Court Opinion

ID: 2764987
Source: CourtListenerOpinion
Date Created: 2014-12-29 17:00:58.736073+00
Date Added: 2024-06-11T11:27:21.580401
License: Public Domain

FILED
                                                                  United States Court of Appeals
                                      PUBLISH                             Tenth Circuit

                     UNITED STATES COURT OF APPEALS                   December 29, 2014

                                                                      Elisabeth A. Shumaker
                                  TENTH CIRCUIT                           Clerk of Court

 KATHRYN KIPLING,

       Plaintiff - Appellee,

 v.                                                        No. 13-1389
 STATE FARM MUTUAL
 AUTOMOBILE INSURANCE
 COMPANY, d/b/a Minnesota Division of
 State Farm Mutual Automobile Insurance
 Company,

       Defendant - Appellant.

           APPEAL FROM THE UNITED STATES DISTRICT COURT
                   FOR THE DISTRICT OF COLORADO
                    (D.C. No. 1:11-CV-01948-BNB-CBS)

Franklin D. Patterson of Frank Patterson & Associates, P.C., Greenwood Village,
Colorado, for Defendant - Appellant.

Bradley A. Levin (Kerri J. Atencio with him on the brief), of Roberts Levin Rosenberg
PC, Denver, Colorado, for Plaintiff - Appellee.

Before BRISCOE, Chief Judge, HARTZ and HOLMES, Circuit Judges.

HARTZ, Circuit Judge.
I.     INTRODUCTION

       The question before us is one of conflict of laws. Plaintiff Kathryn Kipling sued

State Farm Automobile Insurance Company in Colorado federal district court for breach

of contract because it did not pay her benefits under four insurance policies issued in

Minnesota. The court determined that she would be entitled to benefits under Colorado

law but not under Minnesota law. It then applied tort conflict-of-laws principles to rule

that Colorado law governed. We hold that the court erred by not applying contract

conflict-of-laws principles. With appellate jurisdiction under 28 U.S.C. § 1291, we

reverse the judgment below and remand for further consideration.

II.    BACKGROUND

       Plaintiff and her husband Christopher Kipling resided in Colorado. On July 27,

2009, she was injured and he was killed in a motor-vehicle collision in Colorado. Their

vehicle was a 2005 Chevy Suburban provided by Mr. Kipling’s employer, Quicksilver

Express Courier, Inc. (Quicksilver), for his business and personal use. Quicksilver is

incorporated in Minnesota but has a wholly owned subsidiary in Colorado, Quicksilver

Express Courier of Colorado, Inc. (Quicksilver Colorado).

       The sole cause of the accident was the negligence of the driver of the vehicle that

collided with the Suburban. But the driver of that vehicle had inadequate liability

insurance to cover the Kiplings’ damages. Plaintiff therefore sought underinsured

motorist (UIM) benefits under several State Farm policies. The obvious policy to collect

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on was the policy on the Suburban issued in Colorado to Quicksilver (although the

address on the policy was that of Quicksilver Colorado). State Farm paid the UIM

benefits available under that policy and also under a separate policy issued in Colorado

by State Farm to Quicksilver on a 2005 Ford pickup.

       The dispute in this case concerns Plaintiff’s request for additional UIM benefits

under four State Farm policies issued in Minnesota to Quicksilver (the Minnesota

Policies). The address for Quicksilver on the policies was in Minnesota. The policies

insured four vehicles provided to four Minnesota employees of Quicksilver. They were

obtained through an insurance agent in Minnesota but executed by State Farm in Illinois.

Neither Plaintiff nor her husband was a named insured on any policy, and the vehicles

were never driven in Colorado. Each of the policies describes the covered vehicle on the

declaration page as “YOUR CAR,” Aplee. Supp. App. at 107, 113, 119, 125, and the

UIM coverage provision defines insured to mean “any person while occupying: (a) your

car; (b) a newly acquired car; or (c) a temporary substitute car,” id. at 110, 116, 122, 128

(emphasis omitted). Under this provision the Kiplings would not be eligible for UIM

coverage under any of the Minnesota policies because they were not occupying any of the

insured vehicles when they were injured. State Farm denied the claims.

       On July 27, 2011, Plaintiff filed in the United States District Court for the District

of Colorado a breach-of-contract claim against State Farm, invoking diversity

jurisdiction, 28 U.S.C. § 1332, and seeking payment of UIM benefits. State Farm filed a

motion for summary judgment arguing that Minnesota law applied and prohibited
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stacking of UIM policies (that is, obtaining UIM benefits under more than one policy)

and that the Kiplings did not meet the definition of insured under the language of the

policies. Plaintiff argued that Colorado law applied, permitted stacking, and prohibited a

policy from limiting UIM coverage to those occupying the covered vehicle at the time of

the accident, as in the Minnesota policies. The parties did not dispute that if Minnesota

law applied, Plaintiff was not entitled to coverage. The district court denied the

summary-judgment motion, agreeing with Plaintiff that Colorado law applied.

       After denying a motion for reconsideration by State Farm, the district court

conducted a jury trial to determine damages and entered judgment on the verdict. State

Farm filed a motion to alter or amend the judgment under Fed. R. Civ. P. 59(e), arguing

that even under Colorado law it would not have to pay UIM benefits because Colorado

law did not prohibit the policy from tying UIM coverage to occupancy of the insured

vehicle. The district court denied the motion as “an improper attempt to advance a new

argument which could and should have been raised prior to trial and the entry of

judgment.” Aplt. App., Vol. 2 at 311. It further stated that even if the motion had been

appropriate, the court did not agree that Colorado law required altering the judgment.

       State Farm raises two arguments on appeal: (1) even under Colorado law the

Minnesota Policies would not provide UIM benefits to Plaintiff because Colorado law

does not prohibit tying UIM coverage to occupancy of the insured vehicle and (2) the

district court erred in applying tort conflict-of-laws principles in resolving which state’s

substantive law governed Plaintiff’s claim. We reject the first argument because it was
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not timely raised below. But we agree with the second and therefore reverse and remand

for the district court to apply contract conflict-of-laws principles to determine whether

Minnesota or Colorado substantive law governs.

III.   DISCUSSION

       A.     Coverage Under Colorado Law

       State Farm contends on appeal that the district court erred in concluding that

Colorado law prohibits tying UIM coverage to occupancy of the insured vehicle. It

argues that “the policy provisions which define an insured as a person occupying the

business named insured’s vehicle as shown on the declaration page are valid and not

contrary to the [Colorado UIM] statute nor public policy in Colorado.” Aplt. Br. at 18. It

recognizes that DeHerrera v. Sentry Insurance Co., 30 P.3d 167 (Colo. 2001), said that

the UIM statute “require[s] an insurer to provide [UIM] benefits . . . without regard to the

vehicle occupied by the insured at the time of injury,” id. at 169, so that the insurer in that

case could not decline UIM benefits to the son of a named insured on the ground that the

son, who was injured while riding a motorcycle, did not occupy the insured automobile

when he was injured. But State Farm asserts that Farmers Insurance Exchange v.

Anderson, 260 P.3d 68, 79 (Colo. App. 2010), interpreted DeHerrera as permitting

policies to define insured based on occupancy in the insured vehicle so long as the person

seeking coverage is not the named insured or a resident relative.

       The argument is a respectable one, perhaps even correct. But we do not address it.

When State Farm raised it in its Rule 59(e) motion, one of the grounds on which the
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district court rejected it was that it was untimely. We review a denial of a Rule 59(e)

motion for abuse of discretion. See Butler v. Kempthorne, 532 F.3d 1108, 1110 (10th

Cir. 2008). And we hold that the district court did not abuse its discretion in ruling the

motion untimely.

       State Farm does not dispute that a motion for reconsideration under Rule 59(e) “is

not appropriate to . . . advance arguments that could have been raised in prior briefing.”

Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000). But it contends that

it had presented the argument before its motion. The district court did not think so. And

the record supports the court.

       Our review of the record indicates, as the district court found, that State Farm had

never previously raised the argument in its Rule 59(e) motion that Colorado law

permitted its policy provision limiting UIM coverage to persons occupying the insured

vehicle when injured. In its motion for summary judgment, State Farm advanced three

arguments: (1) Minnesota law applied and prohibited stacking of UIM policies; (2) the

Suburban was not a covered vehicle under the language of the Minnesota Policies; and

(3) the Kiplings did not meet the definition of insured under the language of the

Minnesota Policies. None of State Farm’s arguments addressed Colorado law; they

assumed that Minnesota law applied. The opening paragraph of the motion’s Conclusion

section makes this clear:

              Both under the effective choice of law provision in the Minnesota
       policy contracts, and applying the most substantial relationship test,
       Minnesota law would apply to this question of contract interpretation and
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       Plaintiff would not be allowed to stack the UIM coverages of the four
       vehicles and would be exclusively limited in her recovery to the UIM
       coverage for the vehicle she was occupying at the time of the accident—the
       2005 Chevrolet Suburban.

Aplt. App., Vol. 1 at 43.

       In response, Plaintiff expressly advanced the opposite of what State Farm now

asserts, saying that “State Farm’s attempt to tie Mr. Kipling’s entitlement to UIM benefits

to the car he was occupying at the time of the accident is prohibited under Colorado law.”

Id. at 98. State Farm’s reply brief did not challenge this assertion of Colorado law but

merely reiterated its view that “Minnesota law applies, and it permits the language in the

policy.” Id. at 126.

       Likewise, at the hearing on summary judgment State Farm did not respond to

Plaintiff’s contention that under Colorado law, coverage is “person oriented rather than

vehicle oriented.” Id. at 173. Indeed, when the court asked whether, if Colorado law

governed, it would matter “whether Mr. Kipling was in your car as the insurance policies

define that because Colorado law would prohibit tying coverage to a particular

automobile,” id. at 150, State Farm responded that “if he qualifies as an insured under a

Minnesota policy and Colorado law applies then it doesn’t matter what vehicle that

insured might be in under Colorado law,” id. at 150–51. And after Plaintiff agreed “that

if Minnesota law applies then under the anti-stacking rules the plaintiffs have received

everything to which they’re entitled,” id. at 151, State Farm acknowledged that the only

                                             7
issue was which state’s law applied. It later responded to the Court, “Generally, what the

Court’s asking is does—which law applies and I agree that that’s the issue.” Id. at 153.

       State Farm’s pretrial motion for reconsideration of the summary-judgment ruling

went no further. It argued only that the district court erred in its conflict-of-laws analysis

and reiterated that “the central dispute in the matter” was “whether Colorado or

Minnesota law” applied. Id., Vol. 2 at 202 (internal quotation marks omitted). And State

Farm’s reply in support of the motion stated Colorado law on UIM coverage in

conformity with Plaintiff’s views and argued that applying Colorado law to the

Minnesota Policies would produce unacceptable results. In its order on the motion for

reconsideration, the court naturally stated that “it is undisputed that under Colorado law

State Farm is not allowed to tie its underinsured motorist coverage to occupancy in a

particular automobile.” Id. at 241 (citing DeHerrera, 30 P.3d 167).

       State Farm points to its motion for a directed verdict at trial. But that motion only

renewed State Farm’s previous arguments made in its motions for summary judgment

and reconsideration. Also, we reject State Farm’s assertion that Plaintiff conceded in her

response to the Rule 59(e) motion that it had raised this issue of Colorado law.

       Because the district court properly determined that State Farm had failed to raise

its Colorado-law argument before its Rule 59(e) motion, we conclude that the court did

not abuse its discretion in denying the motion as untimely.

       B.     Conflict of Laws

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       We review conflict-of-laws determinations de novo. See Mitchell v. State Farm

Fire & Cas. Co., 902 F.2d 790, 792 (10th Cir. 1990). In a diversity action we apply the

conflict-of-laws rules of the forum state. See TPLC, Inc. v. United Nat’l Ins. Co., 44 F.3d

1484, 1490 (10th Cir. 1995). Accordingly, we apply the conflict-of-laws rules of

Colorado.

       Colorado follows the Restatement (Second) of Conflict of Laws (1971) (the

Restatement) for both contract and tort actions. See Wood Bros. Homes, Inc. v. Walker

Adjustment Bureau, 601 P.2d 1369, 1372 (Colo. 1979) (contract actions); First Nat’l

Bank v. Rostek, 514 P.2d 314, 448‒49 (Colo. 1973) (tort actions); see also AE, Inc. v.

Goodyear Tire & Rubber Co., 168 P.3d 507 (Colo. 2007) (following Restatement § 171

with regard to prejudgment interest); Ficor, Inc. v. McHugh, 639 P.2d 385, 391 (Colo.

1982) (following Restatement § 299 with regard to dissolution of corporation); Dworak v.

Olson Constr. Co., 551 P.2d 198, 199 (Colo. 1976) (following Restatement § 170 in

applying tort conflict principles to covenant not to sue joint tortfeasors).

       The general approach of the Restatement is set forth in § 6. It states that, absent a

statute governing the choice of law, the relevant factors for selecting which state’s

substantive law to apply include:

       (a) the needs of the interstate and international systems,
       (b) the relevant policies of the forum,
       (c) the relevant policies of other interested states and the relative interests
           of those states in the determination of the particular issue,
       (d) the protection of justified expectations,
       (e) the basic policies underlying the particular field of law,
       (f) certainty, predictability and uniformity of result, and
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       (g) ease in the determination and application of the law to be applied.

Restatement § 6.

       The Restatement provides further guidance with respect to particular causes of

action. For tort actions the Restatement provides:

       (1) The rights and liabilities of the parties with respect to an issue in tort are
       determined by the local law of the state which, with respect to that issue,
       has the most significant relationship to the occurrence and the parties under
       the principles stated in § 6.

       (2) Contacts to be taken into account in applying the principles of § 6 to
       determine the law applicable to an issue include:

             (a) the place where the injury occurred,
             (b) the place where the conduct causing the injury occurred,
             (c) the domicil, residence, nationality, place of incorporation and place
             of business of the parties, and
             (d) the place where the relationship, if any, between the parties is
             centered.

Id. § 145.

       And for contract actions, in the absence of a contractual agreement on the choice

of law (which is governed by § 187), it states:

       (1) The rights and duties of the parties with respect to an issue in contract
       are determined by the local law of the state which, with respect to that
       issue, has the most significant relationship to the transaction and the parties
       under the principles stated in § 6.

       (2) In the absence of an effective choice of law by the parties (see § 187),
       the contacts to be taken into account in applying the principles of § 6 to
       determine the law applicable to an issue include:

             (a) the place of contracting,
             (b) the place of negotiation of the contract,
             (c) the place of performance,
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             (d) the location of the subject matter of the contract, and
             (e) the domicil, residence, nationality, place of incorporation and place
                 of business of the parties.

Id. § 188.

       The Restatement specifically addresses “Contracts of Fire, Surety or Casualty

Insurance” in § 193. The term casualty insurance includes “theft insurance, liability

insurance, collision insurance, workmen’s compensation insurance and fidelity

insurance.” Id. § 193 cmt. a. The rule stated in the section is:

       The validity of a contract of fire, surety or casualty insurance and the rights
       created thereby are determined by the local law of the state which the
       parties understood was to be the principal location of the insured risk
       during the term of the policy, unless with respect to the particular issue,
       some other state has a more significant relationship under the principles
       stated in § 6 to the transaction and the parties, in which event the local law
       of the other state will be applied.

Id. § 193.

       The claim in the case before us is one for breach of contract—in particular, the

breach of an insurance contract. Therefore, we readily conclude that Colorado would

apply contract conflict-of-laws principles. Contract principles are “applicable to all

contracts and to all issues in contract.” Id. § 186 cmt. a.

       The district court thought that the Colorado Court of Appeals decision in Ranger

v. Fortune Ins. Co., 881 P.2d 394, 395 (Colo. App. 1994), requires otherwise. We

respectfully disagree. In Ranger the plaintiff sought punitive and treble damages from an

automobile-liability insurer for bad-faith refusal to pay personal-injury-protection (PIP)

benefits. See id. at 394. The insurer argued that under Florida law it was not required to
                                               11
pay the benefits. See id. at 395. The trial court agreed and the plaintiff appealed, arguing

that the trial court should have applied Colorado law. See id. The Court of Appeals

applied Colorado law and reversed. It held that tort conflict-of-law principles governed

the dispute, and that Colorado “had the most significant relationship with the occurrence

and the parties.” Id. The court relied on comment (c) to Restatement § 145 to support

the proposition that “the state where the injury occurred, which is often where the

plaintiff resides, may have the greater interest in the controversy,” id.; and it noted that

the purpose behind the PIP statute was “to avoid inadequate compensation to victims of

automobile accidents,” id.

       But there is a critical difference between Ranger and this case. A bad-faith claim

against an insurer, as in Ranger, sounds in tort. See Farmers Grp., Inc. v. Williams, 805

P.2d 419, 421 (Colo. 1991). The distinction between a claim on an insurance contract

and a bad-faith claim against an insurer was recognized in a diversity case arising in

Colorado that came before this court. In TPLC, 44 F.3d 1484, the plaintiff sued its

insurer for both breach of contract and bad-faith breach of an insurance contract.

Applying Colorado conflict-of-laws principles, we employed the tort principles of

Restatement § 145 to determine that Pennsylvania law governed the bad-faith claim, see

id. at 1495–96, and the contract principles of Restatement § 188 to determine that

Colorado law applied to the breach-of-contract claim, see id. at 1490–91.

       Plaintiff relies on the policy reasons behind Colorado’s UIM statute as requiring

that state’s law to govern here. But the forum state’s public policy, which is always a
                                              12
consideration under the Restatement, see § 6(b), is not a factor in deciding which conflict-

of-laws principles—those for tort, contract, or otherwise—govern. It is simply one

element to be considered along with others once the set of governing principles has been

chosen.

       We are fortified in our view by the apparently uniform practice of those courts

following the Restatement to apply contract conflict-of-laws principles to claims for

benefits under automobile-insurance contracts. See, e.g., Miller v. State Farm Mut. Auto

Ins. Co., 87 F.3d 822, 824‒25 (6th Cir. 1996) (uninsured-motorist coverage); Walker v.

State Farm Mut. Auto Ins. Co., 973 F.2d 634, 636‒37 (8th Cir. 1992) (uninsured-motorist

coverage); Nichols v. Anderson, 788 F.2d 1140, 1142 (5th Cir. 1986) (“starting point for .

. . inquiry [under Mississippi law] is § 193 of the Second Restatement”) (emphasis

omitted); Reliance Ins. Co. v. Calderon, 685 F. Supp. 72, 75 (S.D.N.Y. 1988); Nat’l

Union Fire Ins. Co. v. Binker, 665 F. Supp. 35, 40 (D.D.C. 1987); Am. States Ins. Co. v.

Allstate Ins. Co., 922 A.2d 1043, 1047 (Conn. 2007) (“choice of law determination in

[automobile-insurance] case involves an interplay among §§ 193, 188, and 6”); Johnson

v. U.S. Fid. & Guar. Co., 696 N.W.2d 431, 441 (Neb. 2005) (“[underinsured-motorist]

coverage . . . is governed by the Restatement’s conflict-of-law provisions for contract”);

Ohayon v. Safeco Ins. Co., 747 N.E.2d 206, 211 (Ohio 2001) (“an action by an insured

against his or her insurance carrier for payment of UIM benefits is a cause of action

sounding in contract, rather than tort, even though it is tortious conduct that triggers

applicable contractual provisions”); Dairyland Ins. Co. v. State Farm Mut. Auto. Ins. Co.,
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701 P.2d 806, 808‒09 (Wash. Ct. App. 1985); see also Sotirakis v. United Serv. Auto.

Ass’n, 787 P.2d 788, 791 (Nev. 1990) (citing §§ 188 and 193 with approval). As these

cases illustrate, contract conflict-of-laws principles apply even though tort liability

underlies any liability-insurance or UIM-insurance claim, and even though the court must

consider statutes that override contract provisions on public-policy grounds.

         Accordingly, we hold that contract conflict-of-laws principles apply to Plaintiff’s

breach-of-contract claim seeking UIM benefits under State Farm’s insurance policies.

Because the district court did not apply the conflict-of-laws principles applicable to

contract actions, we remand to the court to apply those principles in the first instance.

IV.      CONCLUSION

      We REVERSE the decision of the district court and REMAND for further

proceedings, including reconsideration of what state’s substantive law governs this

dispute.

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