1 The Honorable Albert J. Engel, Senior Circuit Judge, Sixth Circuit Court of

Appeals, sitting by designation.

PUBLISH

UNITED STATES COURT OF APPEALS

Filed 7/8/96

TENTH CIRCUIT

CHERYL L. REEDER,

Plaintiff - Appellant,

vs.

AMERICAN ECONOMY INSURANCE

COMPANY, a foreign corporation,

Defendant - Appellee.

No. 95-5085

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OKLAHOMA

(D.C. No. 93-C-991-B)

David H. Sanders of Sanders, Sanders & Daffern, Tulsa, Oklahoma, for DefendantAppellant.

Eugene Robinson (John B. DesBarres with him on the brief) of McGivern, Scott, Gilliard,

Curthoys & Robinson, Tulsa, Oklahoma, for Plaintiff-Appellee.

Before KELLY, LOGAN and ENGEL,1

 Circuit Judges.

KELLY, Circuit Judge.

This diversity case arising in Oklahoma stems from a jury verdict against Plaintiff-
2

Johnny Lewis was actually underinsured, but the term “uninsured” includes

underinsured vehicles whose liability limits are less than the amount of the claim. See Okla.

Stat. Ann. tit. 36, § 3636C (West 1990). 

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Appellee American Economy Insurance Company (“AEIC”) awarding DefendantAppellant Cheryl Reeder $612,000 in damages. Reeder filed post-trial motions for

judgment as a matter of law, or in the alternative, a new trial, requesting that the court

award her $1,500,000 and alleging various errors. The district court denied Reeder’s

motions. We have jurisdiction under 28 U.S.C. § 1291 and affirm.

Background

On June 2, 1989, Ms. Reeder was involved in a motor vehicle accident with an

uninsured motorist, Johnny Lewis.2 At the time, Reeder was insured by an AEIC policy

which covered three motor vehicles and which provided uninsured motorist coverage of

$500,000. 

In the spring of 1993, Reeder’s attorney notified AEIC that Reeder was making an

uninsured motorist claim under her AEIC policy. On November 5, 1993, AEIC filed a

complaint for declaratory judgment to determine whether Reeder was entitled to recover

from AEIC under the uninsured motorist coverage. Reeder counterclaimed for

compensatory damages and damages for bad faith on the part of AEIC for failing to

timely and promptly investigate and pay her claim. The parties both moved for summary

judgment, and on August 26, 1994, the district court ruled that the AEIC policy covered
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Reeder’s claim but that AEIC had not acted in bad faith. The court scheduled a jury trial

on the issue of damages for December 19, 1994.

On December 5, 1994, AEIC offered to settle the case for $1 million, which

Reeder refused. The jury eventually awarded Reeder $612,000 for her bodily injuries. 

On December 21, 1994, the court entered judgment on the verdict, as well as granting

partial summary judgment in favor of Reeder on the issue of liability and granting

summary judgment to AEIC on the issue of bad faith.

Reeder filed post-judgment motions contending that the district court should enter

judgment against AEIC for $1,500,000 because $612,000 was wholly inadequate and

because the undisputed facts revealed damages of $1,500,000. Reeder also alleged

numerous errors by the trial court. On March 24, 1995, the district court denied Reeder’s

post-judgment motions. This appeal followed. 

Discussion

I. AEIC’s Offer to Settle

Reeder claims that the district court erred in failing to try the case in accordance

with Oklahoma public policy. Specifically, Reeder claims that AEIC’s offer to settle the

suit for $1 million made the sole issue in the case whether the $1 million offer fully

compensated her or whether she was entitled to $1.5 million. Reeder applied to the

district court to amend the pre-trial order and submit this question to the jury. The district
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court denied Reeder’s motion, ruling that the offer to settle was inadmissible under

Federal Rules of Evidence 408 and 403. Aplt. App. at 73-74, 91. We review de novo

both the interpretation of the Federal Rules of Evidence, United States v. Medina-Estrada,

81 F.3d 981, 986 (10th Cir. 1996), and the interpretation of the law and public policy of

Oklahoma, Horace Mann Ins. Co. v. Johnson, 953 F.2d 575, 576 (10th Cir. 1991). 

 Under Oklahoma law, “if the underinsurer does not conduct an investigation, or

after investigation, determines that the likely worth of the claim exceeds the liability

limits, prompt payment must be offered.” Buzzard v. Farmers Ins. Co., Inc., 824 P.2d

1105, 1112 (Okla. 1991). Reeder claims that there is a distinction between an offer of

payment in this context and an offer to settle a lawsuit under Rule 408. Reeder notes that

Oklahoma public policy, as announced by the Buzzard case, requires an underinsurer to

make an offer of payment, while there is no duty imposed by Rule 408 to make any

settlement offer.

Buzzard imposes a duty upon an underinsurer to investigate and evaluate claims

and offer payment if the claim so warrants. Id. at 1108-09. In this case, AEIC lived up to

its duties as an underinsurer by evaluating Reeder’s claim and offering payment of $1

million. Reeder attempts to claim that the $1 million offer was not a settlement offer but

an “evaluation” and thus admissible as such, citing Massey v. Farmers Ins. Group, 986

F.2d 1428 (10th Cir.), cert. denied, 508 U.S. 911 (1993), an unpublished Order and

Judgment. Besides lacking precedential value, see 10th Cir. R. 36.3, Massey is also
3 The amount of Reeder’s claim was the only issue in dispute; the parties stipulated

as to liability.

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clearly distinguishable. In Massey, an evaluation was admitted into evidence because it

was only an evaluation and nothing more, and the court specifically noted that the

insurance company had “never furnished, offered, or promised to furnish [the evaluation

amount] to settle Plaintiff’s claim.” Massey, 986 F.2d 1428, 1993 WL at *9. In this case,

the evaluation was also the offer and clearly denoted as such; Reeder’s attempt to classify

it as solely an “evaluation” is directly contrary to the undisputed evidence. Reeder also

attempts to claim that the “evaluation” would be admitted for a purpose other than to

prove the amount of her claim, but this argument is specious. Reeder’s admitted purpose

in attempting to introduce the “evaluation” was to determine whether it was adequate

compensation for her claim, which is inexorably linked with proving the amount of the

claim.

Simply because the offer of payment is made pursuant to AEIC’s responsibilities

as an underinsurer does not mean that it is not an offer to settle under Rule 408; the two

situations are not mutually exclusive. Rule 408 provides:

Evidence of (1) furnishing or offering or promising to furnish . . . a valuable

consideration in compromising or attempting to compromise a claim which

was disputed as to either validity or amount, is not admissible to prove

liability for or invalidity of the claim or its amount.

Fed. R. Evid. 408.3

 Although AEIC’s settlement offer may also qualify as an evaluation

made in light of Oklahoma public policy, the offer falls squarely within the confines of
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Rule 408, and thus the district court properly ruled evidence of the offer inadmissible. 

Rule 408 does not distinguish between settlement offers made pursuant to a company’s

statutory or public policy responsibilities and offers made for other reasons. Both types

of offers advance the policy behind Rule 408, namely, to promote the out-of-court

settlement of claims. Contrary to Reeder’s assertion, the fact that an evaluation also

serves as a settlement offer in this case in no way forces the insurance company to settle

because the underinsurer need only offer payment where its investigation reveals liability

on its part; the insurer is not required to make any offer of payment where it has

determined that it is not liable.

II. Stacking

Reeder’s single AEIC insurance policy covered three vehicles, and she paid a

separate premium for each vehicle. The uninsured motorist liability limit under the policy

was $500,000. Reeder contends that the district court erred in aggregating, or “stacking,”

the three coverages and instead should have considered each policy separately and

allowed her to recover against each “policy,” resulting in a total recovery of $1.5 million. 

This is a question of law which we review de novo, applying state law. See Benns v.

Continental Casualty Co., 982 F.2d 461, 462 (10th Cir. 1993).

In Richardson v. Allstate Ins. Co., 619 P.2d 594 (Okla. 1980), the Oklahoma

Supreme Court squarely addressed this stacking issue. In Richardson, the insurance
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company issued Richardson a single policy covering three vehicles with an uninsured

motorist limit of $25,000 per person or $50,000 per accident, and Richardson paid a

separate premium for each of the vehicles. The Oklahoma Supreme Court held:

[W]here an insured had paid three premiums for uninsured motorist

insurance contained in a single policy covering three vehicles, the extent of

uninsured motorist coverage is the aggregate limit of coverages

corresponding to the number of separate uninsured motorist insurance

premiums paid by the insured. Under the record presented, the coverage of

$25,000.00 for each person injured in an accident, not to exceed $50,000.00

in any one accident, will be “stacked” or aggregated to provide limits of

$75,000.00 and $150,000.00 respectively.

 

Id. at 598; cf. Aetna Casualty and Surety Co. v. Craig, 771 P.2d 212, 213-14 (Okla. 1989)

(Class 1 insured may stack uninsured motorist coverage on a fleet of commercial vehicles

covered by a single insurance policy).

Despite this direct Oklahoma Supreme Court authority on point, Reeder argues

against stacking and urges that the policy should be “collateralized,” attempting to

support this theory by relying on a line of Oklahoma cases which have held that uninsured

motorist coverage cannot be offset by workers’ compensation benefits. See Barfield v.

Barfield, 742 P.2d 1107, 1112-13 (Okla. 1987); Chambers v. Walker, 653 P.2d 931, 934-

36 (Okla. 1982). These cases reason that uninsured motorist coverage is separate from

workers’ compensation protection, and thus the two may co-exist. Barfield, 742 P.2d at

1112. However, in this case we are not faced with an attempt to offset Reeder’s

uninsured motorist judgment with another type of insurance payment; rather Reeder is

attempting to collect three times on the same uninsured motorist policy. This is clearly
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not allowed under Oklahoma law. We reject, as we must, Reeder’s contention that the

policy limits on each vehicle are independant collateral sources. 

The jury determined Reeder’s damages to be $612,000, but Reeder is now

attempting to collect $1.5 million for these injuries. As a matter of equity and fairness,

we find Reeder’s position untenable. The fact that Reeder paid separate premiums for the

three vehicles covered under her single policy allows her to stack the policies and recover

the full $612,000 as opposed to only the $500,000 policy limit, but the separate premiums

do not create a collateral source situation. 

III. Bad Faith

After AEIC filed suit for declaratory judgment, Reeder counterclaimed alleging

bad faith on the part of AEIC for failing to investigate, evaluate and pay her claim within

90 days after it was filed. The district court determined that the 90-day time limit did not

apply to uninsured motorist insurance carriers and entered summary judgment in favor of

AEIC on the issue. Reeder subsequently moved to amend or vacate this judgment and for

leave to file an amended counterclaim for bad faith, again on the basis of AEIC’s “delay.” 

The district court denied these motions. Following the trial, Reeder raised these same

issues in another motion, which the district court again denied. We review the district

court’s decision to deny leave to file an amended complaint only for abuse of discretion. 

Phelps v. Wichita Eagle-Beacon, 886 F.2d 1262, 1274 (10th Cir. 1989); Foman v. Davis,
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371 U.S. 178, 182 (1962). 

“[A] party may amend the party’s pleading only by leave of court or by written

consent of the adverse party; and leave shall be freely given when justice so requires.” 

Fed. R. Civ. P. 15(a). However, leave need not be granted where the amendment would

be futile, as in this case. The district court explained its rationale for denying leave in its

October 20, 1994 Order, to which it referred in its March 24, 1995 Order denying

Reeder’s second motion for leave. Aplt. App. at 71; Aplee. Supp. App. at 245-46 (Order

filed October 20, 1994). The district court determined that AEIC’s coverage defense was

“legitimate” and therefore not in bad faith, stating:

The Plaintiff [AEIC] had the right to timely litigate the issue of untimely

notice of the insured (approximately four years after the subject accident) as

it impacted Plaintiff’s contractual right of subrogation against the tortfeasor. While the ruling on that issue was adverse to Plaintiff, it still had

the right to in good faith litigate same. The Plaintiff also has the right to

litigate disputed elements of damages claimed such as pain and suffering

and permanent disability.

Aplee. Supp. App. at 245 (Order filed October 20, 1994). The district court properly

explained the basis for its denial of Reeder’s motion for leave to amend. We find the

district court’s reasoning persuasive, and even if we did not, the district court’s

thoroughly reasoned explanation would not constitute an abuse of discretion.

Reeder contends that her bad faith claim is predicated on events that occurred after

the filing of her initial counterclaim and the district court’s judgments should be

correspondingly altered to reflect this. Specifically, Reeder claims that AEIC acted in bad
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faith by failing to promptly investigate and evaluate her claim, or in the alternative, that

the evaluation was untimely. We find these arguments disingenuous. 

AEIC’s liability was not established until the district court’s Order filed August

26, 1994. Once its liability was established, AEIC promptly took steps to investigate and

evaluate Reeder’s claim, culminating in the $1 million offer on December 5, 1994. This

offer constituted an evaluation and assignment of a dollar value to Reeder’s claim, as well

as an offer to settle the lawsuit. We have held that the two are not mutually exclusive. 

Further, we find that this evaluation was timely as a matter of law; the offer was made

just over three months from the district court’s determination of liability. The fact that

the evaluation was completed twenty-one months after Reeder’s claim was initially filed

is irrelevant because AEIC’s liability was in serious dispute until August 26, 1994. Thus,

AEIC’s “delay” was hardly a delay and certainly not in bad faith.

While we sympathize with Ms. Reeder’s injuries, this is a court of law, not of

sympathy. It is unfortunate that Ms. Reeder and her attorney failed to have the foresight

to accept AEIC’s settlement offer, but they elected to take their chances with a jury and

must abide by the jury’s decision. 

AFFIRMED.