ith c a u se o f a c tio n , co u rts cannotpr es um e thatanyfai l ur e t o r eac h a s et t l ementw hen the i ns ur erdi d not m eeta dea dl i ne uni l at er al l yi m pos ed bythe thi r d- partypl ai nt i ff— no m at t erhow arbi t r aryorm ani pul at i ve the dea dl i ne maybe— m ayr eas onabl ybe bl amed on t he in su re r. A s th e N e w Y o rk C o u rt o f A p p e a ls h a s e x p lain e d : 3 P e rm itt in g a n inju re d p lain tiff ’s c h o se n tim e tab le fo r se ttl e m e n t to g o v ern the b ad -fa ith inq u iryw o u ld p rom o te th e c u stom ary m anufa ctur i ng of bad- fai t h cl ai m s , es peci al l yi n cas es w her e an i ns ur ed of meagerm eans i s cover ed bya pol i cyof i ns ur ance w hi ch coul d fi nance onl ya fr act i on of the damages i n a s er i ous per s onal i nj ur ycas e. I ndeed, i ns ur er s w oul d be bombar ded w i th s et t l ement o ffe rs im p o sin g a rb itrar yd e a d lin e s a n d w o u ld b e e n c o u ra g e d to p re m a tu re lyse ttl e th e ir in su re d s’ c laim s a t th e e a rlies t p o ss ib le oppor tuni t yi n contr avent i on of thei rcontr actual r i ghtand obl i gat i on of thor ough i nves t i gat i on.-25-

P a v ia , 626 N . E . 2d at28–29. I ti s ther efor e nec es s aryt o t ake i nt o cons i der at i on, in a d d iti o n to th e o th e r p e rtin e n t B oll i ng er fac t or s , r el evantas pect s of the thi r dpar t ypl ai nt i ff’ s conduct , i ncl udi ng anyr es pons i bi l i tythe pl ai nt i ff mi ghthave for t he i ns ur er ’ s l ack of

adequa t e i nform at i on upon w hi ch t o j udge a pr opos ed s et t l ementoffe rand the r eas ons the pl ai nt i ff ha d fordecl i ni ng t o ent er t ai n an o ffe r a f te r e x p ir a tio n o f

a d e a d lin e . W e n o w tu rn to th e u n d isp u ted fa c ts re g a rd in g E M C A S C O ’s d e lay i n acc ept i ng M r . N guy en’ s offe rof a pol i cy - l i m i t s s et t l ementi n thi s cas e. For c o n v e n ien c e , w e d iv id e o u r a n a ly sis in to tw o tim e se g m e n ts. F irst, w e w ill co n side r th e p eriod b etw ee n M ay1 , 2 0 0 1 , an d A u g u st 20 , 2 0 0 1 , d u ri n g w h ich M r. N g u y e n fo rm a llyk e p t o p e n h is p o licy -lim its se ttl e m e n t o ffe r. T h e n , w e w ill co n side r th e p eriod b etw ee n A u g u st 20 , 2 0 0 1 , an d N o v em b er 1 9 , 2 0 0 1 , w h en M r. N g u y en rejected E M C A S C O ’s po li cy -l im it s settl em en t offe r. B . E M C A SC O ’ s C ondu ct P ri or t o A ugust 20, 2001 W e have no hes i t at i on i n aff i r m i ng the di s tr i ctcourt ’ s j udgm enti n favorof E M C A S C O w ith re g a rd to th e p e rio d b e tw e e n M a y1 a n d A u g u st 2 0 , 2 0 0 1 . T h is co n clus ion ap p ea rs esp ec ial lyp rop er in li g h t of the K an sas S u p rem e C o u rt ’s p ro n o u n c e m e n t th a t “[ t]h e stre n g th o f th e p lain tiff ’s c a se m u st b e g a u g e d a s it appea r ed att he t i m e the offerw as r efus ed. ” Id. at502. D ur i ng thi s t i m e per i od, w ith o n e p o ss ib le e x c e p tio n , n o n e o f th e p e rtin e n t B ol l i ngerfac t or s s ugges t s t hat-26-

E M C A S C O breached i t s duty . T he st rengt h o f t he inj ured cl ai m ant’ s case w as a m at t er of go od fai t h d i spute, bo t h as t o li abil i tyand as t o am ou nt of dam ages; E M C A SC O r eas onabl yr el i ed on oppos i ng couns el ’ s offe rt o s end medi cal r ecor ds , and otherw i s e w as pr oper l yi nves t i gat i ng the ci r cumst ance s of the a c c id e n t; th e in su re r h a d re c e iv e d n o c o n tra rya d v ice f ro m its a tto rn e yo r a g e n t; and the amountof fi nanci al r i s k t o w hi ch ea ch partyw oul d be expos ed i n the e v e n t o f a re f u s a l to s e ttle w a s u n k n o w n . See Bol l i nger , 449 P. 2d at512. T he Pl ai nt i ff be ar s m uch of the r es pons i bi l i tyforE M C A SC O ’ s l ack of i nform at i on r egar di ng M r . N guy en’ s i nj ur i es , beca us e Pl ai nt i ff’ s couns el pr om i s ed t o pr ovi de E M C A S C O M r. N g u y e n ’s m e d ic a l r e c o rd s , y e t p ro v id e d o n ly so m e o f th e m . T h e p o ssible ex ce p ti o n inv o lves E M C A S C O ’s ap p are n t fail u re to info rm M r. W ad e o f th e p lai n ti ff ’s sett lem en t offe r. A t th is po int i n ti m e, ho w ev er, M r. W ade w as i ns i s t entt hathe w as notr es pons i bl e forthe ac ci dent , he w as noty et rep rese n ted b yco u n sel, an d there is no ev iden ce to su g g est th at fa il u re to info rm hi m affect ed the cour s e of the l i t i gat i on. O n oraboutA ugus t7, D avi d C ooper w a s e n g a g e d a s M r. W a d e ’s la w y e r, an d h e im m e d iate lyc o m m u n ica ted w ith p lai n ti ff ’s co u n sel o n M r. W ad e’s b eh alf. T h ere is no ev iden ce that, af ter M r. C ooperbeca m e M r . W ade’ s l aw y er , he fa i l ed t o keep M r . W ade f ul l yabr eas tof set t l em ent nego t i at i on s. A lth o u g h n o tw o c a se s a re id e n tica l, as o f A u g u st 2 0 , 2 0 0 1 , this c a se is r emar kabl ys i m i l art o G l enn , C o v ill , and Wi l l i a ms . I n eac h of thos e ca s es , t he-27-

pl ai nt i ff pl ace d a dea dl i ne on a s et t l ementoffe rw hi l e fa i l i ng t o compl yw i th a pr om i s e t o pr ovi de r el evantm edi cal r ecor ds . I n eac h cas e, the courtconcl uded that the in su rer h ad n o t brea ch ed it s d u tyto the insu red b yn o t acc ep ti n g the o ffer, d e s p i t e s u b s e q u e n te x c e s s j u d g me n t s . W e a r e c o n fi d e n tth a tth e Ka n s a s S u p r e me C our tw oul d r eac h t he s ame concl us i on her e. C . E M C A SC O ’ s C ondu ct A ft er A ugust 20, 2001 In m a n yre s p e c ts , th e s itu a tio n re m a in e d th e s a m e a f te r A u g u s t 2 0 . Pl ai nt i ff’ s couns el cont i nued t o m ake i tdi ffi cul tfort he defens e t o obt ai n the r el evantm edi cal r ecor ds . M r . N guy en’ s l aw y er , M r . Pat t er s on, obt ai ned and r evi ew ed the r ecor ds of M r . N guy en’ s t w o- w eek s t ayatW es l eyM edi cal C ent er on J une 28, butdes pi t e hi s pr om i s e— and hi s w r i t t en as s ur ance i n a l et t erdat ed M ay21 t hat he had al readyprovided all m edical recor ds— he w ai t ed fo ur m on t hs, u n til a ll s e ttle m e n t o ffe rs h a d e x p ir e d , to p ro v id e th e s e re c o rd s to th e d e fe n s e . N ordi d he pr ovi de anyr ecor ds per t ai ni ng t o the ambul ance s ervi ce. T he medi cal and ambul ance r ecor ds w er e r el evantbeca us e, as M r . C ooperexpl ai ned, w i thout t hem he “di dn’ tknow w hati nform at i on ther e w as t hatcaus al l yconnec t ed the a c c id e n t to th e p a ra p leg ia [ a n d ] w h e th e r o r n o t th e re c o u ld h a v e b e e n a n yc laim fornegl i gence orm al pr act i ce byei thert he emer gencycar e pr ovi der s , ei theri n t he ambul ance oratt he hos pi t al ori n the cour s e of the s t ayatt he hos pi t al . ” C ooper D e p . 6 7 , A p p . 6 9 5 .-28-

M r. C o o p e r th e n a sk e d M r. P a tters o n fo r m e d ica l re lea se s s o th a t h e c o u ld o b tain th e re c o rd s d ire c tlyf ro m th e in stitu tio n s. A p p . 8 1 7 . H e se n t a le tter to M r . Pat t er s on expl ai ni ng w hyhe nee ded t o exami ne the r ecor ds , and r emi ndi ng M r . Pat t er s on of hi s agr eementt o w i thhol d s ervi ce on M r . W ade unt i l the r ecor ds h a d b e e n e x a m in e d . Id. a t 8 1 8 . M r. P a tters o n se n t M r. C o o p e r a re lea se , b u t it w as s i gned byPat t er s on hi m s el f r atherthan the pat i ent , and w as ther efor e not a c c e p te d b yW e s le yH o s p ita l. Id. at801. M r . C oopercont act ed M r . Pat t er s on agai n, and thi s t i m e— on O ct ober30— M r . Pat t er s on s entthe r ecor ds he had p r o mi s e d fo u rmo n t h s b e fo r e . M r . Co o p e ri mm e d i a t e l yc o n t a c t e d E M CA S CO , E M C A SC O author i zed a pol i cy - l i m i t s s et t l ement , and M r . C ooperconvey ed the o ffe r t o M r. P a tte rs o n o n N o v e m b e r 1 . Id. at822. H e t es t i fi ed thathe bel i eved th e o ffe r w o u ld b e a c c e p ted . H e a lso w ro te to a n E M C A S C O su p e rv iso r th a t if M r . Pat t er s on had onl ys entt he r ecor ds “i n the fi r s tpl ace , thi s fi l e w oul d be cl os ed bynow . ” Id. at819. In som e otherres pects , ho w ever, the cir cum st ances ch ang ed af t er A ug ust 20. T he pos s i bi l i t yof a s ucce s s ful defe ns e bas ed on w ho r an the r ed l i ght di m i ni s hed w hen the di s i nt er es t ed ey ew i tnes s s t at ed unequi vocal l y , on t ape, that s he had s een M r . W ade e nt ert he i nt er s ect i on agai ns ta r ed l i ght . T he foc us s hi ft ed fr om t he ca us e of the ac ci dentt o the medi cal caus e of the i nj ur i es — w hethert heyw er e a r es ul tof the ac ci denti t s el f, a pr eexi s t i ng condi t i on, ornegl i gence bym edi cal pr ofes s i onal s orthe ambul ance s ervi ce. M or eover , as-29-

th e e x ten t o f

M r. N g u y e n ’s inju rie s b e c a m e a p p a re n t, th e d e fe n se h a d re a so n to bel i eve thateven i f M r . W ade w er e hel d r es pons i bl e foronl ya s m al l por t i on of t he i nj ur y , t he damages w oul d s t i l l exce ed the pol i cyl i m i t . T he EM C A SC O agent expr es s ed conc ern t o M r . C ooperthat“[t ] hi s i s one of thos e s i tuat i ons thatm ay notal l ow us t o w ai tforal l of the fa ct s [bec aus e] the thr eatof exc es s j udgm ent and ‘ bad fa i t h’ m ayfor ce us t o pr ocee d m or e has t i l ythan w e w oul d pr efe r . ” A pp. 7 6 7 . M os ts i gni fi cant l y , A ppel l antar gues thati tcea s ed t o be r eas onabl e forthe in s u re r t o re ly o n p la in tiff ’s c o u n s e l’ s p ro m is e to p ro v id e th e m e d ic a l r e c o rd s . S e e C o v ill , 4 5 2 F . S u p p . at 2 3 8 (“ [ I]f S tate F a rm h a d m o re a g g re ss iv e ly i nves t i gat ed [the pl ai nt i ff’ s ] cl ai m i ns t ead of r el y i ng pas tthe poi ntof al l r eas on o n [ p lain tiff ’s c o u n se l] to v o lu n tar ilyf u rn ish a ll o f

th e in fo rm a tio n a lleg e d ly nece s s aryforadequa t e eva l uat i on of the cl ai m i tw oul d have know n m uch ea r l i er

. . . t hatt he r i s k of an e xces s i ve j udgm entw as gr eat . ”) . K ans as l aw r equi r es i n s u r e r s t o p r o mp t l yc o n d u c tr e a s o n a b l e , g o o d - fa i th i n v e s t i g a t i o n s o f c l a i ms a ri s in g u n d e r t h e irp o lic ie s . K a n . S ta t. A n n . § 4 0 -2 4 0 4 (9 )( b )– (c ). I n d e e d , a fac t ori n deci di ng w hetheran i ns ur eract ed i n bad fa i th i n r ej ect i ng a s et t l ement offer i s w hethert he insur er fai l ed “‘t o p roperl yi nv est i gate the cir cum st ances so as t o as cert ai n t he evi dence agai ns tthe i ns ur ed. ’ ” Levi erv. Koppenhef f er , 879 P. 2d 40, 46 ( K an. C t . A pp. 1994) ( quot i ng B ol l i nger , 449 P. 2d at502 ( other q u o ta tio n m a rk s o m itte d )) .-30-

W e ar e notnece s s ar i l yper s uaded thatthe evi dence s uppor t s a conc l us i on t hatE M C A SC O vi ol at ed i t s dut yt o M r . W ade w i th r egar d t o effor t s t o obt ai n t he m edical recor ds. Iti s not cl ear t o u s that the K ansas Su prem e C ou rtw ou l d w i sh t o r ew ar d pl ai nt i ffs fori nduci ng i ns ur er s t o r el yon pr om i s es thatpl ai nt i ffs never k e e p ; s u c h a h o ld in g c o u ld c re a te p e rv e rs e in c e n tiv e s fo r g a m e s m a n s h ip . See P eckham , 895 F. 2d at835. A nd once M r . C ooperbeca m e i nvol ved i n the ca s e, he c e a se d to re lyo n P lain tiff ’s c o u n se l to su p p lyth e re c o rd s; h e a ttem p ted to o b tain th e re c o rd s d ire c tlyf

ro m th e h o sp ital. B u t in o rd e r to d o so , h e h a d to o b tain m e d ic a l r e le a s e s , a n d P la in tiff ’s c o u n s e l s u p p lie d le g a lly d e fe c tiv e re le a s e s . W e hesi t at e t o co nclude t hat EM C A S C O cou l d b e held r espon si ble unde r tho se ci rcum st ances. N evert hel es s , A ppel l antm ai nt ai ns thatthes e ci r cumst ance s aft erA ugus t20, in terp re ted in th e lig h t m o st fa v o ra b le to th e p a rtyo p p o sin g su m m a ryju d g m e n t, w er e s uffi ci entt o go t o t he j ur yon a cl ai m of negl i gence . W e di s agr ee a nd concl ude that , i n l i ghtof the Pl ai nt i ff’ s m ani pul at i on of the s et t l ementoffe r d e a d lin e , the K a n sa s S u p re m e C o u rt w o u ld h o ld th a t n o re a so n a b le ju ryc o u ld fi n d E M C A S C O ’ s d e l a y w a s r e s p o n s i b l e fo rth e p a r t i e s ’ fa i l u r e t o r e a c h a p o l i c ylim its s e ttle m e n t. Fi r s t , E M C A SC O , t hr ough M r . C ooper , had no r eas on t o bel i eve that Pl ai nt i ff’ s couns el w oul d r efus e t o acc epta s et t l ementoffe ron acc ountof the addi t i onal del aybetw een A ugus t20 and N ovember1. T he Pl ai nt i ffs had-31-

ext ended thei roffe rbefor e, and ci r cumst ance s had notchange d i n anyr el evant r es pect . T o be s ur e, M r . Pat t er s on s t at ed i n hi s depos i t i on thathe w oul d nothave acc ept ed a pol i cy - l i m i t s offe raft erA ugus t20. Pat t er s on D ep. 97, A pp. 741. B ut i n h i s l et t er of A ug ust20 t o M r. C oo per, he ex press l yagreed n ot t o serve process a g a in st M r. W a d e “ to g iv e [ E M C A S C O ] tim e to m a k e a se ttl e m e n t o ffe r o n th is cas e s houl d [the company ] des i r e t o do s o. ” A pp. 765. M r . C oopert es t i fi ed that he i nt erpr et ed thi s l et t eras s ol i ci t i ng a pol i cy - l i m i t s offe rand thathe bel i eved M r . Pat t er s on w oul d acc epts uch an offerw hen i tw as m ade. C ooperD ep. 153–55, A pp. 714. A ppel l anthas t ender ed no evi dence thatthi s bel i ef w as in s in c e re , u n fo u n d e d , o r u n re a s o n a b le . M or e i m por t ant l y , t he undi s put ed evi dence i n the r ecor d s how s that Pl ai nt i ff’ s couns el ’ s s ol e r eas on forr ej ect i ng E M C A SC O ’ s N ovember1 offe rw as h is h o p e to p u rsu e a b a d fa ith c laim a g a in st th e in su re r. M r. P a tters o n c a n d id ly a d m itt e d th a t h e m a n a g e d th e N g u y e n a ffa ir, fro m its in c e p tio n , w ith a b a d fa ith c laim in m in d . A s h e e x p re ss e d it i n h is d e p o sitio n : “P u rsu it o f a b a d fa ith c laim i s ki nd of a pr oces s t hats t art s on t he fi r s tdayof the ac ci dent , and then w i nds up atsom e po i nt l at er. ” P at t ers on D ep. 11 5, A pp . 74 4. H e exp l ai ned that byA ug ust 20— a dat e w hen w e have concl uded no r eas onabl e j ur orcoul d fi nd that E M C A SC O had ac t ed i n bad fa i t h— he “w as fai r l ycert ai n thattheyhad bee n ac ti n g in b ad fa ith ” a n d that fo r th is r ea so n a “ p o li cyli m it[se tt lem en t offe r] w oul d nothave done i t . ” Id. a t 9 5 , A p p . 7 4 1 . C f
. Mi el , 912 P. 2d at1339–40-32-

( r ever s i ng a bad fai t h j udgm entbeca us e the tr i al cour tfai l ed t o al l ow evi dence th a t th e p lain tiff ’s r e a so n fo r im p o sin g a d e a d lin e w a s to “ se t u p ” a b a d fa ith cl ai m ) . M r . Pat t er s on admi t t ed thathe coul d notr eca l l havi ng done any ad d it ion al w o rk o r un co v ering an yad d it ion al i n fo rm ati o n relev an t t o M r. N guy en’ s cl ai m agai ns tM r . W ade be tw een A ugus tand N ovember . Pat t er s on D e p . 1 1 5 , A p p . 7 4 4 . C f
. Haugh , 322 F. 3d at232–33 ( r ever s i ng j udgm enti n favor of i ns ur erw her e pl ai nt i ff’ s r efus al of a be l at ed offerr es ul t ed fr om the s ubs t ant i al lit ig a tio n c o sts a tten d a n t to th e in su ra n c e c o m p a n y ’s d e lay); A s s oci at ed Who l esal e G rocers , 934 P. 2d at92 ( r ecogni zi ng thatthe r i s k and expe ns e of a t r i al i s r el evantt o pl ai nt i ff’ s w i l l i ngnes s t o negot i at e) . N orhas A ppel l ant s ugges t ed anyot herl egi t i m at e r eas on w hythe pol i cy - l i m i t s offe r , w hi ch w as g o o d o n A u g u s t 2 0 , w a s n o lo n g e r g o o d o n N o v e m b e r 1 . C f
. A dduci , 424 N . E . 2d at649 ( uphol di ng di s m i s s al of bad- fai th cl ai m w her e the evi dence r evea l ed no l egi t i m at e r eas on fort he pl ai nt i ff t o r efus e a s et t l ementoffe rfor tyday s aft erthe d e a d lin e ). Ind ee d , in h is l ett er to E M C A S C O rejecti n g it s settl em en t offe r, M r. G r aybi l l ( a s peci al i s ti n bad fa i t h cl ai m s w hom M r . Pat t er s on engage d as coc o u n s e l i n A u g u s t , 2 0 0 1 ) e x p l a i n e d t h a tM r . N g u ye n c o u l d n o ta c c e p tt h e p o l i c yl i m i toffe rbeca us e “i tappea r s a p rim a fa c ie c a s e c a n b e ma d e t h a t[ E M CA S CO ] i s gui l t yof negl i gence orbad fa i th” bas ed on i t s del ayi n offe r i ng t o s et t l e the cl ai m , and thatM r . N guy en hoped t o “enfor ce M r . W ade’ s r i ght s i n a l aw s ui t . ”-33-

A pp. 833–34. I ti s t her efor e an a dm i t t ed fa ctthatPl ai nt i ff’ s m ot i ve i n r efus i ng E M C A S C O ’s s e ttl e m e n t o ffe r o n N o v e m b e r 1 w a s to se t u p a b a d fa ith c laim a g a in s t th e in s u re r. B eca us e the dutyof good fa i th i s an obl i gat i on ar i s i ng fr om the contr act i t s el f, gener al pr i nci pl es of contr actl aw appl y , i ncl udi ng the r equi r ed el ement s of c a u s a tio n a n d d a m a g e s . S o u rs v . R u ss e ll , 967 P. 2d 348, 351–52 ( K an. C t . A pp. 1 9 9 8 ). O f

p a rticu lar re lev a n c e h e re is th e K a n sa s S u p re m e C o u rt’s a p p ro v a l in Ha w k in s v . D e n n is of the K ans as C our tof A ppeal s ’ hol di ng “thatther e mustbe a caus al l i nk betw een the i ns ur er ’ s conductand the exc es s j udgm entagai ns tthe i ns ur ed. ” 905 P. 2d 678, 690 ( K an. 1995) ( ci t i ng Sn odgrass v . S ta te Fa rm Mu t. A ut o. Ins . C o. , 804 P. 2d 1012, 1021–22 ( K an. C t . A pp. 1991) ) . T hus , an i ns ur ed m ayr ecove rundera bad- fai t h cl ai m onl yforthos e exc es s j udgm entl os s es “di r ect l yand natur al l yr es ul t i ng fr om the br eac h. ” So urs , 9 6 7 P .2 d a t 3 5 1 . See als o P eckham , 895 F. 2d at836 ( “[W ] e thi nk i ts et t l ed bey ond s er i ous ques t i on t hat , i n or dert o w arr antr ecove r yforan i ns ur er ’ s bad fa i th anents et t l ement negot i at i ons , i tm us tbe s how n t hatthe i ns ur er ’ s conductcaus ed the ens ui ng e x c e ss ju d g m e n t.”). T h e re a re a n u m b e r o f re a so n s w h ya n in su re r’s d e lay i n at t empt i ng t o s et t l e a c l ai m m i ghts etup a natur al and cont i nuous s equenc e of event s t hatcaus es a cl ai m antt o r ej ecta pol i cy - l i m i t s s et t l ementoffe rthathe w oul d have a cce pt ed ea r l i er . Forexampl e, a cl ai m antw ho has i nves t ed t i m e and res ou rces prepari ng for tri al m i gh tw ant the set t l em ent agr eem ent t o refl ecttho se-34-

a d d e d e x p e n s e s . See Haugh , 3 2 2 F .3 d a t 2 3 2

– 3 3 . B u t if a c laim a n t ar b itrar ily w i t hdr aw s an i ni t i al s et t l ementoffe rand l at err ej ect s an i dent i cal pr opos al fr om th e in s u re r, t h e c la im a n t’ s c o n d u c t is th e le g a l c a u s e o f th e fa ilu re to s e ttle . See A dduci , 424 N . E . 2d at649 ( hol di ng thatthe courtcoul d not“fa i r l ypl ace the bl ame forfai l ur e of s et t l ementupon I ns ur er ” w hen the pl ai nt i ff di d “nots how w hyt he offerw oul d have be en good on M ay7, 1976, butw as notacc ept abl e on Ju n e 1 8 , 1 9 7 6 ” ); see also Sn odgrass , 8 0 4 P .2 d a t 1 0 2 4 (rejec tin g a b a d -fa ith c laim agai ns tSt at e Farm w her e the “onl y ” purpos e of the pl ai nt i ff’ s s et t l ementoffe r w a s “ a s e v id e n c e to s h o w th e ju ry th a t S ta te F a rm reje c te d a n o ffe r” ). T he undi s put ed evi dence s how s thatM r . N guy en’ s l egal t eam r ej ect ed E M C A S C O ’s N ov em ber 1, 20 01 , set t l em ent offer as par tof a st rat egyt o est abli sh a b a d fa ith c la im a g a in s t E M C A S C O fo r i ts fa ilu re to s e ttle th e c a s e e a rl ie r. H ol di ng an i ns ur ance companyl i abl e forthe exc es s j udgm entagai ns tthe i ns ur ed undert hes e ci r cumst ance s w oul d be i ncons i s t entw i th the ca us e of a ct i on forbadfa ith o r n e g lig e n t re f

u sa l to se ttl e . T h e c a u se o f a c tio n fo r fa ilu re to se ttl e is m eantt o pr ot ectt he i nt er es t s of the i ns ur ed byr equi r i ng the i ns ur ert o conduct t he l i t i gat i on, i ncl udi ng s et t l ementnegot i at i ons , as i f the i ns ur ance contr acthad n o p o lic ylim its . B ol l i nger , 449 P. 2d at511. I ti s notm eantt o cr eat e an a r t i fi ci al ince n ti v e fo r th ir d -pa rtyclaim an ts t o reject o therw ise reas o n ab le sett lem en t offe rs th a t ar e w ith in th e p o licylim its. W e w o u ld b e tu rn in g th e c a u se o f a c tio n o n its h e a d b yh o ld in g a n in su ra n c e c o m p a n yliab le w h e re it ev e n tu a llyo ffe re d to se ttl eA lth o u g h M r. W a d e p re se n ted n u m e ro u s to rt c laim s to th e d istric t co u rt, 4 i ncl udi ng negl i gence , fr aud, br eac h of fi duci aryduty , and t or t i ous i nt er fer ence w i t h contr act , he appe al s onl yt he di s tr i ctcourt ’ s gr antof s um m aryj udgm enton th e f ra u d c la im . -35- t he cl ai m fort he pol i cyl i m i t s , buta cl ai m antr ej ect ed the offerpr eci s el yi n or der to m a n u fa c tu re a la w s u it a g a in s t th e in s u re r fo r b a d -fa ith re f u s a l to s e ttle . I I I . M r . W a d e ’ s Cl a i ms Ag a i n s t EM CAS CO M r. W ad e se p ara tel yap p ea ls th e d istri ct co u rt ’s gra n t of su m m ary j udgm enti n favorof EM C A SC O on hi s br eac h of contr act , br eac h of the dutyof go od fai t h, and fraud clai m s. W e turn fi rs tt o M r. W ade’s contr actcl ai m s. 4 A. Br e a c h o f

Co n t r a c t a n d Go o d F a i t h Cl a i ms K a n sa s la w re q u ire s th a t ev e ryleg a l ac tio n b e p ro se c u ted b yth e re a l p a rty i n i n t e r e s t . Ka n . S t a t . An n . § 6 0 - 2 1 7 ( a ) . I n c a u s e s o f a c t i o n a r i s i n g f

r o m a contr act , onl ypart i es t o t he contr actm ayenfor ce the contr actbeca us e “the per s on w h o p o s s e s s e s th e ri g h t s o u g h t to b e e n fo rc e d ” is th e re a l p a rt yin in te re s t. O ’D onnel lv. F l etcher , 6 8 1 P . 2 d 1 0 7 4 , 1 0 7 6 ( Ka n . Ct . Ap p . 1 9 8 4 ) . Ka n s a s l a w, how ever , al l ow s an i nj ur ed part yt o as s i gn hi s r i ghtt o r ecove ryundera contr act to a th ir d p a rt y . A l ldr i t tv. Kan. C ent enni alG l obalExpos i t i on, Inc. , 371 P. 2d 1 8 1 , 1 8 7 (K an . 1 9 6 2 ) (“In th is st ate a ll ch o ses in ac ti o n , ex ce p t t o rt s, are as s i gnabl e. A ccor di ngl yi thas been he l d thata ca us e of a ct i on fordamages for b re a c h o f

c o n tra c t is a ss ig n a b le.” (c itatio n s o m itt e d )). W h e re th e inju re d p a rty a ss ig n s a ll o f

h is rig h ts to a th ird p a rty , the a ss ig n e e b e c o m e s th e re a l p a rtyin-36-

in te re s t a n d th e a s s ig n o r c a n n o lo n g e r p u rs u e a c la im o n h is o w n b e h a lf. See A r my Nat ’ lB ank v. E qui t y D eve l opers , Inc ., 7 7 4 P .2 d 9 1 9 , 9 3 2 (K a n . 1 9 8 9 ); F i rst Na t’ l B a n k o

f Top eka v. Un itedTel. A ss’n , Inc. , 353 P. 2d 963, 970 ( K an. 1960) (ex p lai n ing that “the assig n ee o f a n ac co u n t [i s] i ts l eg al ho lder” an d there fo re “the p rop er rep rese n tat ive o f th e a cc o u n t as ag ains t th e d eb tor”). A s par tof the confes s i on of j udgm entbetw een M r . N guy en and M r . W ade, t he tw o m en ent er ed i nt o a “CovenantN ott o E xecut e and A s s i gnm entof R i ght s . ” A p p . 8 3 9

– 4 1 . T h e a g re e m e n t p ro v id e d , in p e rtin e n t p a rt: W ade a s s i gns t o N guy en, hi s exec ut or s , admi ni s tr at or s , l egal re p re se n tativ e s, a g e n ts, su c c e ss o rs a n d a ss ig n s a ll o f h is rig h ts fl ow i ng from anyi nter esthe m ayhav e givi ng ri se t o a clai m against anyi ns ur ert o paydamages W ade i s l egal l yobl i gat ed t o payN guy en, i n c l u d i n g wi t h o u tl i mi t a t i o n i n s u r a n c e p o l i c i e s i s s u e d b yEM C. Id. a t 8 4 0 . O n c e M r. W a d e a ss ig n e d a ll o f h is c o n tra c tu a l rig h ts u n d e r h is in su ra n c e p o licyto M r. N g u y e n , M r. W a d e n o lo n g e r p o ss e ss e d th e rig h t to e n fo rc e th e c o n tra c t ag a in st E M C A S C O . H e is th e re fo re n o t th e re a l p a rtyin i nt er es tand ca nnotm ai nt ai n a ca us e of a ct i on agai ns tE M C A SC O forbr eac h of c o n tra c t o r b re a c h o f

th e d u tyo f

g o o d fa ith a risin g f

ro m th e c o n tra c t. B . F r a u d C la im B eca us e t or tcl ai m s ar e unas s i gnabl e underK ans as l aw , M r . W ade r emai ns th e re a l p a rtyin in ter e st fo r th e f ra u d c laim . H is f

ra u d c laim , h o w e v e r, fa ils underK ans as l aw beca us e i ti s an i m perm i s s i bl e att empt t o r echa r act er i ze the b re a c h o f

c o n tra c t cla im a n d d o e s n o t alle g e a n in d e p e n d e n t to rt.-37-

T o m ai nt ai n a fr aud cl ai m underK ans as l aw , the bas i s of the cl ai m m us tbe d iffe re n t f

ro m th e c o n d u c t u p o n w h ic h a b re a c h o f c o n tr a c t c la im is b a s e d . See B r ow n v. C haf

f ee , 612 F. 2d 497, 503 ( 10th C i r . 1979) ( i nt erpr et i ng K ans as l aw and conc l udi ng “B r ow n cannotturn an ac t i on forbr eac h of contr acti nt o an ac t i on forfr aud bym er el yal l egi ng r el i ance on r epr es ent at i ons thatthe contr actw oul d be p e rfo rm e d a n d d e trim e n t f ro m its b re a c h ” ); He llerv . Ma rtin , 782 P. 2d 1241, 1245 ( K an. C t . A pp. 1989) . Fur t herm or e, the fr aud musthave r es ul t ed i n damages g re a te r t h a n th o s e c a u s e d b yth e b re a c h o f c o n tr a c t a lo n e . Hel l er , 782 P. 2d at 1 2 4 5 ; cf
. G uar ant ee Abstr act& Ti t l e C o. v. Int ers tat e Fi r e & C as . C o. , 652 P. 2d 6 6 5 , 6 6 8 (K a n . 1 9 8 2 ) (“ [ T ]h e re m u st b e a n in d e p e n d e n t to rt re su lti n g in addi t i onal i nj ur ybefor e puni t i ve damages can be r ecove r ed i n a br eac h of an in s u ra n c e c o n tr a c t a c tio n .” ). M r . W ade’ s al l egat i ons of fr aud ar e i ndi s t i ngui s habl e fr om hi s br eac h of contr actcl ai m s . M r . W ade a l l eges , as the bas i s forhi s fr aud cl ai m , that E M C A S C O in ten tio n a llym isre p re se n ted to M r. W a d e th a t M r. C o o p e r w o u ld v igo rou slyd efen d M r. W ad e a g ains t M r. N g u y en ’s claim , d esp it e E M C A S C O ’s kn ow l edg e t hat M r. C oo per w ou l d als o co nsi der E M C A S C O ’s i nter est s. E M C A S C O ’s r e p re se n tatio n , h o w e v e r, w a s m e re lya sta tem e n t th a t itw o u ld per form i t s obl i gat i on underM r . W ade’ s i ns ur ance pol i cyt o defe nd M r . W ade agai ns tanycl ai m s . T hus , M r . W ade’ s fr aud cl ai m i s m er el ya cl ai m that EM CAS CO b r e a c h e d i t s c o n t r a c tu a l d u tyt o d e fe n d M r . W a d e a g a i n s tc l a i ms-38-

arisi n g fro m the a cc iden t and that M r. W ad e w as injured b yE M C A S C O ’s fa il u re to sa tisf yits c o n tra c tu a l o b lig a tio n . S u c h a c laim so u n d s in b re a c h o f c o n tra c t, n o t f ra u d . S e e Br o wn , 6 1 2 F .2 d a t 5 0 3 ; Hel l er , 7 8 2 P .2 d a t 1 2 4 5 . N orhas M r . W ade a l l eged f r aud damages di s t i nctfr om thos e ar i s i ng fr om E M C A SC O ’ s br eac h of contr act . I n hi s A m ended Pet i t i on, M r . W ade c l ai m ed t hatE M C A SC O ’ s br eac h of contr actcaus ed “a j udgm enti n exce s s of $3 m i l l i on [t o be] ent er ed aga i ns t[hi m ] ” and “ pr event ed [hi m ] fr om borr ow i ng m oney s ecur ed byhi s hom e and . . . fr om s el l i ng hi s hom e. ” A pp. 319. Si m i l ar l y , the damages t hathe cl ai m s ar os e fr om E M C A SC O ’ s al l eged f r aud w er e as fol l ow s : “a j udgm enti n exce s s of $3 m i l l i on [w as ] ent er ed aga i ns thi m ; he has been de pr i ved of the bene fi t s of hi s i ns ur ance pol i cy ; he has been a nd w i l l be pr ecl uded fr om us i ng hi s r eal es t at e as s ecur i t yforl oans ; he has been a nd w i l l be pr event ed fr om buy i ng ors el l i ng r eal es t at e. ” Id. at325. T he damages cl ai m ed underthe br eac h o f c o n tr ac t cl aim an d the f rau d claim are iden ti ca l. T h e o n lyad d it ion al i njury M r. W a d e a lleg e s in th e f ra u d c laim is th a t h e w a s “ d e p riv e d o f th e b e n e fits o f

h is i ns ur ance pol i cy . ” Id. T hi s i nj urydi r ect l yr el at es t o the contr act , and damages a ri s in g f ro m th is inju ry w e re re c o v e ra b le u n d e r t h e b re a c h o f c o n tr a c t c la im . B ecause M r. W ade h as fai l ed to al l ege an add i t i on al i njurydis t i nct fr om tho se caus ed byt he br eac h of contr act , he has fai l ed t o es t abl i s h an i ndepende ntt or tof f ra u d .-39- I V . C oncl usi on Fort he for egoi ng r eas ons w e A F F I R M the di s tr i ctcourt ’ s gr antof su m m a ryju d g m e n t in fa v o r o f E M C A S C O o n M r. N g u y e n ’s c laim fo r b a d -fa ith fai l ur e t o s et t l e as w el l as on M r . W ade’ s cl ai m s forbr eac h of contr act , br eac h of t he dutyof good fa i t h, and fr aud.W ade v. E M C A SC O , 05- 3044 and 05-3054

E bel , C i r cui tJ udge, C oncurr ence and D i s s ent I j oi n t he maj or i t yopi ni on aff i r m i ng s um m aryj udgm enti n favorof E M C A S C O o n th e to rt c la im s . H ow ever , I w oul d r ever s e s um m aryj udgm entforE M C A SC O on the c o n t r a c tc l a i ms , a n d wo u l d r e ma n d t h o s e c l a i ms fo rf u r th e rc o n s i d e r a t i o n . I n my jud g m en t, there are g en era l dispu tes o f m aterial fa ct w h ich p rec lud e su m m ary j ud gm ent for EM C A S C O on t he co ntr actcl ai m s.