Court Opinion

ID: 165161
Source: CourtListenerOpinion
Date Created: 2010-08-14 08:45:34+00
Date Added: 2024-06-11T17:18:15.586392
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                      UNITED STATES COURT OF APPEALS
                                                                         OCT 28 2004
                                   TENTH CIRCUIT
                                                                    PATRICK FISHER
                                                                             Clerk

 GLENN R. GRAHAM,

          Plaintiff - Appellant,
                                                       No. 03-1507
 v.                                             (D.C. No. 03-K-713 (BNB))
                                                        (D. Colo.)
 PROGRESSIVE CASUALTY
 INSURANCE COMPANY, an Ohio
 corporation,

          Defendant - Appellee.

                             ORDER AND JUDGMENT *

Before TACHA, Chief Judge, KELLY, and McCONNELL, Circuit Judges.

      Plaintiff-Appellant Glenn R. Graham appeals from the district court’s order

dismissing his action against Defendant-Appellee insurer, Progressive Casualty

Insurance Company (“Progressive”). Our jurisdiction arises under 28 U.S.C. §

1291 and we affirm.

      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
                                    Background

      On May 9, 2001, Mr. Graham was injured in an accident in Fremont

County, Colorado, while operating his motorcycle. At the time of the accident,

Mr. Graham was insured by Progressive under two motor vehicle policies; one

policy covered Mr. Graham’s automobiles, while the other covered his

motorcycle. Mr. Graham’s automobile policy provided personal injury protection

(“PIP”) coverage. His motorcycle policy provided no such coverage.

      Following the accident, Mr. Graham submitted a claim for PIP benefits

under his automobile policy. Progressive initially sent him an application for PIP

benefits and paid a limited amount of benefits under the policy. Progressive

subsequently determined that, because he was operating his motorcycle at the time

of the accident, Mr. Graham was not entitled to PIP benefits under the policy.

Progressive advised Mr. Graham of its error and ceased paying PIP benefits.

      On April 23, 2003, Mr. Graham filed this diversity suit against Progressive

seeking declaratory relief that his injuries were compensable under the PIP

coverage provided in his automobile insurance policy. In addition, Mr. Graham

sought damages arising from breach of contract and violation of Colorado’s

insurance laws, breach of the implied covenant of good faith and fair dealing,

statutory willful and wanton breach of contract, bad faith breach of contract, and

deceptive trade practice.

                                        -2-
      On June 2, 2003, Progressive moved the district court to dismiss the suit

pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim

upon which relief could be granted. Progressive argued that it had no contractual

obligation to provide PIP benefits under the terms of the policy and that the

exclusion of PIP benefits to an insured involved in an accident while operating

his own street motorcycle was valid under Colorado law. Progressive urged that

Lamb v. GEICO General Insurance Co., 77 P.3d 748 (Colo. Ct. App. 2002), cert.

denied, 2003 WL 22331939 (Colo. Oct. 14, 2003), was dispositive of the issues

before the district court and mandated dismissal of Mr. Graham’s claims. The

district court agreed with Progressive.

      On appeal Mr. Graham argues that: (1) the plain language of Progressive’s

automobile insurance policy extends PIP coverage under these circumstances; (2)

Progressive’s policy contains an unlawful restriction on PIP coverage; (3) the

Lamb decision is not controlling nor dispositive of the claims at issue.

                                     Discussion

      We review the district court’s grant of a motion to dismiss under Rule

12(b)(6) de novo, applying the same standards as the district court. Montgomery

v. City of Ardmore, 365 F.3d 926, 934-35 (10th Cir. 2004). We take all well-

pleaded factual allegations in the complaint as true and view them in the light

                                          -3-
most favorable to the non-movant. Id. at 935. Dismissal is appropriate only

where it is apparent that the plaintiff can prove no set of facts in support of his

claim. Id.

A. The Plain Language of the Policy

      Mr. Graham first asserts that the plain language of Progressive’s

automobile insurance policy extends PIP coverage under the circumstances of the

instant case. Interpretation of an insurance policy is governed by traditional

principles of contract law. Essex Ins. Co. v. Vincent, 52 F.3d 894, 896 (10th Cir.

1995). “‘Unambiguous provisions of an insurance contract must be construed to

give effect to their plain meaning.’” Id. (quoting Am. Family Mut. Ins. Co. v.

Johnson, 816 P.2d 952, 953 (Colo. 1991)).

      At the time of his accident, Mr. Graham’s automobile insurance policy

contained the following provision:

         PART II(A) - PERSONAL INJURY PROTECTION COVERAGE

      INSURING AGREEMENT

      Subject to our Limits of Liability, we will pay, in accordance with
      the Colorado Auto Accident Reparations Act, covered expenses
      incurred because of bodily injury:

      1. caused by an accident;
      2. sustained by an eligible injured person; and
      3. arising out of the use or operation of a motor vehicle.

Aplt. App. at 73. Relevant here, the policy contained the following definition of

                                          -4-
the term “eligible injured person” referenced in Part II(A)2:

       “Eligible injured person” or “eligible injured persons” means:
       a.     you or any relative sustaining bodily injury in an accident
              involving any motor vehicle; and
       ....
       When used in subsection “a” above, the term “motor vehicle” means
       any motor vehicle required to be registered and licensed for operation
       on the public highways of the State of Colorado or any other
       jurisdiction.

Id. at 74. Finally, in the context of Part II(A)3, the policy defines “motor

vehicle” as

       any vehicle of a type required to be registered and licensed under the
       laws of the State of Colorado and which is designed to be propelled
       by an engine or motor. It does not include a motorcycle,
       motorscooter, minibike, snowmobile, bicycle with a motor or engine
       attached, or any vehicle designed primarily for use off the road or on
       rails.

Id. at 74.

       Under the terms of Part II(A) of the policy, Mr. Graham is eligible for PIP

coverage only if his injuries resulted from an accident, he was an eligible person

at the time of injury, and the accident arose from the use or operation of a motor

vehicle. Neither party disputes that Mr. Graham satisfies the coverage

requirements in Parts II(A)1 and 2. Mr. Graham asserts that, because the other

vehicle involved in the accident was indisputably a motor vehicle, he is entitled to

PIP coverage for his expenses related to the accident. Aplt. Br. at 9. This despite

the fact that the definition of “motor vehicle” in Part II(A)3 apparently functions

                                         -5-
to deny coverage for injuries arising from the use or operation of a motorcycle.

      We disagree with Mr. Graham’s construction. The plain language of Part

II(A) and its related definitions clearly negate PIP coverage to insureds injured

while operating motorcycles. Were we to accept Mr. Graham’s construction of

Part II(A), we would be forced to conclude that the language in Part II(A)3 is

superfluous or redundant. Satisfaction of the requirement in Part II(A)2 is

premised on an accident involving any motor vehicle, including a motorcycle,

required to be licensed or registered. Under these terms, Part II(A)2 would fairly

encompass the construction Mr. Graham ascribes to Part II(A)3. As a result, to

give Part II(A)3 meaning, we must conclude that through its definition of “motor

vehicle” the provision operates to deny PIP coverage under the circumstances

present here. Mr. Graham’s injuries indeed arose, at least in part, from his “use

or operation” of a motorcycle, a vehicle not encompassed by the terms of Part

II(A)3. As such, Mr. Graham’s claims fall outside the policy coverage. Having

reached this determination, we need not address the parties’ arguments with

respect to any operative contract exclusion.

B. Validity Under Colorado Law

      Having determined that the plain language of the automobile insurance

policy indeed denies PIP coverage to insureds whose injuries arise from the use or

operation of a motorcycle, we next consider whether this exclusion is valid under

                                        -6-
Colorado law. Even where, as here, a policy term is unambiguous, a court may

render it unenforceable “if it violates public policy by attempting to ‘dilute,

condition, or limit statutorily mandated coverage.’” Terranova v. State Farm Mut.

Auto. Ins. Co., 800 P.2d 58, 60 (Colo. 1990) (quoting Meyer v. State Farm Mut.

Auto. Ins. Co., 689 P.2d 585, 589 (Colo. 1984)).

      When exercising diversity jurisdiction, a federal court must apply the law

of the forum state as promulgated by that state’s highest court. See Cooper v.

Cent. & Southwest Servs., 271 F.3d 1247, 1251 (10th Cir. 2001). Absent a

decision by the forum state’s highest court, “we must ‘predict the course that

body would take if confronted with the issue.’” Vanover v. Cook, 260 F.3d 1182,

1186 (10th Cir. 2001)(quoting Stauth v. Nat’l Union Fire Ins. Co. of Pittsburgh,

236 F.3d 1260, 1267 (10th Cir. 2001)). Decisions by intermediate courts in the

forum state are not considered controlling. See Rancho Lobo, Ltd. v. Devargas,

303 F.3d 1195, 1202 n.2 (10th Cir. 2002). We have explained, however, that

“‘[w]here an intermediate appellate state court rests its considered judgment upon

the rule of law which it announces, that is a datum for ascertaining state law

which is not to be disregarded by a federal court unless it is convinced by other

persuasive data that the highest court of the state would decide otherwise.’”

Webco Indus., Inc. v. Thermatool Corp., 278 F.3d 1120, 1132 (10th Cir.

2002)(quoting Hicks ex rel. Feiock v. Feiock, 485 U.S. 624, 630 n.3 (1988)).

                                         -7-
      The Colorado Supreme Court has not resolved the issue arising in the

instant case, i.e., whether an exclusion of PIP coverage in an automobile policy

for insureds whose injuries arise from the use or operation of a street motorcycle

is valid under Colorado law. Mr. Graham asserts that Progressive’s exclusion of

motorcycles from the definition of “motor vehicles” under Part II(A) of the policy

impermissibly narrows the coverage in violation of Colorado law. In contrast,

Progressive urges that the Colorado Court of Appeals’ decision in Lamb v. Geico

General Insurance Co., 77 P.3d 748 (Colo. Ct. App. 2003), cert. denied, 2003 WL

22331939 (Colo. Oct. 14, 2003), is dispositive of the statutory issues raised by the

parties in the instant case. We agree.

      In Lamb, the Colorado Court of Appeals was confronted with precisely this

issue. Similar to the circumstances here, the plaintiff in Lamb was insured under

both an automobile and a motorcycle policy by the defendant. 77 P.3d at 748.

She was injured when the motorcycle she was operating collided with an

automobile. Id. Only her automobile policy, however, contained PIP coverage.

Id. at 748-49. The automobile policy “expressly excluded coverage for bodily

injury resulting from the use or operation of a motor vehicle owned by the insured

person but not insured under the policy.” Id. at 749. Relying on the Colorado

Supreme Court’s decision in DeHerrera v. Sentry Insurance Co., 30 P.3d 167

(Colo. 2001), the trial court held that despite the exclusion the plaintiff was

                                         -8-
entitled to PIP coverage under her automobile insurance policy. Lamb, 77 P.3d at

749. On appeal, the defendant argued that Colorado’s No-Fault Act did not

require PIP coverage for operators of street motorcycles and that the trial court

erred in relying on DeHerrera. Id.

      The Lamb court began by construing the terms of Colorado’s No-Fault Act.

The No-Fault Act required insurers to extend PIP coverage for

      [a]ccidental bodily injury sustained by the named insured when
      injured in an accident involving any motor vehicle, regardless of
      whether the accident occurs in this state or in any other jurisdiction,
      except where the injury is the result of the use or operation of the
      named insured’s own motor vehicle not actually covered under the
      terms of [the No-Fault Act].

Colo. Rev. Stat. § 10-4-707(1)(a) (repealed 2003) (emphasis added). Motorcycles

are generally excluded from the definition of “motor vehicles” under other

provisions of the No-Fault Act. See id. § 10-4-703(7) (repealed 2003). However,

the Lamb court found that they were included within the context of section 10-4-

707(1)(a). 77 P.3d at 749 (citing Colo. Rev. Stat. § 10-4-707(2) (repealed 2003)

(“For purposes of [§ 10-4-707(1)(a)], ‘motor vehicle’ means any motor vehicle

required to be registered and licensed for operation on the public highways of this

state or any other jurisdiction.”)). Because motorcycles were elsewhere not

included under the definition of “motor vehicle” for purposes of applying the No-

Fault Act’s mandatory PIP coverage, the Lamb court found the exclusion in

section 10-4-707(1)(a) operative on the facts before it. Id. at 750. Thus, the

                                         -9-
insurer was not required to extend PIP coverage when the insured’s injuries arose

from her own use of a street motorcycle. Id.

      In so deciding, the Lamb court rejected the plaintiff’s argument, identical

to Mr. Graham’s in the instant case, that the Colorado Supreme Court’s decision

in DeHerrera was controlling on the issue. In DeHerrera, the court considered a

claim for PIP coverage for injuries suffered by the son of the named insured who

was involved in an accident with a truck while riding his own off-road

motorcycle. 30 P.3d at 168. A provision in the policy limited the PIP coverage to

circumstances where the insured occupied a car at the time of injury, thus

excluding persons riding a motorcycle. Id. at 170. The court of appeals validated

the provision, holding that the No-Fault Act did not require PIP coverage for

persons operating off-road motorcycles at the time of injury. Id. at 171.

      In reversing the court of appeals, the Colorado Supreme Court held that

“under the plain language of the [No-Fault Act], subject to some statutory

exclusions, PIP coverage for relatives of named insureds is mandatory

irrespective of a person’s occupancy in a vehicle, as long as any vehicle involved

in the accident qualifies as a motor vehicle.” Id. at 172 (emphasis in original;

underscoring added). The court refused to express an opinion whether the

exclusion found in sections 10-4-707(1)(a) and 10-4-707(1)(b) (applying to

relatives of the named insured) applied in the case before it in that the insurer had

                                         - 10 -
not argued its applicability and had admitted that it did not apply before the trial

court. Id. at 172 nn.6, 7.

      The Lamb court relied upon this reservation, emphasizing that the

motorcycle involved in DeHerrera was an off-road vehicle. 77 P.3d at 751.

Because off-road vehicles were not required to be registered in Colorado, the

motorcycle in DeHerrera was not encompassed by the statutory definition of

“motor vehicle” operative in section 10-4-707(1)(a). Thus, the Lamb court held

that DeHerrera did not require PIP coverage for injuries arising from the

operation of an insured’s street motorcycle under an automobile insurance policy.

Id.

      The decision in Lamb effectively forecloses Mr. Graham’s claims.

Although the Colorado Court of Appeals’ decision does not bind us, we find that

court’s reasoning persuasive and do not believe the Colorado Supreme Court

would reach a different conclusion. As such, we hold that the policy provisions at

issue in the instant case did not contain an unlawful restriction on PIP coverage

and were valid under Colorado law as it existed at the time of accident.

C. Mr. Graham’s Remaining Claims

      Because we hold that the policy in the instant case excludes PIP coverage

for insureds injured while operating or using a motorcycle, and further that such

an exclusion is valid under Colorado law, Mr. Graham’s remaining claims must

                                         - 11 -
fail. Despite assertions to the contrary, Mr. Graham’s claims for declaratory

relief, breach of contract, breach of the implied covenant of good faith and fair

dealing, and deceptive trade practice necessarily depend on the existence and

validity of the policy terms at the core of this dispute. Our answer to the issues

presented above is dispositive of these claims. Part II(A) of the policy, including

the definition of “motor vehicle” contained therein, is enforceable as written.

Thus, Progressive breached neither the contract nor an implied covenant when it

denied Mr. Graham’s claim for PIP benefits. Moreover, in that Progressive’s

policy is entirely in keeping with the mandates of the No-Fault Act as it existed at

the time of the accident, there is no evidence that the insurer engaged in an unfair

trade practice.

      AFFIRMED.

                                       Entered for the Court

                                       Paul J. Kelly, Jr.
                                       Circuit Judge

                                        - 12 -