Full Opinion (html_with_citations)

                                      PUBLISH                    FILED
                                                     United States Court of Appeals
                      UNITED STATES COURT OF APPEALS         Tenth Circuit

                             FOR THE TENTH CIRCUIT                      December 2, 2019
                         _________________________________
                                                                       Elisabeth A. Shumaker
                                                                           Clerk of Court
 BRIAN SHOTTS,

       Plaintiff - Appellant,

 v.                                                          No. 18-6206

 GEICO GENERAL INSURANCE
 COMPANY, d/b/a GEICO among other
 names,

       Defendant - Appellee.
                      _________________________________

                     Appeal from the United States District Court
                        for the Western District of Oklahoma
                            (D.C. No. 5:16-CV-01266-SLP)
                       _________________________________

Clifton Naifeh of Naifeh & Associates, Norman, Oklahoma, for Plaintiff – Appellant.

Gerard F. Pignato (Justin R. Williams with him on the brief) of Roberson, Kolker,
Cooper, & Goeres, P.C., Oklahoma City, Oklahoma, for Defendant – Appellee.
                        _________________________________

Before MATHESON, PHILLIPS, and MORITZ, Circuit Judges.
                  _________________________________

MATHESON, Circuit Judge.
                   _________________________________

      In 2014, Brian Shotts was injured in a car accident caused by Dana Pollard. Mr.

Shotts’s automobile insurance through GEICO General Insurance Company (“GEICO”)
included underinsured motorist (“UM”) coverage. 1 Ms. Pollard had automobile

insurance through Farmers Insurance (“Farmers”).

       Mr. Shotts filed a claim with Farmers, which offered Ms. Pollard’s policy limits as

settlement. Before accepting the offer, Mr. Shotts notified GEICO of the accident.

GEICO opened a claim, assigned an adjuster, and began an investigation. GEICO also

waived its subrogation rights, allowing Mr. Shotts to accept the offer from Farmers.

       GEICO’s investigation determined that Mr. Shotts’s injuries exceeded Ms.

Pollard’s policy limits by $3,210.87. GEICO offered Mr. Shotts a settlement of that

amount, but Mr. Shotts declined the offer as “unreasonably low.” App., Vol. 5 at 144.

Mr. Shotts demanded GEICO promptly “pay the first dollar of his claim, up to the value

of [the] claim or the total available UM limits” of $25,000. Id. at 143. 2 He also asked

GEICO to reevaluate the offer. In response, GEICO requested additional information




       1
         As explained in greater detail below, UM coverage protects drivers from
accidents and injuries caused by individuals who have no insurance or who do not have
enough coverage to pay the full value of a claim. When an individual is involved in an
accident with an underinsured or uninsured motorist, the individual’s UM coverage pays
for the amount not covered by the at-fault underinsured motorist’s insurance.
        The parties and Oklahoma case law use the abbreviations “UM” and “UIM”
interchangeably to refer to uninsured and underinsured motorist coverage. In this
opinion, we use “UM.”
       2
         As discussed in greater detail below, Oklahoma courts refer to this as the “first-
dollar payment” requirement. Under this requirement, if an insured individual is injured
by an underinsured motorist and his or her injuries exceed the underinsured driver’s
policy limits, the UM insurer must promptly pay the full value of the UM claim up to the
UM policy limits.

                                             2
about Mr. Shotts’s injuries. It then proposed a peer review to determine whether his

injuries exceeded the $3,210.87 offer.

       Mr. Shotts sued for bad faith breach of contract, alleging that GEICO acted in bad

faith by (1) conducting “a biased and unfair investigation and evaluation of [his] claim”

and (2) failing to pay the full value of his claim. App., Vol. 1 at 30-31. He also

requested punitive damages. The district court granted summary judgment for GEICO on

both bad faith claims and denied punitive damages. Exercising jurisdiction under
28 U.S.C. § 1291
, we affirm.

                                   I. BACKGROUND

       Before describing the factual and procedural background of this case, we provide a

brief overview of Oklahoma’s laws regarding UM insurance coverage and subrogation.

We then discuss the events leading to this appeal.

                       A. UM Coverage and Subrogation Overview

   Uninsured Motorist Coverage

       UM coverage pays for damage or injuries caused by uninsured or underinsured

drivers (the “underinsured driver” or “at-fault driver”). 3 It “applies in the situation where

the tortfeasor [i.e., the driver who causes an accident] is without insurance or where the

tortfeasor has insufficient insurance to satisfy the claim of the insured.” Buzzard v.



       3
        In this opinion, we use the term “UM” coverage to refer to both underinsured
motorist coverage and uninsured motorist coverage. We use the term “underinsured
motorist” to describe both underinsured motorists and uninsured motorists.

                                              3
Farmers Ins. Co.,
824 P.2d 1105, 1110
 (Okla. 1991). Put differently, if an individual is

in an accident caused by an underinsured at-fault driver, UM coverage will cover what

the underinsured driver’s insurance does not.

       Under Oklahoma law, 4 every vehicle insurance policy must include UM coverage.
Okla. Stat. Ann. tit. 36, § 3636
 5; Buzzard,
824 P.2d at 1110
. Because of this, an

individual typically receives UM coverage through the same insurer that provides the

person’s automobile insurance (the “primary insurer,” “UM insurer,” or “UM carrier”).

       Oklahoma considers UM coverage primary, or first-party, coverage. See Buzzard,
824 P.2d at 1110
; see also Mustain v. U.S. Fid. & Guar. Co.,
925 P.2d 533, 536
 (Okla.

1996) (“[A]s between the insurer and its insured UM insurance is primary coverage.”).

Coverage is “primary” when an individual’s “insurer is liable without regard to any other

insurance coverage available.” Equity Mut. Ins. Co. v. Spring Valley Wholesale Nursery,




       4
         Because our jurisdiction is based on the parties’ diversity of citizenship,
28 U.S.C. § 1332
, we apply the substantive law of the forum state—Oklahoma. Klaxon Ins.
Co. v. Stenor Elec. Mfg. Co.,
313 U.S. 487, 496
 (1941); Clark v. State Farm Mut. Auto.
Ins. Co.,
433 F.3d 703, 709
 (10th Cir. 2005).
       5
        The statute states, in pertinent part,
              No policy insuring against loss resulting from liability . . . for
              bodily injury or death . . . arising out of the ownership,
              maintenance or use of a motor vehicle shall be issued,
              delivered, renewed, or extended in this state . . . unless the
              policy includes . . . coverage . . . for the protection of persons
              insured thereunder who are legally entitled to recover
              damages from owners or operators of uninsured motor
              vehicles . . . .
Okla. Stat. Ann. tit. 36, § 3636
(A)-(B).

                                               4
747 P.2d 947, 954
 (Okla. 1987). 6 In other words, an individual injured by an

underinsured driver does not need to exhaust the at-fault driver’s policy limits before

making a UM claim with his or her primary insurer. See Mustain,
925 P.2d at 535

(“[T]he UM insurer may not withhold payment . . . on the sole basis that the liability

insurance has not been exhausted.”); Buzzard,
824 P.2d at 1112
 (noting that “exhaustion

of limits is not required as a condition precedent to [UM] recovery”).

   Subrogation

       “Subrogation simply means substitution of one person for another; that is, one

person is allowed to stand in the shoes of another and assert that person’s rights against a

third party.” US Airways, Inc. v. McCutchen,
569 U.S. 88
, 97 n.5 (2013) (quotations

omitted); see also 16 Couch on Ins. § 222:5 (“‘Subrogation’ is the substitution of another

person in place of the creditor to whose rights [the substitute] succeeds in relation to the

debt[.] [Subrogation] gives to the substitute all the rights . . . of the [creditor].”). “[A]

subrogated insurer stands in [the] shoes of an insured” and “is subrogated in a

corresponding amount to the insured’s right of action against any other person

responsible for the loss, such that the insurer is entitled to bring an action against this

third party . . . .” 16 Couch on Ins. § 222:5.




       6
         “Secondary” or “excess” coverage, by contrast, is available “only after any
primary coverage—other insurance—has been exhausted.” Equity Mut. Ins. Co.,
747 P.2d at 954
.

                                                 5
       In Oklahoma, UM insurers enjoy statutory subrogation rights.
Okla. Stat. Ann. tit. 36, § 3636
(F). These rights allow UM insurers to pay an insured’s claim and then

seek reimbursement from the underinsured at-fault driver’s insurer. This process

operates as follows. When insured individuals involved in an accident with an

underinsured driver reach a tentative agreement to settle with that driver’s insurer, they

must notify their UM insurer and submit documentation of any pecuniary losses.
Id.
 § 3636(F)(1). The UM insurer then has 60 days to “substitute its payment to the

insured for the tentative settlement amount”—that is, to pay the injured individual the

amount owed by the underinsured driver’s insurer. Id. § 3636(F)(2). If the UM insurer

chooses to substitute payment, the injured individual receives payment for the entire

value of the claim directly from the UM insurer but loses the right to receive any payment

from the underinsured driver’s insurer. The UM insurer is then “entitled to the insured’s

right of recovery,” id., and can exercise its subrogation rights to seek repayment from the

underinsured motorist’s insurer. 7


       7
         “It is not unreasonable to ask, upon confronting the extensive and complicated
field of subrogation, why the law countenances a system under which [the] insurer first
settles with [the] insured, then . . . pursues [the] responsible party.” 16 Couch on Ins.
§ 222:4. As one scholar explains,
                       Several policy considerations underlie the doctrine of
                subrogation. First, subrogation has its genesis in the principle
                of indemnity. Although an insured is entitled to indemnity
                from an insurer pursuant to coverage provided under a policy
                of insurance, the insured is entitled only to be made whole,
                not more than whole. Subrogation prevents an insured from
                obtaining one recovery from the insurer under its contractual
                obligations and a second recovery from the tortfeasor under
                general tort principles. Additionally, subrogation rights
                                                 6
       A UM insurer may waive its subrogation rights. See Buzzard,
824 P.2d at 1110
. It

may also forfeit the rights by failing to substitute payment within 60 days. See
Okla. Stat. Ann. tit. 36, § 3636
(F)(2) (“If the [UM] coverage insurer fails to pay the insured the

amount of the tentative tort settlement within sixty (60) days, the [UM] coverage insurer

has no right to the proceeds of any settlement or judgment . . . .”).

   First-Dollar Payment Requirement

       As just explained, Oklahoma law requires UM insurers to substitute payment

within 60 days of learning of an individual’s claim or waive their subrogation rights. See
id.
 Oklahoma courts have labeled this requirement as a “speedy payment mechanism,”

Phillips v. N.H. Ins. Co.,
263 F.3d 1215, 1225
 (2001), and have specified that it

“entitle[s] [injured parties] to swift payment” of UM policy benefits, Mustain,
925 P.2d at 535
. If an individual is damaged or injured by an underinsured driver, the UM insurer




               enable the insurer to recover payments to the insured, who
               theoretically should have been made whole through those
               payments. Finally, subrogation advances an important policy
               rationale underlying the tort system by forcing a wrongdoer
               who has caused a loss to bear the burden of reimbursing the
               insurer for indemnity payments made to its insured as a result
               of the wrongdoer’s acts and omissions.
Elaine M. Rinaldi, Apportionment of Recovery Between Insured and Insurer in a
Subrogation Case, 29 Tort. & Ins. L.J. 803, 803 (1994).
       Subrogation is not always beneficial to the insurer, however. Rather, “[i]nsurers
must . . . assess whether pursuing the third party [through subrogation] will be cost
effective or too time consuming.” 16 Couch on Ins. § 222:4. An insurer may decide to
waive its subrogation rights if “the relative fault of the insured and third parties, the dollar
amount of the loss, . . . the estimated cost of legal prosecution of the claim,” or other
factors indicate that the action will not be “economically feasible.” Id.

                                               7
“may not delay the payment of benefits until exhaustion of [the other driver’s policy]

liability limits.” Buzzard,
824 P.2d at 1112
. Instead, the UM insurer “must take prompt

action to determine what payment is due.”
Id.
 If, “after investigation, [it] determines that

the likely worth of the claim exceeds the liability limits [of the underinsured at-fault

driver’s policy], prompt payment must be offered.”
Id.

       In Burch v. Allstate Insurance Company,
977 P.2d 1057
 (Okla. 1998), the

Oklahoma Supreme Court held that “[a UM] carrier is liable for the entire amount of its

insured’s loss from the first dollar up to the UM policy limits without regard to the

presence of any other insurance.”
Id. at 1058
 (emphasis added). In other words, if an

individual is injured by an underinsured driver, and if the individual’s injuries exceed the

underinsured driver’s policy limits, the UM insurer must promptly pay the full value of

the UM claim, as capped by the UM policy limits. Following the parties, we refer to this

as the “first-dollar payment” or “drop-down payment” requirement.

       Once a UM insurer pays the full value of an injured party’s claim, as capped by

the UM policy limits, the injured party can no longer seek recovery from the

underinsured driver’s insurance. Rather, the UM insurer “stands in [the] shoes of [the]

insured,” 16 Couch on Ins. § 222:5, and can exercise its statutory subrogation rights “to

proceed in its own right against the [at-fault underinsured driver],” Burch,
977 P.2d at 1065
. The first-dollar payment requirement thus “does not make the UM carrier the final

indemnitor for the injured party’s loss.”
Id.
 It also does not allow an injured party to

recover twice—once from the UM insurer and once from the underinsured driver’s

                                              8
insurer—for his or her injuries. Instead, the requirement “is only a temporary expedient

to facilitate prompt payment to the [injured party].”
Id.

                                 B. Factual Background

   Pre-Accident Medical History

       Beginning in 2001, Mr. Shotts visited multiple doctors with complaints of back

and neck pain. Between March 2007 and May 2011, he saw the same physician at least

33 times to receive treatment for his back. Between September 2011 and April 2013, he

received treatment from a chiropractor at least 15 times. He also had several x-rays and

MRIs, which revealed minor spinal abnormalities. His physicians prescribed medications

to treat his pain and encouraged him to take Ibuprofen and Tramadol daily.

   Accident and Insurance Policy

       On June 14, 2013, Mr. Shotts was involved in a car accident caused by Dana

Pollard. He received hospital treatment for injuries to his back, elbow, and neck.

       Mr. Shotts had automobile insurance through GEICO. His policy included UM

coverage in the amount of $25,000 per person. It also contained a subrogation provision

that stated:

               When payment is made under this policy, [GEICO] will be
               subrogated to all the insured’s rights of recovery against
               others. The insured will help us to enforce these rights. The
               insured will do nothing after loss to prejudice these rights.
               This means [GEICO] will have the right to sue for or
               otherwise recover the loss from anyone else who may be held
               responsible.

App., Vol. 2 at 95.

                                             9
       Ms. Pollard had automobile coverage through Bristol West, a subsidiary of

Farmers. Her policy had a liability limit of $25,000.

   Post-Accident Medical History

       After the accident on June 14, 2013, Mr. Shotts was admitted to the emergency

department at the Comanche County Memorial Hospital. He reported “generalized

soreness” and rated his pain as “2/10 to 3/10.” Id. at 79. The treating physician recorded

Mr. Shotts’s condition as “[m]otor vehicle collision with musculoskeletal pain and

muscle spasm.” Id. at 80.

       Over the next several years, various physicians concluded that “Mr. Shotts’s

[preexisting back] condition ha[d] been exacerbated by [the] car accident.” App., Vol. 3

at 101; see also id. at 105; App., Vol. 2 at 189. Mr. Shotts continued taking daily

painkillers, and at a doctor’s visit in 2014, he reported “[t]aking Ibuprofen 800MG[,] 1

tablet [t]hree times a day.” App., Vol. 3 at 111.

       In 2015, Mr. Shotts received treatment for digestive issues and ulcers. In June

2016, his physician sent a letter to his attorney, stating, “Brian Shotts is a patient under

my care for multiple diagnoses. [He] has a history of long term use of 800mg [of

nonsteroidal anti-inflammatory drugs] five to six times daily. Due to the length of use,

[he] developed peptic ulcer disease. The peptic ulcer disease then led to further

complications.” App., Vol. 2 at 227.




                                              10
   Worker’s Compensation and Farmers Claims

       After the accident, Mr. Shotts filed a worker’s compensation claim and a claim

with Farmers, Ms. Pollard’s insurer. In January 2016, Farmers paid $10,154.51 for the

worker’s compensation claim. It offered the rest of Ms. Pollard’s policy limits—

$14,845.49—to resolve any remaining claims. 8

   GEICO Claim

       In March 2016, Mr. Shotts’s attorney, Clifton Naifeh, informed GEICO of the

accident. GEICO opened a claim and assigned the case to adjuster Larrisa Henley. Ms.

Henley requested a copy of Mr. Shotts’s policy declarations page and the police report.

She asked Mr. Shotts to sign and return authorizations allowing GEICO to access his

medical data. She also left a voice message with Farmers to request information about

the claim.

       Mr. Shotts submitted the police report, his medical bills, and relevant medical

records to Ms. Henley. He also provided a recorded statement about the incident.

   GEICO’s Waiver of Subrogation Rights

       GEICO next received a letter from Mr. Naifeh. In the letter, Mr. Naifeh explained

that Farmers paid $10,154.51 for Mr. Shotts’s worker’s compensation claim and had


       8
         It appears from the record that Mr. Shotts never accepted this offer. In one of his
submissions to the district court, Mr. Shotts stated, “[GEICO’s] position that [Mr. Shotts]
may have prematurely or surreptitiously accepted Farmers [sic] partial policy limits, or
later the full policy limits, at any time is not shown in the record anywhere prior to
GEICO’s evaluation [that] the claim exceeds the tortfeasors [sic] limits.” App., Vol. 5 at
164.

                                            11
offered the remaining policy limits as settlement. Mr. Naifeh stated this offer was

insufficient because “Mr. Shotts suffered a significant injury well in excess of the adverse

carriers [sic] policy limits.” App., Vol. 5 at 128. He requested that GEICO “waive its

subrogation interest, so that [Mr. Shotts] may accept the third-party tortfeasors [sic]

offer” and “timely pay in good faith all policy benefits to which [Mr. Shotts] is entitled.”

Id. at 129. He included a copy of the Farmers offer, a summation of the medical bills Mr.

Shotts attributed to the accident, and the medical records and bills supporting the

summation.

       After reviewing the letter, Ms. Henley made a note in Mr. Shotts’s case file

attributing fault to Ms. Pollard. She then contacted Mr. Naifeh to request access to Mr.

Shotts’s medical records. She also informed Mr. Naifeh that GEICO “waive[d] [its]

subrogation interest so that Mr. Shotts may accept the tort feasor’s [sic] offer.” App.,

Vol. 2 at 147.

   GEICO’s Investigation and Initial Evaluation

       Ms. Henley evaluated Mr. Shotts’s claim using the medical documents Mr. Naifeh

attached to his letter. She reviewed records from various medical facilities and providers,

including the Comanche County Memorial Hospital, the Southwest Medical Center, the

Oklahoma Spine Institute, and at least three physicians. She also reviewed Mr. Shotts’s

MRIs and other medical imaging. Based on her assessment, she concluded that Mr.

Shotts sustained “thoracic strain and back pain.” Id. at 191.




                                             12
       Ms. Henley then used Mr. Shotts’s medical bills to determine the value of his

claim. She excluded medical bills for visits to digestive health specialists because she

concluded they were not related to the accident. She determined Mr. Shotts’s claim had a

value between $19,822.91 and $24,822.91.

       When Ms. Henley completed her evaluation, she wrote to Mr. Naifeh. She

explained, “We have confirmed that Farmers has Bodily Injury limits of $25,000. Based

on the information you submitted in your demand, my evaluation . . . is within the

tortfeasors [sic] limits. Therefore, I will not be extending any offer.” App., Vol. 5 at

134. Mr. Naifeh responded with a letter stating that he did not agree with the evaluation

because it was too low. The letter also demanded a first-dollar payment under Burch. 9

   GEICO’s Reevaluation and Additional Investigation

       After receiving Mr. Naifeh’s letter, Ms. Henley reevaluated Mr. Shotts’s claim.

She did not change her general damages evaluation or alter her assessment of Mr.

Shotts’s injuries, but she adjusted her calculation to reflect incurred, rather than paid,

medical expenses. Based on this reevaluation, Ms. Henley offered a settlement of

$3,210.87.

       Mr. Naifeh declined “the unreasonably low offer.” App., Vol. 2 at 206. He

requested that GEICO reevaluate the claim and, based on Burch, “pay the first dollar of



       9
         As explained above, Burch held “that when the preconditions for the loss under
[UM] coverage exist, [a UM] coverage carrier is obligated to pay the entire loss of its
injured insured from the first dollar up to the policy limits.”
977 P.2d at 1064
.

                                              13
[Mr. Shotts’s] claim, up to the value of [the] claim or the total available UM limits.” Id.

at 205.

          GEICO did not respond to Mr. Naifeh’s requests. Shortly after, Mr. Naifeh

informed Ms. Henley that Farmers had offered $25,000 to settle the claim. He also

requested confirmation from GEICO that it had waived its subrogation rights. Ms.

Henley responded, confirming that GEICO would “waive any subrogation rights to that

policy.” App., Vol. 5 at 148.

          Over the next several weeks, Mr. Naifeh twice asked GEICO to reevaluate the

$3,210.87 settlement offer. In response, Ms. Henley requested further information

regarding Mr. Shotts’s injuries and inquired about the ulcers he claimed he developed

after the accident. Mr. Naifeh provided a doctor’s letter and medical authorization for

GEICO to obtain additional medical records. He stated the records he already produced

clearly “provided that Mr. Shotts’s [sic] peptic ulcer did not develop until after the

subject collision,” App., Vol. 3 at 190, and asked GEICO to pay “within 30 days”

because “[i]t [was] well past time for GEICO to have paid,” id. at 191.

          Ms. Henley used the medical authorizations to request additional records. She told

Mr. Naifeh that once she “received the requested documentation,” she would “review to

determine if a peer review . . . [was] needed to complete [the] evaluation.” App., Vol. 2

at 248. She also wrote:

                The medical records you have provided in the past indicate
                that Mr. Shotts had prior chronic back pain issues and was
                already taking the medication that you indicate caused his
                Peptic Ulcer. In addition, the letter from [Mr. Shotts’s
                                              14
                doctor] indicates that multiple diagnoses caused his ulcer, but
                it is unclear what diagnosis is or is not related to this loss.
                The peer review . . . will assist in providing me the
                information needed to determine if the ulcer was caused
                directly as a result of the treatment from this loss.

Id.

                                  C. Procedural Background

       After learning that Ms. Henley intended to seek peer review of the claim, Mr.

Shotts sued GEICO in Oklahoma state court, asserting claims for breach of contract and

bad faith. Specifically, Mr. Shotts alleged that GEICO conducted “a biased and unfair

investigation and evaluation of [his] claim,” “unfairly failed and refused to pay any

amount which it owed . . . under the UM/UIM coverages,” and “breached its contract and

its duties to [him].” App., Vol. 1 at 30-31.

       Invoking diversity jurisdiction, GEICO timely removed to the United States

District Court for the Western District of Oklahoma. It then moved for summary

judgment. Mr. Shotts opposed the motion, arguing that GEICO acted in bad faith by (1)

conducting an inadequate investigation and evaluation of his claims, (2) failing to timely

pay the full policy limits as required under Burch, (3) requesting peer review, and

(4) mishandling his requests about policy stacking. 10 The court initially denied the

motion in part, but eventually granted summary judgment for GEICO on all claims.




       10
            Only the first and second bad faith claims are at issue on appeal.

                                               15
       In its initial ruling, the district court granted summary judgment on the inadequate

investigation, peer review, and stacking bad faith claims. It also granted summary

judgment for GEICO on the issue of punitive damages. But it concluded GEICO was

“not entitled to summary judgment as to [Mr. Shotts’s] bad faith claim premised on a

violation of Burch” because GEICO “did not promptly tender ‘first dollar’ payment to

[Mr. Shotts] after [Ms.] Henley determined the value of [the] claim exceeded the

tortfeasor’s policy limits.” App., Vol. 5 at 104-05.

       GEICO moved for reconsideration. The district court granted the motion and

entered summary judgment for GEICO on the Burch bad faith claim. In doing so, the

court noted that, although GEICO never paid the full value of Mr. Shotts’s claim, it had

waived its subrogation rights, which allowed Mr. Shotts to seek prompt payment from

Farmers. It concluded that “summary judgment should be entered in GEICO’s favor as

to [Mr. Shotts’s] bad faith claim premised on Burch and alleging that GEICO failed to

make prompt payment of proceeds due under the policy.” Id. at 208.

       Mr. Shotts timely appealed the district court’s summary judgment rulings on his

unreasonable investigation bad faith claim, Burch bad faith claim, and punitive damages

request. We affirm on all three.

                                    II. DISCUSSION

       This appeal concerns whether the district court properly granted summary

judgment for GEICO on Mr. Shotts’s (1) unreasonable investigation bad faith claim,

(2) Burch bad faith claim, and (3) request for punitive damages.

                                            16
       On the unreasonable investigation claim, we affirm because Mr. Shotts has not

provided evidence to show that GEICO’s investigation demonstrated bad faith. On the

Burch claim, we affirm because GEICO’s waiver of subrogation rights extinguished its

duty to make a prompt first-dollar payment. The punitive damages issue is dependent on

and derivative of Mr. Shotts’s bad faith claims. Because those claims fail, we also affirm

the district court’s summary judgment on punitive damages.

                                    A. Background Law

   Standard of Review

       “We review the grant of summary judgment by the district court de novo, applying

the same legal standard to the evidence in the record as did the district court.” Oulds v.

Principal Mut. Life Ins. Co.,
6 F.3d 1431, 1436
 (10th Cir. 1993). In doing so, “[w]e view

the evidence and draw reasonable inferences in the light most favorable to the nonmoving

party.” Teets v. Great-W. Life & Annuity Ins. Co.,
921 F.3d 1200, 1211
 (10th Cir. 2019).

“The court shall grant summary judgment if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.”

Fed. R. Civ. P. 56(a).

   Oklahoma Bad Faith Insurance Claims

       Under Oklahoma law, “[a]n insurer has an ‘implied-in-law duty to act in good

faith and deal fairly with the insured to ensure that the policy benefits are received.’”

Badillo v. Mid Century Ins. Co.,
121 P.3d 1080, 1093
 (Okla. 2005) (quoting Christian v.




                                             17
Am. Home Assurance Co.,
577 P.2d 899, 901
 (Okla. 1977)). “[T]he violation of this duty

gives rise to an action in tort . . . .” Christian,
577 P.2d at 904
.

       “The core of a bad-faith claim ‘is the insurer’s unreasonable, bad-faith conduct,

including the unjustified withholding of payment due under a policy.’” Flores v.

Monumental Life Ins. Co.,
620 F.3d 1248, 1255
 (10th Cir. 2010) (quoting McCorkle v.

Great Atl. Ins. Co.,
637 P.2d 583, 587
 (Okla. 1981)). To succeed on a bad faith claim,

“the insured must present evidence from which a reasonable jury could conclude that the

insurer did not have a reasonable good faith belief for withholding payment of the

insured’s claim.” Oulds,
6 F.3d at 1436
 (citing McCoy v. Okla. Farm Bureau Mut. Ins.

Co.,
841 P.2d 568, 572
 (Okla. 1992)); see also Garnett v. Gov’t Emps. Ins. Co.,
186 P.3d 935, 944
 (Okla. 2008) (“A party prosecuting a claim of bad faith carries the burden of

proof . . . .”); Timberlake Constr. Co. v. U.S. Fid. & Guar. Co.,
71 F.3d 335, 343
 (10th

Cir. 1995) (“[T]he insured must present sufficient evidence reasonably tending to show

bad faith.” (quotations omitted)).

       To determine whether a plaintiff has made this showing, courts assess “whether

the insurer had a good faith belief in some justifiable reason for the actions . . . that are

claimed violative of the [insurer’s] duty of good faith and fair dealing.” Badillo,
121 P.3d at 1093-94
. Courts make this determination “in light of all facts known or knowable

concerning the claim at the time plaintiff requested the company to perform its

contractual obligation.” Oulds,
6 F.3d at 1439
 (quotations omitted). “[U]ntil the

facts . . . have established what might reasonably be perceived as tortious conduct on the

                                               18
part of the insurer, the legal gate to submission of the issue to the jury remains closed.”
Id. at 1437
.

       Courts generally conduct this analysis in two steps. First, the court considers

whether there is a legitimate dispute between the insurer and the insured regarding

coverage or the value of the claim. If there is no legitimate dispute between the parties,

the court may infer that the insurer denied payment in bad faith. See Barnes v. Okla.

Farm Bureau Mut. Ins. Co.,
11 P.3d 162, 171, 175
 (Okla. 2000) (finding no legitimate

dispute about the amount or extent of coverage and concluding that insurer denied

payment in bad faith). But where there is a legitimate dispute between the parties, then

“as a matter of law[,] . . . no reasonable inference of bad faith arises.” Timberlake,
71 F.3d at 344
 (quoting Oulds,
6 F.3d at 1442
).

       Because “the denial of a claim based upon a legitimate dispute does not imply bad

faith” as a matter of law, “judgment as a matter of law is to be granted to the insurer”

unless the insured “produce[s] specific evidence of bad faith.” Oulds,
6 F.3d at 1442
.

Thus, if the court determines there is a legitimate dispute between the parties, it proceeds

to the second step of its analysis and considers whether the plaintiff offered specific

additional evidence to demonstrate bad faith. See Bannister v. State Farm Mut. Auto. Ins.

Co.,
692 F.3d 1117, 1128-32
 (10th Cir. 2012) (identifying a legitimate dispute between

the parties and then considering whether plaintiff had identified additional evidence of

the insurer’s bad faith). If the court determines that the plaintiff has offered sufficient




                                              19
evidence to show the insurer acted in bad faith, the court will send the case to a jury.
Id. at 1128
; see also Oulds,
6 F.3d at 1442
.

       The additional evidence required for this showing may take several forms. For

example, a plaintiff may demonstrate bad faith by providing “evidence that the insurer

did not actually rely on th[e] legitimate [dispute]” to deny coverage, Bannister,
692 F.3d at 1128
, “denied the claim for an illegitimate reason,”
id.,
 or otherwise “failed to treat the

insured fairly,” Thompson v. Shelter Mut. Ins.,
875 F.2d 1460
, 1462 (10th Cir. 1989). A

plaintiff may also show bad faith by providing evidence that the insurer performed an

inadequate investigation of the claim. See, e.g., Oulds,
6 F.3d at 1442
.

                             B. Mr. Shotts’s Bad Faith Claims

       Mr. Shotts alleges that GEICO demonstrated bad faith by (1) conducting an

inadequate investigation, and (2) failing to pay the full, first-dollar value of his claim as

required under Burch. We provide additional legal background and analysis relating to

these claims.

       Our analysis follows the two-step framework described above. We first consider

whether there was a legitimate dispute between the parties regarding the value of Mr.

Shotts’s claim and the extent of his injuries. We hold there was a legitimate dispute. We

therefore cannot conclude as a matter of law that GEICO breached the duty of good faith

by refusing to pay the full value of Mr. Shotts’s claim.

       We thus proceed to consider whether Mr. Shotts has offered sufficient additional

evidence to support his unreasonable investigation and Burch bad faith claims. As to

                                              20
both, we hold that Mr. Shotts has not presented evidence to show GEICO acted in bad

faith. We therefore affirm the district court’s summary judgment for GEICO on both bad

faith claims.

   Legitimate Dispute

       a. Legal background

       In Oklahoma, “a claim must be promptly paid unless the insurer has a reasonable

belief the claim is either legally or factually insufficient.” Barnes,
11 P.3d at 171
. If

there is no “legitimate dispute” between the parties regarding the amount or extent of

coverage, then an insurer’s denial of payment gives rise to an inference of bad faith as a

matter of law. See id.; see also
id. at 175
. But where there is “a legitimate dispute,” then

“[n]o reasonable inference of bad faith arises.” Oulds,
6 F.3d 1440
. In such instances,

courts will not conclude “as a matter of law” that the insurer “breach[ed] the duty of good

faith merely by refusing to pay [the] claim.” Timberlake,
71 F.3d at 344
. Instead, courts

will grant judgment for the insurer unless the insured can offer additional evidence of bad

faith. See Oulds,
6 F.3d at 1442
.

       “[T]he fact that a reasonable jury could find in favor of the insurer based on all

facts known or that should have been known by the insurer when it denied a claim is

strong evidence that a dispute is ‘legitimate.’”
Id.

       b. Analysis

       This case presents a legitimate dispute. Although GEICO and Mr. Shotts have

access to the same sets of medical records, the parties disagree about the nature and

                                             21
extent of his injuries. Mr. Shotts claims he had a normal spine before the accident and

insists that his peptic ulcer developed only after the crash. GEICO, by contrast,

maintains that Mr. Shotts’s spinal problems predate the accident and that he “was already

taking the medication that . . . caused his Peptic Ulcer.” App., Vol. 2 at 248.

       The record contains evidence from which “a reasonable jury could find in favor of

the insurer.” Oulds,
6 F.3d at 1442
. Specifically, a reasonable jury could conclude from

Mr. Shotts’s medical records that his preexisting back injuries generated at least some of

his post-accident medical expenses. The jury could also find that Mr. Shotts

overestimates the value of his claim because some of his expenses were not necessitated

by the accident. This is “strong evidence that a dispute is ‘legitimate.’”
Id.

       Because the medical records in this case could support a finding that Mr. Shotts’s

back problems and peptic ulcer predated or are unrelated to the accident, there is a

legitimate dispute between the parties. Accordingly, we cannot conclude as a matter of

law that GEICO breached the duty of good faith by refusing to pay Mr. Shotts’s

requested claim. See Bannister,
692 F.3d at 1127-28
.

   Additional Evidence of Bad Faith

       Because there is a legitimate dispute regarding the value of his claim, Mr. Shotts

must “produce additional evidence of bad faith in order to send the issue to the jury.”

Timberlake,
71 F.3d at 344
. Mr. Shotts attempts to make this showing by arguing that

GEICO (a) conducted an inadequate investigation, and (b) failed to make timely first-

dollar payment as required under Burch. We address these arguments in turn.

                                             22
       a. Inadequate investigation

               i. Legal background

       “[A] duty to timely and properly investigate an insurance claim is intrinsic to an

insurer’s contractual duty to timely pay a valid claim.” Brown v. Patel,
157 P.3d 117, 122
 (Okla. 2007); see also Buzzard,
824 P.2d at 1109
 (“[T]he insurer must conduct an

investigation reasonably appropriate under the circumstances.”). Thus, even if there is a

legitimate coverage dispute between the parties, an insurer’s failure to conduct a

reasonable investigation may give rise to a bad faith claim. See Buzzard,
824 P.2d at 1109
; see also Bannister,
692 F.3d at 1128
 (“[T]he jury may decide the issue . . . if there

is evidence that the insurer failed to adequately investigate [the] claim.” (quotations

omitted) (alterations in original)); Oulds,
6 F.3d at 1442
 (“The investigation of a claim

may in some circumstances permit one to reasonably conclude that the insurer has acted

in bad faith.”).

       “Under Oklahoma law, . . . an insurer’s investigation need only be reasonable, not

perfect.” Roberts v. State Farm Mut. Auto. Ins. Co.,
61 F. App’x 587, 592
 (10th Cir.

2003) (unpublished) (citing Buzzard,
824 P.2d at 1109
). 11 Accordingly, “‘when a bad

faith claim is premised on inadequate investigation, the [claimant] must make a showing

that material facts were overlooked or that a more thorough investigation would have



       11
          Although not precedential, we find the reasoning in the unpublished opinions we
cite to be instructive. See 10th Cir. R. 32.1 (“Unpublished decisions are not precedential,
but may be cited for their persuasive value.”); see also Fed. R. App. P. 32.1.

                                             23
produced relevant information’ that would have delegitimized the insurer’s dispute of the

claim.” Bannister,
692 F.3d at 1128
 (quoting Timberlake,
71 F.3d at 345
). “[E]vidence

of inadequate investigation must ‘suggest a sham defense or an intentional disregard of

uncontrovertible facts’ in order to be put to a jury.” Id.; see also Oulds,
6 F.3d at 1442
.

              ii. Analysis

       Summary judgment is inappropriate “if the evidence is such that a reasonable jury

could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248
 (1986). To return a verdict in favor of Mr. Shotts, a jury would have to

determine that GEICO’s investigation was not reasonable. Mr. Shotts has not provided

evidence from which a reasonable jury could draw that conclusion.

       The record shows that GEICO began its investigation immediately after it learned

about the accident. It took a recorded statement from Mr. Shotts. It also requested Mr.

Shotts’s medical records and reviewed all the documents—including the MRIs and other

medical images—he provided. GEICO continued this investigation after making its

initial settlement offer, and it conducted additional review at Mr. Shotts’s request. When

Mr. Shotts objected to the initial offer, for example, GEICO reevaluated the claim and

adjusted the offer to reflect incurred, rather than paid, medical expenses. And when he

insisted that his ulcer developed after the accident, GEICO requested additional medical

documentation and pursued peer review. Based on these facts, a reasonable jury could

not conclude that GEICO’s investigation was unreasonable.




                                             24
       Despite this, Mr. Shotts argued at summary judgment that “GEICO biasedly

refused to consider and evaluate all of [his] permanent lifetime injuries”; “intentionally

placed an unreasonably low dollar evaluation” on the claim; and “unfairly looked for

ways to reduce, delay[,] or deny [his] claim.” App., Vol. 3 at 45. But he did not offer

specific evidence to support these bare allegations. For example, although Mr. Shotts

alleged that Ms. Henley used a biased computer tool to conduct her evaluation, he

provided no evidence to show the computer system was faulty or that the valuation was

arbitrary.

       Mr. Shotts also stated that Ms. Henley’s “[f]ailure to properly consider important

favorable information to the insured . . . is bad faith,” but he did not explain when or how

Ms. Henley overlooked information that might have been favorable to his claim. Id. at

47. He asserted that Ms. Henley ignored his worker’s compensation records, which

“would [have] suggest[ed] an injury more significant than a strain,” id. at 40, but he did

not explain how those records would have contradicted the other medical records Ms.

Henley reviewed or “changed the underlying facts already known to [her],” Timberlake,
71 F.3d at 345
. Finally, he argued that Ms. Henley “should have . . . investigated and

evaluated” facts “such as the difference between the before and after MRI’s [sic] and X-

rays, the permanence of the injuries, [and] the value of the lifelong additional pain,” but

he did not provide evidence to show that Ms. Henley did not do this during her

investigation. App., Vol. 3 at 48.




                                             25
       “Under Oklahoma law, . . . an insurer’s investigation need only be reasonable, not

perfect.” Roberts,
61 F. App’x at 592
. The undisputed facts indicate that GEICO

conducted a thorough, timely, and reasonable review of the claim. Mr. Shotts has not

shown “that material facts were overlooked or that a more thorough investigation would

have produced relevant information that would have delegitimized the insurer’s dispute

of the claim,” Bannister,
692 F.3d at 1128
 (quotations omitted), and he has not

“produce[d] additional evidence of bad faith,” Timberlake,
71 F.3d at 344
. A reasonable

jury could not conclude that GEICO’s investigation was unreasonable. Summary

judgment was appropriate, and we affirm.

       b. Burch first-dollar payment

              i. Legal background

       As explained above, Oklahoma UM insurers “may not delay the payment of

benefits until exhaustion of [the other driver’s policy] liability limits” and must make

“prompt payment” on any claim that “exceeds the liability limits [of the underinsured

at-fault driver].” Buzzard,
824 P.2d at 1112
. Burch clarified that this prompt-payment

requirement applies to the “entire amount of [the claim] from the first dollar up to the

UM policy limits.”
977 P.2d at 1058
. Thus, if an individual is injured by an

underinsured motorist, and if the individual’s injuries exceed the underinsured motorist’s

policy limits, the UM insurer must promptly pay the full value of the UM claim.

       Oklahoma case law recognizes a connection between the prompt-payment

requirement and a UM insurer’s subrogation rights. For example, Oklahoma courts have

                                             26
specified the prompt-payment requirement does not apply if an insured party

intentionally interferes with or destroys a UM insurer’s subrogation rights. See Porter v.

MFA Mut. Ins. Co.,
643 P.2d 302, 305
 (Okla. 1982); Torres v. Kan. City Fire & Marine

Ins. Co.,
849 P.2d 407, 413
 (Okla. 1993). 12 And when the Oklahoma Supreme Court

specified in Burch that the prompt-payment requirement applies “from the first dollar up

to the policy limits,”
977 P.2d at 1064
, it emphasized that, although the UM insurer was

obligated to pay the full amount of the plaintiff’s claim, the insurer could still “proceed in

its own right against the tortfeasor,”
id. at 1065
. The Burch court also observed that it

might be unfair to require the UM insurer to “duplicate” coverage, but it concluded this

would not happen when the UM insurer could obtain payment through subrogation.
Id.

It emphasized that its holding “[did] not make the UM carrier the final indemnitor”

because “[t]he UM carrier is statutorily subrogated to the rights of its insured against the

[underinsured at-fault driver].”
Id.
 Put differently, Burch used the UM insurer’s ability



       12
          Oklahoma courts refer to this as the “Porter doctrine” or “Porter defense.” It is
not absolute. An insured party’s interference with a UM insurer’s subrogation rights does
not always extinguish the insurer’s duty to render prompt payment. Rather, “equitable
considerations come into play when a UM carrier seeks to avoid payment of a claim
based on allegations that the insured has prejudiced its subrogation rights.” Strong v.
Hanover Ins. Co.,
106 P.3d 604, 610
 (Okla. Civ. App.); see, e.g., McFadden v. Arch Ins.
Co.,
2013 WL 105214
, at *3 (E.D. Okla. Jan. 8, 2013) (unpublished) (insured’s release of
claims against underinsured at-fault driver did not extinguish UM insurer’s prompt-
payment duties because insured did not know he had UM coverage and “did not
voluntarily and knowingly interfere with [the UM insurer’s] right to subrogation”
(emphasis added)); Buzzard,
824 P.2d at 1114
 (insured’s release of claims against at-fault
driver did not extinguish UM insurer’s prompt-payment duties because “[the UM
insurer’s] course of action forced [the insured] to negotiate with the [underinsured at-fault
driver’s] insurer”).
                                             27
to “seek recovery of paid indemnity through an exercise of its right to subrogation” as

justification for the first-dollar payment requirement.
Id.

              ii. Analysis

       Mr. Shotts has not demonstrated that GEICO acted in bad faith when it failed to

make a prompt first-dollar payment. Although “being legally able to exercise

subrogation rights is not the sine qua non of an obligation to pay a [UM] claim,” Phillips,
263 F.3d at 1222
, the principles articulated in Oklahoma case law suggest that a UM

insurer’s duty to render prompt payment is linked to its ability to exercise subrogation

rights. 13 Burch, in particular, indicates that courts crafted the first-dollar payment

requirement with an insurer’s subrogation rights in mind. Here, GEICO waived its

subrogation rights. In doing so, it relinquished its ability “to proceed in its own right

against the tortfeasor.” Burch,
977 P.2d at 1065
. Under these circumstances, requiring

first-dollar payment would force GEICO to make a payment that it could not later recoup


       13
          In a few cases, Oklahoma courts have suggested that a “[UM] carrier’s legal
ability to exercise subrogation rights is not an indispensable condition of its obligation to
pay an otherwise valid [UM] claim.” Strong,
106 P.3d at 610
; see also Torres,
849 P.2d at 413
; Robertson v. U.S. Fid. & Guar. Co.,
836 P.2d 1294, 1297
 (Okla. 1992); Barfield
v. Barfield,
742 P.2d 1107, 1112
 (Okla. 1987); Uptegraft, 662 P.2d at 686-87. In each of
these cases, the UM insurer attempted to avoid its payment obligations by arguing that
the insured had somehow interfered with its subrogation rights. And in each case, the
court held that the insurer could not assert a Porter defense because the insurer had itself
provoked or otherwise contributed to the insured’s conduct. The cases thus stand for the
limited proposition that an insured’s interference with a UM insurer’s subrogation rights
will not always extinguish the UM insurer’s prompt-payment duties. But they do not
suggest that subrogation rights are irrelevant to the prompt-payment requirement and do
not affect our analysis above.


                                              28
from Farmers. This would, in essence, make GEICO “the final indemnitor for the injured

party’s loss”—an outcome the Burch court sought to avoid. Id. We thus conclude that

GEICO’s waiver of subrogation rights extinguished its duty to render a prompt, first-

dollar payment.

       Policy considerations support this conclusion. Requiring prompt first-dollar

payment when a UM insurer has waived its subrogation rights would enable injured

parties to obtain double recovery. Specifically, an injured party could (1) obtain a

settlement offer from the underinsured motorist’s insurer, (2) request that the UM insurer

waive its subrogation rights, (3) request and accept a first-dollar payment from the UM

insurer, and then (4) accept the underinsured driver’s settlement offer. This would allow

the injured party to recover from both the UM insurer and the underinsured driver’s

insurer. But because the UM insurer would have waived its subrogation rights, it would

not be able to recoup its payment from the underinsured driver’s insurer. The UM

insurer’s payment would thus “create a duplicate pool of insurance,” Burch,
977 P.2d at 1065
, and would allow the injured party to receive payments from two insurers that could

not later seek reimbursement from one another. The UM carrier’s payment also would

not operate as “a temporary expedient to facilitate prompt payment to the insured,”

Burch,
977 P.2d at 1065
, but would instead be a final and unrecoverable payment to the

injured party.

       Because GEICO waived its subrogation rights, requiring GEICO to render prompt,

first-dollar payment would allow Mr. Shotts to recover twice for his injuries: once from

                                            29
GEICO, and once from Farmers. We decline to permit that outcome. Instead, we hold

that GEICO’s waiver extinguished its duty to promptly pay the full value of Mr. Shotts’s

claim. Mr. Shotts thus cannot show that GEICO’s failure to pay constituted bad faith.

Summary judgment on the Burch claim was appropriate, and we affirm.

                                  C. Punitive Damages

       As stated earlier, Mr. Shotts’s punitive damages claim is derivative of and

dependent on his bad faith claims. Because both of those claims fail, his request for

punitive damages must fail, too. We affirm the district court’s summary judgment for

GEICO on Mr. Shotts’s request for punitive damages.

                                  III. CONCLUSION

       We affirm the district court’s summary judgment for GEICO on Mr. Shotts’s bad

faith and punitive damages claims. 14




       14
        We grant Mr. Shotts’s February 22, 2019 motion to file the appendix to his
opening brief under seal. We deny his March 1, 2019 motion to unseal the same.

                                            30