Opinion ID: 2136
Heading Depth: 3
Heading Rank: 3

Heading: Reformation Date

Text: In Fincher I, we instructed the district court to determine the reformation date by applying the three-factor test from Clark I. See Fincher I, 76 Fed. Appx. at 922-23. On remand, the court considered four possible reformation dates, the earliest of which was the date of Fincher’s accident (May 8, 1994). In describing the effect of choosing the date of the accident as the reformation date, it explained: In essence, reformation as of [the date of Fincher’s accident] would indicate that Prudential should have been aware of its obligation to provide offers and policies with an APIP cap no lower than 200,000 dollars, that there was no reasonable basis for Prudential not to have done so, and that other relevant considerations do not weigh in favor of a later reformation date. (Appellants’ App. Vol. VII at 2252.) The court applied the three-factor test from Clark I -8- and determined the policy should be reformed as of the date of Fincher’s accident. Prudential contends the court should have utilized the test outlined in Allstate Ins. Co. v. Parfrey, 830 P.2d 905 (Colo. 1992) (Parfrey),8 rather than the Clark I test. Alternatively, it argues even if the court did not err in using the Clark I test, it applied the test incorrectly. It contends the court should have selected the date of its order as the effective date of reformation. The selection of a reformation date “is an equitable decision to be determined by the trial court based on the particular circumstances of each case.” Clark I, 319 F.3d at 1243. Our review is for an abuse of discretion. See Clark III, 433 F.3d at 709. “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. We examine the district court’s underlying factual findings for clear error, and its legal determinations de novo.” Id. (citation and quotations omitted). 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 8 In Parfrey, the Colorado Supreme Court adopted a multi-factorial “totality of the circumstances” test for determining whether an insurer has fulfilled its statutory duty of notification and offer. 830 P.2d at 914. It explained: [A] court may appropriately consider such factors as the clarity with which the purpose of UM/UIM coverage was explained to the insured, whether the explanation was made orally or in writing, the specificity of the options made known to the insured, the price at which the different levels of UM/UIM coverage could be purchased, and any other circumstances bearing on the adequacy and clarity of the notification and offer. Id. at 913. -9- exceeded the bounds of permissible choice in the circumstances.” Id. at 713 (quotations omitted). This case does not qualify. The court did not commit a legal error in utilizing the Clark I test. In Clark I, we ordered reformation of an insurance policy because the insurer failed to offer APIP benefits which covered pedestrians, in violation of CAARA. 319 F.3d at 1241. In Parfrey, the issue was not whether the insurance company offered CAARA-compliant coverage; instead, the issue was whether the insurer satisfied its one-time duty to notify the insured of the nature and purpose of certain coverage (coverage for uninsured and underinsured motorists). See 830 P.2d at 913. Thus, the Parfrey test is used to determine the sufficiency of an offer of CAARA-compliant coverage. See, e.g., May v. Travelers Prop. Cas. Co. of Am., 263 Fed. Appx. 673, 683 (10th Cir. 2008) (unpublished) (applying Parfrey test in determining whether the insurer made a sufficient offer of CAARAcompliant APIP benefits).9 By contrast, the Clark I test is used when the benefits offered do not comply with CAARA. In Fincher I, we held Fincher was entitled to reformation because the APIP benefits offered by Prudential did not comply with CAARA. Clark I therefore presents the proper test. Under Clark I, a district court must consider three factors in determining the effective date of reformation: (1) the degree to which reformation from a particular effective date would upset past practices on which the parties may have relied and whether [the 9 Unpublished decisions are not binding precedent. We mention May as we would any other non-precedential authority, persuasive because of its reasoned analysis. See 10th R. 32.1(A). - 10 - insurer] 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. 319 F.3d at 1243. “These factors do not necessarily have equal weight but are to be evaluated on the basis of the strength of the equitable and policy considerations underlying each.” Id. at 1243-44 (quotations omitted). Prudential argues the district court misapplied each of these factors. We disagree. In applying the Clark I test, the court did not make a clear error in judgment or exceed the bounds of permissible choice. On the contrary, its decision was thorough and wellreasoned. The court considered the first factor (reliance and anticipation) to weigh in favor of an early reformation date. The court found Prudential knew of the $200,000 cap on APIP benefits when it became effective (January 1, 1990) and did not act diligently in pursuing approval of its forms reflecting the $200,000 cap.10 The court found reforming 10 Prudential’s policy forms complied with CAARA and were approved by the Colorado Division of Insurance (DOI) until January 1, 1990, when the lowest permissible cap on APIP benefits was increased to $200,000. See supra n.2. Prudential began revising its policy forms to reflect the $200,000 cap; however, the DOI disapproved of Prudential’s revised forms on multiple occasions due to problems unrelated to the policy cap. Prudential claims it was “caught between a rock and a hard place” because it was “legally prohibited from using” its new forms prior to receiving DOI approval. (Appellee’s/Cross-Appellant’s Principal & Response Br. at 4.) This is a convenient but unappealing argument. The district court was not persuaded Prudential pursued “with adequate vigilance” the task of making its forms compliant. (Appellants’ App. Vol. VII at 2255). Neither are we. - 11 - the policy as of the date of Fincher’s accident “does not upset the parties’ past practices or their reasonable reliance on applicable legal rules that were clear and predictable.” (Appellants’ App. Vol. VII at 2257.) Prudential contends the district court should have considered whether it could have predicted the rule in Brennan (APIP coverage must include pedestrians), not whether it could have predicted that APIP benefits would be subject to a $200,000 cap. In the district court, however, Prudential argued the degree to which it could have anticipated Brennan “is not directly applicable to this case because Prudential (as opposed to some other insurers) was already providing extended PIP coverage to pedestrians prior to Brennan.” (Id. at 2123.) The court adopted this very argument—it found Prudential could not have anticipated the rule in Brennan but stated that fact “carries little weight” because Brennan “is not directly relevant to the key flaw in the Prudential policy,” which was Prudential’s offer of improperly capped APIP coverage. (Id. at 2253.) Prudential cannot now complain of an alleged error it induced or invited in the district court. See Brown v. Presbyterian Healthcare Servs., 101 F.3d 1324, 1332 (10th Cir. 1996). According to Prudential, the court also erred by not considering Prudential’s belief it was complying with CAARA by instructing its agents to orally offer APIP benefits with the $200,000 cap. The court considered this argument but found it did not weigh in favor of a later reformation date because Prudential did not prove it made a compliant - 12 - offer of APIP benefits to the insured here.11 As to the second factor (furthering the purpose of Brennan), the district court found it also weighed in favor of an early reformation date because such a date “tends to ensure that Fincher receives all of the coverage to which she is entitled, and that she receives compensation for the fact that she did not receive that coverage in a timely fashion.” (Appellants’ App. Vol. VII at 2260.) The court reiterated that, at the time the policy was issued and at the time of the accident, CAARA required insurers to offer APIP benefits capped at no less than $200,000. This requirement “was established clearly at all times relevant to this case” and an early reformation date “will have the effect of deterring violation of the clear requirements of Colorado law.” (Id.) Prudential contends an early reformation date does not further the purpose of Brennan because Prudential reasonably believed it was complying with CAARA by instructing its agents to orally offer APIP benefits up to $200,000 and by paying APIP benefits up to $200,000 when an insured selected APIP benefits capped at $150,000. The district court considered, and rejected, this argument. The court looked at the purpose of Brennan more broadly—as not just ensuring pedestrians receive APIP coverage, but ensuring all individuals receive the statutorily required coverage. Reformation is an 11 Prudential claims it routinely paid APIP benefits up to $200,000 (in spite of its policies’ nominal $150,000 limit) when an insured selected APIP benefits. Its claim is not disputed. From that undisputed assertion it argues it was, in fact, complying with CAARA. While this may (and probably did) impact the equitable considerations in the reformation calculus in this case, it does not address the problem with Prudential’s deficient offer of benefits and is not relevant where, as here, the insured did not select APIP benefits. - 13 - equitable remedy and the court did not clearly err in its analysis As to the third factor (injustice or hardship), the district court recognized “both parties face some hardships depending on the reformation date” but concluded “the balance of these hardships weighs in favor of an earlier reformation date.” (Id. at 2262.) Prudential says Fincher faced no hardship because all of her PIP-compensable bills were timely paid by Prudential and other insurers and the delay in payment “enabled Fincher to pocket duplicative reimbursement of $92,500 in medical expenses and $202,000 in interest at 18%.” (Appellee/Cross-Appellant’s Principal & Response Br. at 22.) Fincher may not ultimately have suffered any financial hardship, but she did not receive full payment from Prudential until twelve years after her accident and after six years of litigation. That delay surely counts as a hardship.