Opinion ID: 171942
Heading Depth: 2
Heading Rank: 2

Heading: Analysis of Summary Judgment

Text: Although, as noted above, Colorado law governs our analysis of the underlying claims, “we are governed by federal law in determining the propriety of the district court’s grant of summary judgment. Accordingly, we review the grant of summary judgment de novo, applying the same standard as the district court pursuant to Rule 56(c) of the Federal Rules of Civil Procedure.” Stickley v. State Farm Mut. Auto. Ins. Co., 505 F.3d 1070, 1076 (10th Cir. 2007) (internal quotations omitted). Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). Further, as a general matter, “[t]he [CAARA] is to be liberally construed to further its remedial and beneficent purposes.” Brennan, 961 P.2d at 553. A. Bad Faith and Willful and Wanton Claim Regarding Basic PIP Benefits Mr. Lopez first argues that by February 28, 2006, he had provided reasonable proof of the fact and amount of his lost income under § 10-4-708(1), and that basic PIP lost-income benefits were therefore fifteen days overdue when -11- they were paid on April 13, 2006. His argument is based on Colorado Division of Insurance Amended Regulation 5-2-8(4)(C)(2) (2004), 3 Colo. Code Regs. § 702-5, which addresses the documents usually sufficient to establish proof of the fact and amount of wage loss when a claimant is pursuing PIP lost-income benefits. 8 It reads in pertinent part: In the usual case, if the claimant is pursuing covered PIP wage loss benefits, the following documents are sufficient to establish proof of the fact and amount of wage loss incurred: a. A properly executed application for benefits from the PIP claimant; and b. Written verification by a health care provider that the claimant is not able to perform his/her work as a result of the injury; and c. Written verification of employment and income[.] 8 In § 10-4-708(1.3), the Colorado legislature directed the commissioner of insurance to promulgate a rule “establish[ing] guidelines for the timely payment of personal injury protection benefits including the penalties for the failure to timely pay such benefits or to otherwise comply with the rule.” The legislature required that “[t]he guidelines for timely payment established by rule shall include at the minimum a list of the items necessary, in addition to the requirements set forth in section 10-4-706, to establish proof of the fact and amount of expenses incurred . . . .” Id. The commissioner subsequently promulgated Colo. Div. of Ins. Am. Reg. 5-2-8 pursuant to that statute. See Colo. Div. of Ins. Am. Reg. 5-2-8(1). Further, § 3 of Am. Reg. 5-2-8 reads: The Colorado Reparations (No-Fault) Act was repealed effective July 1, 2003. Automobile insurance policies with personal injury protection (PIP) benefits issued or renewed prior to July 1, 2003 will continue to incur PIP claims until such benefits do not apply any longer. This regulation applies to claims occurring under No-Fault Policies issued prior to July 1, 2003. -12- Mr. Lopez argues that he provided these documents by February 28, 2006, and the regulation’s thirty-day clock started at that time. In the usual case, these documents would show that an injured party was employed at the time of the accident, the amount he or she earned through that employment, and that the party was no longer able to work because of the injury. But another factor comes into consideration when the insured is injured on the job. Under § 10-4-707(5), an injured worker’s entitlement to PIP lost-income benefits is reduced to the extent that worker receives lost income benefits under the workers’ compensation statute. Tate v. Indus. Claim Appeals Office, 815 P.2d 15, 19 (Colo. 1991). Thus, in a case such as this, information regarding the injured party’s employment and the severity of the party’s injury, standing alone, is not sufficient to allow the insurer to determine the amount of benefits. Nevertheless, even if we assume for the sake of argument that Mr. Lopez had provided the documentation required by the regulation by February 28, 2006, the regulation goes on to provide that [i]f an insurer does not pay a claim for benefits under § 10-4-706, C.R.S. within 30 days of receipt of the appropriate documents described in this regulation and as set forth in § 10-4-708, C.R.S., the insurer shall immediately notify the PIP claimant or the claimant’s representative . . . of the reason(s) the claim has not been paid. If the claim has not been paid because an investigation is underway, the insurer shall document in the claim file the actions being taken to investigate the claim and the efforts being made to promptly conclude the investigation. Am. Reg. 5-2-8(4)(D). -13- The record reveals that United Fire informed Mr. Lopez that it was not paying basic PIP lost-income benefits because the workers’ compensation information was ambiguous and Mr. Lopez had made no specific claim as to the amount of benefits owed. Thus, the issue is whether United Fire’s delay in payment for these reasons constituted bad faith or a willful and wanton failure to pay benefits when due. As noted above, to show that United Fire acted in bad faith, Mr. Lopez had to show that United Fire acted: “(1) unreasonably and (2) with knowledge of or reckless disregard of its unreasonableness.” Dale, 948 P.2d at 551. To show that United Fire’s actions in paying those basic PIP benefits constituted a willful and wanton failure to pay benefits when due, Mr. Lopez had to establish that United Fire “act[ed] without justification and in disregard of [his] rights.” Id. (quotation omitted). In Dale, the Colorado Supreme Court explained that a willful and wanton failure to pay a claim is not identical to a claim of bad faith, holding that while “[p]roof of willful and wanton conduct as we have defined it will also prove that the insurer knowingly or recklessly acted unreasonably toward its insured . . . a finding that the insurer’s conduct was not willful and wanton is not the equivalent of a finding that the insurer did not act in bad faith.” Id. The court held this was so “because willful and wanton conduct under the No-Fault Act is a subset of insurance bad faith” in that “[w]hile a willful and wanton claim under the -14- No-Fault Act is limited to the circumstances concerning the refusal to pay insurance benefits when due, the tort of bad faith breach of an insurance contract encompasses an entire course of conduct and is cumulative.” Id. The Colorado Supreme Court thus held that although the “element of reasonableness” in both claims could be considered equivalent, the claims themselves could not be considered equivalent and “a finding on the element of reasonableness in the willful and wanton claim may be preclusive with respect to the same element in the bad faith claim” only if the evidence that supports the common-law bad faith claim is identical to the evidence that supports the statutory willful and wanton conduct claim. Id. at 552. In the present case, the assertion under both claims is a failure to pay PIP benefits when due and the evidence supporting both claims was identical. We therefore see no difference between the burdens of proof required for each claim and, as explained below, hold that United Fire’s actions were reasonable as a matter of law. In his benefits application, Mr. Lopez claimed that he either was eligible for or had received workers’ compensation in the amount of $213.33 per week. To support this claim he provided an indemnity activity log from the workers’ compensation insurer, Pinnacol. After receiving notice of Mr. Lopez’s claim, United Fire wrote a number of letters attempting to obtain an executed application for PIP benefits, wage and medical authorizations, information regarding the amount of workers’ compensation benefits Mr. Lopez had received, and the -15- amount of PIP benefits he was claiming. United Fire’s correspondence consistently reiterated that Mr. Lopez had failed to supply the information necessary for a valid claim. The record shows no response to this correspondence until February 27, 2006, when Mr. Lopez sent United Fire a letter disputing its contention that he had not, at that point, properly submitted a claim. That letter enclosed further documentation regarding his inability to work, but provided no new information regarding workers’ compensation payments. On March 23, 2006, Mr. Reihmann sent a letter to Mr. Lopez’s legal counsel in which he reasserted United Fire’s position that a proper insurance claim for lost income had not been filed by Mr. Lopez because the indemnity activity log appeared to pay Mr. Lopez more than the basic PIP weekly benefit. The letter asserted: You have provided no assertion of what the amounts [owed by United Fire] should be during the first year from the date of the accident, and indeed admitted that neither you nor your client had access to the Worker’s Compensation file or documentation of the settlement of the Worker’s Compensation claim, for United Fire to make a reasoned determination of what may be owed during the first year. Aplt. App. at 227. United Fire further claimed “the offset that United Fire is entitled to is still unclear, since you have yet to provide us with a copy of any release signed by your client outlining what the Pinnacol payments represented.” Id. The letter complained that because “[t]he Pinnacol Indemnity Activity document indicates that your client was paid $19,221.76 during the first year” and -16- that the first year of PIP payments under either the enhanced or basic PIP formula would be less than that amount, “it does not appear that you have provided sufficient documentation as to any [wage] loss [as to the first year of disability] at this time.” Id. at 227-28. On appeal, Mr. Lopez argues that “the fact that United Fire came up with an incorrect number in reading the figures on the Pinnacol Assurance log . . . does not establish that, as a matter of law, it acted reasonably.” Aplt. Reply Br. at 5. We believe that under the circumstance of this case no reasonable jury could find that United Fire acted unreasonably in trying to obtain more information regarding the amount of workers’ compensation payments. First, United Fire–not Mr. Lopez–was the proactive party in trying to obtain the information necessary to properly handle the claim. Second, the indemnity activity log provided by Mr. Lopez is unclear as to the amount of workers’ compensation lost-income payments he received. 9 Third, until March 23, 2006, Mr. Lopez never responded 9 Although it is not clear how United Fire arrived at its $19,221.76 figure, the log shows a number of different payments being made. Under “Comp Code PP,” the log shows $35,527.52 in payments consisting of two “Regular” payments of $426.66, a “Regular” payment of $170.38, a “Lump Sum” payment of $9,503.82, and a “Settlement” of $25,000. Aplt. App. at 230-31. Under “Comp Code TT,” the log shows $9,264.62 in payments, consisting of one “Regular” payment of $304.76, and twenty-one “Regular” payments of $426.66. Id. The $426.66 regular payments, under both the PP and TT “Comp Code” sections are all for two-week periods, which would be consistent with the application’s claim that Mr. Lopez was entitled to $213.33 per week in workers’ compensation benefits. Id. But there is nothing to explain the difference between the payments under the PP and TT codes, what the lump sum and settlement payments were for, (continued...) -17- to United Fire’s inquiries regarding its inability to determine the amount of workers’ compensation benefits received or the amount of benefits being claimed. On that date, Mr. Lopez’s counsel sent American Family’s counsel a letter–and forwarded a copy of this letter to United Fire’s counsel–which specifically set forth Mr. Lopez’s calculations showing the amount of workers’ compensation received and the amounts he claimed were owed by the insurers. Even this letter, since it was addressed to American Family’s counsel, made no attempt to address United Fire’s prior correspondence. Less than thirty days from its receipt of this letter, United Fire acknowledged that a valid PIP lost-income claim had been received and paid the basic PIP lost-income benefits, despite the fact that it “still ha[d] questions regarding the income amounts already paid to [Mr. Lopez] as reflected in the Pinnacol Indemnity Activity document.” Aplt. App. at 359. Under these facts, no reasonable jury could determine that United Fire’s fifteen-day delay in paying basic PIP benefits was unreasonable. B. Bad Faith and a Willful and Wanton Claim Regarding Enhanced PIP Benefits As noted above, United Fire voluntarily reformed the insurance contract to include enhanced PIP lost-income benefits from October 14, 2005, and began paying Mr. Lopez for income lost after that date. It chose October 14 because 9 (...continued) or what the remaining regular payments covered. -18- its internal investigation had revealed that on that date one of its claim representatives, while investigating a different insurance claim, had incidentally become aware of Mr. Lopez’s potential claim. United Fire advanced this same argument on summary judgment, asserting the effective reformation date “should at best be to when United Fire was put on notice that such an issue even exist[ed],” Aplt. App. at 113, and that it should only have to pay Mr. Lopez for wages he lost after it became aware its policy violated Colorado law. It argued “reformation should not make an insurer liable for coverage it could not foresee during a time it reasonably did not know of such exposure.” Id. at 351. Mr. Lopez disagreed, arguing that although United Fire had reformed the insurance policy to include enhanced PIP coverage, its failure to reform the policy to pay those benefits from the date the policy was issued constituted bad faith and a willful and wanton failure to pay benefits when due under § 10-4-708(1.8). Resort to a judicial forum is not necessarily bad faith–or willful and wanton conduct–because an insurer may legally challenge claims as long as the legal questions presented by its arguments are fairly debatable. See Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1275 (Colo. 1985); Brennan, 961 P.2d at 557; Brandon v. Sterling Colo. Beef Co., 827 P.2d 559, 561 (Colo. App. 1991). But Mr. Lopez argued to the district court, and argues to this court on appeal, that a review of the applicable case law shows that United Fire’s arguments were not fairly debatable. -19- Under Colorado law, when an insurer delays paying insurance benefits to pursue legal arguments, the reasonableness of that party’s decision is a question of law. See Tozer v. Scott Wetzel Servs., Inc., 883 P.2d 496, 499 (Colo. App. 1994) (“To submit such a question to the jury would not only require the [lay] jurors to assess the reasonableness of a legal argument, . . . it would require the parties . . . to provide the jurors with legal advice through the guise of expert testimony.”). In support of its legal arguments, United Fire cited to the Clark line of decisions by the district court and this court. 10 We need not examine the Clark cases in detail, however, because United Fire also relied on Breaux v. American Family Mutual Insurance Co., 387 F. Supp. 2d 1154 (D. Colo. 2005). In Breaux, which was decided approximately six months before United Fire’s summary judgment motion was filed, the insured purchased an insurance policy from American Family in February 2000. At that time, American Family offered several optional enhanced PIP coverages but did not offer the enhanced PIP lost-income coverage required by § 10-4-710(2)(a)(II). Evidence was presented that American Family amended its general PIP endorsement in January 2001, to offer coverage complying with § 10-4-710(2)(a)(II), but made no change to the insured’s policy. The insured 10 These cases are Clark v. State Farm Mut. Auto. Ins. Co. (Clark I), 319 F.3d 1234, 1241 (10th Cir. 2003); Clark v. State Farm Mut. Auto. Ins. Co. (Clark II), 292 F. Supp. 2d 1252, 1268 (D. Colo. 2003); and Clark v. State Farm Mut. Auto. Ins. Co. (Clark III), 433 F.3d 703, 713 (10th Cir. 2005). -20- was injured in an automobile accident in September 2001 and eventually sued to have her policy reformed “to include enhanced PIP benefits [under § 10-4-710(2)(a)(II)] as of the issuance date of the policy.” Breaux, 387 F. Supp. 2d at 1164. The district court found that reformation was clearly proper but exercised its discretion to set “the appropriate date of reformation [as] the date that [American Family] became aware that it was not in compliance with section 10-4-710(2)(a)(II) as to Plaintiff’s policy.” Id. (emphasis added). But the district court did not pick the date of issuance of Ms. Breaux’s policy as the reformation date, despite the fact that there is nothing in the opinion showing American Family should not have been aware at the time of issuance of either (1) what coverages it offered, or (2) what Colorado law required. The court instead chose January 1, 2001, as the proper reformation date, which was the date American Family amended its PIP endorsement to add § 10-4-710(2)(a)(II) coverage. Thus, it appears the court chose the date that it was clear American Family had realized its previous PIP coverage options violated Colorado law. United Fire’s argument was essentially that the district court should follow its ruling in Breaux and exercise its discretion to reform the insurance policy to the date United Fire received notice that it had failed to offer the proper enhanced PIP lost-income coverage in regard to the Pueblo Sanitation policy. 11 United Fire 11 More specifically, United Fire argued that the policy should be reformed to the date it realized it could not prove it had made the required offer of coverage. -21- argues this legal position was fairly debatable and we agree. Consequently, we affirm the court’s decision that it was not bad faith or a willful and wanton failure to pay benefits when due for United Fire to delay payment of enhanced PIP lost-income benefits by relying on its previous decision in Breaux. 12 Mr. Lopez also complains that United Fire acted in bad faith and committed willful and wanton conduct by delaying payment of enhanced PIP lost-income benefits after the district court ordered that such benefits were due. He argues the district court could not properly grant summary judgment because the benefits had not been paid at the time of the court’s order and the court therefore had no way of determining if future acts of bad faith or willful and wanton conduct would occur. We first note that Mr. Lopez’s response to United Fire’s summary judgment motion did not argue that the court could not rule on the motion until the benefits were paid. Kelly, 410 F.3d at 676 (holding we review issues not raised only for 12 Mr. Lopez also argues for the first time on appeal that the effective date of reformation is irrelevant to the amount of enhanced PIP benefits owed to Mr. Lopez. It appears Mr. Lopez is arguing that because United Fire admitted that the reformation date was, at latest, the middle of October 2005, then (1) enhanced PIP coverage–i.e., benefits equaling eighty-five percent of his lost income from the day after the date of the accident–was at least incorporated as of that date, and thus (2) once he had presented reasonable proof of his claim at the end of February 2006, those benefits–i.e., lost-income from the day after the accident–should have been paid within thirty days. Mr. Lopez never raised this argument in the district court. We review issues not raised in the district court only for plain error, which is not present here. Kelly v. Metallics W., Inc., 410 F.3d 670, 676 (10th Cir. 2005). -22- plain error). But even if the argument had been made it would clearly have failed. Mr. Lopez’s bad faith and willful and wanton conduct claims necessarily had to concern conduct by United Fire that occurred prior to the court’s order. In this case the claims regarding the enhanced PIP lost-income benefits were based on the reasonableness of the legal arguments regarding reformation put forth by United Fire. Those arguments were properly settled by the court in its summary judgment order. Mr. Lopez could not have brought a proper claim arguing that a wrong might be committed at some point in the future. Even if a claim existed for conduct by United Fire that occurred after the court’s order, it would be a separate claim that is not properly reviewable in this appeal.