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Hansen v. American Family Mutual Insurance Co.

Court of Appeals of Colorado

December 19, 2013

Jennifer Hansen, Plaintiff-Appellee,
v.
American Family Mutual Insurance Company, Defendant-Appellant.

City and County of Denver District Court No. 10CV6246 Honorable Ann B. Frick, Judge.

Burg Simpson Eldredge Hersh & Jardine, P.C., Nelson Boyle, Englewood, Colorado, for Plaintiff-Appellee.

Campbell, Latiolais & Averbach, P.C., Colin C. Campbell, Denver, Colorado, for Defendant-Appellant.

OPINION

ROY, JUDGE [*]

¶ 1 American Family Mutual Insurance Company (the insurance company), appeals the judgment and award of damages to Jennifer Hansen (the claimant) on her claim for an unreasonable delay or denial of a covered benefit under her underinsured motorist (UIM) coverage pursuant to sections 10-3-1115, -1116, C.R.S. 2013 (the statutory claim). We affirm.

I. Issues on Appeal

¶ 2 The insurance company contends that the trial court erred in: (1) concluding that the insurance policy was ambiguous; (2) refusing to award a directed verdict to insurer on both the common law bad faith claim (the common law claim) and the statutory claim when the identity of the named insured on the policy was "fairly debatable"; (3) entering judgment in favor of the claimant in the amount of $150, 000 together with attorney fees and costs on the statutory claim when the jury awarded no damages; and (4) awarding the statutory penalty under section 10-13-1116(1).

II. Background

¶ 3 On December 30, 2007, the claimant was injured while riding as a passenger in her boyfriend's vehicle when it rear-ended a pickup truck at a high rate of speed. On April 24, 2008, she filed a claim for underinsured motorist (UIM) benefits under an insurance policy issued by the insurance company (the policy). That claim remained pending while she pursued her claim against the boyfriend's insurer. In the fall of 2009, she settled her claim with the boyfriend's insurer — with the consent of the insurance company — for policy limits of $25, 000.

¶ 4 The claimant then pursued her UIM claim. The insurance company's records indicated that the named insureds on the policy at the time of the accident were the claimant's mother and stepfather, William and Joyce Davis (the parents), so the company requested proof that the claimant resided with the parents on the day of the accident, which was a condition of the UIM coverage. Thereafter, the insurance company made several unsuccessful attempts to contact the claimant to discuss her claim, but she did not return messages.

¶ 5 On January 18, 2010, the claims adjuster sent the claimant a letter requesting "a recorded statement and verification of [her residence at the time of the accident] in order to determine if [she was] eligible for [UIM] Coverage under [the parents'] automobile policy." The claims adjuster advised the claimant that if it did not hear from her within thirty days, the claim would be closed. On April 27, 2010, not having heard from the claimant, the claims adjuster denied coverage, stating in a letter to the claimant that the parents were the named insureds, she was not living with the parents at the time of the accident, and, thus, was not insured under the policy.

¶ 6 On August 5, 2010, the claimant filed this action against the insurance company asserting a breach of contract claim, the common law claim, and the statutory claim.

A. Pretrial Procedural History

¶ 7 On December 8, 2010, the claimant filed a motion for partial summary judgment asserting, among other things, that the insurance policy was ambiguous as to the identity of the insured, relying, in part, on D.C. Concrete Management, Inc. v. Mid-Century Ins. Co., 39 P.3d 1205 (Colo.App. 2001). The claimant argued that the insurance policy was ambiguous based on lienholder's statements issued by the insurance company's local agent (the agency), copies of which were attached to the motion.

¶ 8 On December 27, 2010, the insurance company filed a cross-motion for summary judgment asserting that the policy was unambiguous, that the parents were the named insureds, that the claimant was not a resident of the parent's residence and, therefore, the policy afforded claimant no UIM coverage on the day of the accident. The insurance company asserted that the agency-issued lienholder statements attached to claimant's motion, referred to as declaration pages, could not create an ambiguity.

¶ 9 On December 29, 2010, however, the insurance company was informed that the claimant had owned the insured vehicle from the inception of the policy and on the day of the accident. Within a week of that disclosure the insurance company notified the claimant that it would reform the policy and provide coverage for her injuries.

¶ 10 On January 5, 2011, the insurance company filed a motion to withdraw its cross-motion for summary judgment relating to the ambiguity issue. In that motion, it stated, in pertinent part, as follows:

[The insurance company] considers the coverage issue moot because it has now elected to reform [the insurance policy] issued on the 1988 Ford Escort to substitute [the claimant] for [the claimant's parents] as the named insured on the Policy.
This is not a confession of [the claimant's] own Motion for Summary Judgment on the legal issue of coverage. Rather, [the insurance company] submits the circumstances of this claim permit, but do not compel [the insurance company] to reform the Policy, and that had [the insurance company] not chosen to reform the Policy, the weight of the evidence establishes [the parents] and not [the claimant] to have been the named insured. Because [the insurance company] has chosen to accept coverage through this policy reformation, it submits that the parties' previously filed cross motions for summary judgment are now rendered moot, and need not be addressed by the Court.

¶ 11 As a result of retroactively reforming the policy to recognize claimant as the insured, on February 15, 2011, the insurance company extended a settlement offer of $17, 000 on the contract claim only. On March 1, 2011, six weeks before trial was scheduled to begin and eight weeks after being advised that claimant was the owner of the car, the parties entered into mediation which resulted in a settlement of the contract claim by the payment of $75, 000, the maximum policy benefit.[1] The settlement amount was paid and the claimant's contract claim was dismissed. This did not, however, end the dispute over whether the insurance policy was ambiguous as to the named insured for purposes of the claimant's common law and statutory claims.

¶ 12 On March 9, 2011, the insurance company, conceding that the only claims remaining were the common law and statutory claims, filed a motion for a determination of law that the claimant's parents were the named insured on the insurance policy. Its argument was that: (1) the declaration pages issued by the underwriting department are the "gold standard" for determining the provisions of the insurance policy; (2) the claimant's mother had acknowledged receipt of a letter dated June 25, 2007, addressed to the parents, and designating the parents as the owners of the policy; and (3) the claimant's expert witness agreed that the underwriter file was the "gold standard" for determining the provisions of a policy and had not seen any documents challenging the underwriter file, but, nevertheless, declined to express an opinion that the policy was unambiguous.

¶ 13 On April 21, 2011, the claimant filed a trial brief on the ambiguity issue, again arguing the application of D.C. Concrete.

B. Trial and Post-trial Proceedings

¶ 14 Trial commenced on April 27, 2011. On the first day the trial court heard the arguments of counsel on the ambiguity issue and concluded:

[T]he contract of insurance here is ambiguous, that the policy is — including the additional declaration pages that is consistent with what was the case of D.C. Concrete, and the witness here has testified similarly to the witness in the D.C. Concrete case that[, ] and this is the [C.R.C.P. 30(b)(6) company designated witness] from American Family . . .[, ] that she could not tell who the named insured was because of these different declaration pages saying its [the parents] and others saying it's Jenny Davis and the same address for the same car and others saying it's Jenny Hansen.
It is clear to me so — that this contract of insurance covers — it is ambiguous as a matter of law and I am going to give the instruction. I'm also going to give the instruction that [] an insurance policy that is ambiguous is to be construed against the insurance company.

¶ 15 The case proceeded to trial on the common law and statutory claims. At the conclusion of trial, the jury completed three special verdict forms pertinent to this appeal.

¶ 16 First, it found that the claimant was a named insured under the insurer's auto policy.

¶ 17 Second, as to the claimant's common law claim, the jury found that the insurance company did not "unreasonably deny payment of [the claimant's] insurance claim, " or "know its denial of such claim was unreasonable, " or "recklessly disregard the fact that its position was unreasonable"; and, although the claimant had incurred damages, the insurance company's denial of the claim was not a cause of those damages.

¶ 18 Third, as to the claimant's statutory claim, the jury found that (1) the claimant incurred damages; (2) the insurance company denied and/or delayed payment without a reasonable basis for its action; and (3) the insurance company's unreasonable conduct was a cause of the claimant's damages and losses. In addition, the jury found that the UIM benefit for which payment was delayed or denied without reasonable basis was $0.

¶ 19 The trial court entered judgment on the jury's verdict in favor of the claimant on her statutory claim, awarded her attorney fees and costs, but did not enter a monetary award. The claimant filed a motion to amend the judgment and requested that the court award a statutory penalty of two times the covered benefit, or $150, 000, under section 10-13-1116(1), in addition to attorney fees and costs. The trial court granted the claimant's motion.

¶ 20 The insurance company filed a motion to amend the judgment, arguing that the court had incorrectly calculated the statutory penalty. The trial court conducted a hearing on the insurance company's motion, denied it, and issued a final judgment in favor of the claimant for $199, 683.28 in attorney fees and costs, and a $150, 000 penalty under section 10-3-1116.

III. Ambiguity

ΒΆ 21 The insurance company argues that the trial court erred in concluding that the insurance policy was ambiguous and by referring its construction to the ...


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