Opinion ID: 171597
Heading Depth: 2
Heading Rank: 2

Heading: The Reformation Date in the February 13, 2007 Order of Decision

Text: On February 13, 2007, the district court granted in part and denied in part Mr. Whitehead's Motion to Increase Punitive Damage Award and Enter Judgment. The district court determined the date of reformation of Mr. Whitehead's insurance policy to be the date of the order. Consequently, the district court denied Mr. Whitehead's requests for interest and statutorily-trebled damages. Mr. Whitehead appeals the district court's determination that the reformation date should be the date of the order. First, Mr. Whitehead argues that the district court's weighing of whether this case resembled other reformation cases was incorrect. Second, Mr. Whitehead argues that the selection of a reformation date after the inception of the policy was contrary to Colorado law. Third, Mr. Whitehead argues that the district court's analysis did not address factors this court has stated are relevant to establishing a reformation date. Fourth, Mr. Whitehead argues that the district court improperly refused to follow the jury's finding that American Family acted unreasonably and in bad faith. Finally, Mr. Whitehead suggests that at the latest, the reformation date should be when American Family knew that no compliant offer was made.
We have recognized that the selection of a reformation date is an equitable decision, based on the particular circumstances of each case. Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d 703, 711 (10th Cir.2005) ( Clark II ). As a result, we review for an abuse of discretion. Id. `A district court abuses its discretion where it commits a legal error or relies on clearly erroneous factual findings, or where there is no rational basis in the evidence for its ruling.' Id. (quoting Davis v. Mineta, 302 F.3d 1104, 1111 (10th Cir.2002)). We review the district court's underlying factual findings for clear error, and review legal determinations de novo. Id. We will not disturb the district court's selection of an effective reformation date unless [we have] a definite and firm conviction that the [district] court has made a clear error in judgment or exceeded the bounds of permissible choices in the circumstances. Clark II, 433 F.3d at 713 (quotation omitted).
In Clark v. State Farm Mut. Auto. Ins. Co., 319 F.3d 1234, 1243-44 (10th Cir.2003) ( Clark I ), we identified a nonexhaustive list of factors to consider when a court exercises its equitable power. Central to these factors is whether any previous, controlling ruling should have guided the parties in their practices related to the policy at issue. For example, in Clark I, we found that reformation of the policy in that case was necessary to include extended PIP benefits that covered pedestrians. Id. at 1242. In making this finding, we relied on the Colorado Court of Appeals decision in Brennan v. Farmers Alliance Mut. Ins. Co., 961 P.2d 550 (1998), which also reformed a policy to include PIP benefits covering pedestrians. To determine the effective reformation date, we analyzed the retroactive and prospective impact of the Brennan decision. Clark I, 319 F.3d at 1243 n. 6. The factors key to our analysis were: (1) the degree to which reformation from a particular date would upset past practices on which the parties may have relied and whether [defendant] anticipated the rule in Brennan; (2) how reformation from a particular effective date would further or retard the purpose of the rule in Brennan; and (3) the degree of injustice or hardship reformation from a particular effective date would cause the parties. Id. at 1243. We noted that [r]elevant evidence might include ... whether [defendant] anticipated the Brennan decision, compiled information of Brennan 's effect on claims processing, relied on the interpretation of CAARA rejected in Brennan, or had the ability to notify or considered notification of insureds and third-party beneficiaries about the Brennan decision. Id. at 1244. Ultimately, we approved of the district court's selection of the date of its order as the reformation date, noting `[t]he fact that the insured may be entitled to obtain a reformation of the policy does not impose any obligation upon the insurer to conform to such `reformed' policy before a court has made such reformation.' Clark II, 433 F.3d at 713 (quoting Clark I, 319 F.3d at 1244). This case does not involve the same substantive claims as those present in Clark I and Brennan. The basis of Mr. Whitehead's claims was that American Family's actions were insufficient to offer enhanced PIP benefits in compliance with § 10-4-710. As the district court noted, and Mr. Whitehead does not challenge, [n]o court had previously analyzed or defined the parameters of whether or when an offer is reasonably calculated to allow a purchaser an opportunity to make an informed decision. App. at 1103. Mr. Whitehead, however, contends that American Family should have known that its offer was insufficient under any standard and should have anticipated the informed decision standard. The informed decision standard is adopted from Allstate Ins. Co. v. Parfrey, 830 P.2d 905 (Colo. 1992) (discussing the sufficiency of an offer under a different statute than the CAARA). After the trial in this case, the Colorado Court of Appeals in Munger v. Farmers Ins. Exch., 174 P.3d 832 (2007), applied Parfrey to the analysis of offers of enhanced PIP coverage under § 10-4-710. The Munger court noted that there was a split among the [f]ederal courts in Colorado on the applicability of Parfrey to such offers. Id. at 834. As a result, we disagree with the notion that American Family should have anticipated the application of Parfrey. Without a prior controlling case, such as Brennan, we adapt the Clark I factors to establish a reformation date. When we omit any reference to Brennan, the following factors remain: (1) the degree to which reformation from a particular date would upset past practices on which the parties may have relied; and (2) the degree of injustice or hardship reformation from a particular effective date would cause the parties. Both of these factors relate to whether American Family should have anticipated that it would have to pay the enhanced PIP benefits. Whether the insurer should have anticipated its obligation to pay the benefits at issue is the analysis the Brennan court applied in its determination of a reformation date when no controlling case existed. Brennan, 961 P.2d at 556. While the district court did not explicitly consider or adjust the Clark I factors, the court compared the present facts to those in Brennan and examined whether American Family should have anticipated its obligation to pay enhanced PIP benefits. There is no indication that the district court erred in its judgment or exceeded the bounds of permissible choices in these circumstances. Accordingly, we will not disturb the district court's selection of the date of the February 13, 2007 order as the reformation date. This resolves Mr. Whitehead's arguments that relate to what factors the district court should have considered when selecting the reformation date. Mr. Whitehead's remaining arguments do not affect the above analysis. Mr. Whitehead's contention that the district court improperly weighed the resemblance of this case to other reformation cases does not address the district court's selection of a reformation date. Whether reformation is appropriate is distinct from when reformation should occur. The district court found reformation to be appropriate. App. at 1102 ([A]lthough the instant case is factually distinguishable, it is conceptually analogous to the other reformation cases discussed above.). Mr. Whitehead's assertion that Colorado law requires the reformation date to be the date the policy was created is not compelling. Repeatedly, we have considered the selection of a reformation date to be an equitable decision that requires consideration of the particular circumstances of each case. Clark II, 433 F.3d at 712 (quoting Clark I, 319 F.3d at 1243); see also Brennan v. Farmers Alliance Mut. Ins. Co., 961 P.2d 550, 556 (Colo.Ct.App. 1998) (The remedy of reformation is an equitable one, ... and the trial court's formulation of such remedy is within its discretion.). This requirement of individualized analysis contradicts Mr. Whitehead's assertion that Colorado law mandates a specific reformation date. May, 263 Fed.Appx. at 681-82 (similarly rejecting the same argument). Because we conclude the district court did not err in its selection of February 13, 2007 as the reformation date of Mr. Whitehead's policy, the district court did not err in its denial of interest and statutorily-trebled damages.