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Maxwell v. United Services Automobile Association

Court of Appeals of Colorado, Fourth Division

January 2, 2014

James Maxwell, Janet Maxwell, and Leon F. Hill, individually and on behalf of all others similarly situated, Plaintiffs-Appellants,
United Services Automobile Association and USAA Casualty Insurance Company, Defendants-Appellees

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[Copyrighted Material Omitted]

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Boulder County District Court No. 06CV323. Honorable D.D. Mallard, Judge.

Hill & Robbins, P.C., Robert F. Hill, John H. Evans, Jennifer H. Hunt, Nathan P. Flynn, Denver, Colorado; McFarland Law Offices, Thomas D. McFarland, Golden, Colorado; Evans & McFarland, LLC, M. Gabriel McFarland, J. Lucas McFarland, Golden, Colorado, for Plaintiffs-Appellants.

Ayd & Johnson, P.C., Patricia M. Ayd, James D. Johnson, Denver, Colorado, for Defendants-Appellees.

Opinion by JUDGE WEBB. Bernard and Plank[*], JJ., concur.



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[¶1] This putative class action concerns uninsured/underinsured motorist (UM/UIM) coverage. Plaintiffs, James and Janet Maxwell and Leon Hill, individually and on behalf of all others similarly situated, assert that defendants, United Services Automobile Association and USAA Casualty Insurance Company (collectively, USAA), fraudulently concealed information necessary for USAA insureds to make informed decisions about purchasing UM/UIM coverage on their additional vehicles. They pleaded claims for fraudulent concealment, insurer bad faith, and violation of the Colorado Consumer Protection Act (CCPA), § § 6-1-101 to -1001, C.R.S. 2013.

[¶2] In this interlocutory appeal of the order denying class certification, plaintiffs raise two main contentions. First, the trial court abused its discretion by concluding that plaintiffs failed to satisfy the predominance requirement of C.R.C.P. 23(b)(3), because it improperly required them to prove reliance and invaded the merits by considering USAA's circumstantial evidence of some putative class members' likely nonreliance. Second, the court erred in holding that the filed rate doctrine applies to the insurance industry and, as applied here, precludes refund of UM/UIM premiums on additional vehicles as damages for fraudulent concealment. Both contentions raise unresolved questions of law in Colorado.

[¶3] We discern no abuse of discretion in the decision denying class certification and we agree with the trial court's legal conclusions concerning the filed rate doctrine. Therefore, we affirm the order denying class certification and remand the case for further proceedings consistent with this opinion.

I. Background

[¶4] In 2003, twenty-seven plaintiffs sued twenty-five insurance companies, including USAA. The trial court severed the case into separate proceedings against specific insurers. This is one of those severed cases.

[¶5] After severance, the trial court granted USAA's summary judgment motion. The court held that because USAA required its insureds to purchase UM/UIM coverage for either every vehicle they insured with USAA or none of them, the putative class could not have been misled about purchasing such coverage on additional vehicles. The summary judgment was reversed in Maxwell v. USAA ( Maxwell I ), (Colo. App. No. 07CA1611, Dec. 4, 2008) (not published pursuant to C.A.R. 35(f)). In Maxwell I, the division:

o Pointed to the " disputed factual issue whether the declaration page in the USAA policy could be misleading absent disclosure" regarding the extent of UM/UIM coverage, in light of the supreme court's decision in DeHerrera v. Sentry Ins. Co., 30 P.3d 167 (Colo. 2001).[1]
o Held that USAA's policy provision that UM/UIM coverage excluded " bodily injury sustained by any person while using or occupying: any motor vehicle . . . owned by you or a relative, other than a covered vehicle" (OBNI exclusion) was potentially misleading.

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o Reversed the summary judgment order because a genuine issue of material fact existed " whether an insured could reasonably have misunderstood that [USAA] was selling UM/UIM coverage on a per vehicle basis, rather than on a per policy basis." [2]

[¶6] On remand, plaintiffs moved for class certification. According to plaintiffs, USAA fraudulently concealed that after DeHerrera, the OBNI exclusion was not enforceable as to named insureds or their resident relatives, and that buying UM/UIM coverage on additional vehicles did not increase the protection of these insureds. (Although plaintiffs did not coin the terminology, through the litigation, named insured and their resident relatives came to be termed " class one insureds" ; nonresident relatives and guests were termed " class two insureds." ) They contend this harmed the putative class in two ways:

o The putative class was misled into buying UM/UIM coverage on additional vehicles (the initial purchase theory); and
o With proper disclosure, a putative class member could have obtained UM/UIM coverage on the primary vehicle from another insurer that did not require its insureds to carry this coverage on all vehicles and not purchased such coverage on additional vehicles (the split coverage theory).[3]

[¶7] After holding a five-day evidentiary hearing on class certification, the trial court denied the motion in a lengthy and well-reasoned order. Plaintiffs appeal that order based on the court's C.R.C.P. 54(b) certification.

II. The Trial Court Did Not Abuse its Discretion in Admitting Retention Data of Another Insurer at the Class Certification Hearing

[¶8] Plaintiffs contend the trial court erred in admitting data compiled by State Farm Mutual Insurance Company (State Farm) about its insureds' retention of UM/UIM coverage on additional vehicles after having been notified of DeHerrera (SF Data). This data showed that the majority of State Farm's insureds who were notified of DeHerrera chose to retain UM/UIM coverage on all vehicles. We begin with this issue because error would require remand for further findings without regard to the SF Data, which the trial court noted in the order denying certification. We discern no abuse of discretion.

[¶9] The court denied plaintiffs' motion in limine to exclude the SF Data on three grounds: (1) the SF Data is admissible hearsay under the business records exception; (2) this data is relevant and any argument to the contrary goes to weight, not admissibility; and (3) reversal of the summary judgment order in Young v. State Farm Mut. Auto. Ins. Co., (Colo. App. No. 10CA1405, July 7, 2011) (not published pursuant to C.A.R. 35(f)), vacated & remanded, (Colo. No. 11SC814, Apr. 9, 2012) (unpublished order granting certiorari), does not require a different result.

A. Standard of Review and Preservation

[¶10] Evidentiary rulings are reviewed for an abuse of discretion, meaning they " are reversible only if they are manifestly arbitrary, unreasonable, or unfair." Chavez v. Parkview Episcopal Med. Ctr., 32 P.3d 609, 611 (Colo. App. 2001). Plaintiffs' motion in limine preserved this issue. C.R.E. 103(a)(2).

B. Application

[¶11] None of the three grounds on which the trial court ruled to admit the SF Data constitutes an abuse of discretion.

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[¶12] First, before the trial court admitted the SF Data under the business records exception to the hearsay rule, C.R.E. 803(6), it considered the five requirements for admissibility under Schmutz v. Bolles, 800 P.2d 1307, 1312 (Colo. 1990). It found record support for the court's reasoning in Health Alliance Network, Inc. v. Cont'l Cas. Co., 245 F.R.D. 121, 129-30 (S.D.N.Y. 2007), which analyzed the admissibility of a subset of data extracted from a larger database. Although plaintiffs assert that the SF Data had " obvious hearsay . . . issues," plaintiffs do not provide any basis for reversing the trial court's findings as to the hearsay exception. We decline to " address the contention based on a hypothetical construction of what [plaintiffs'] argument might be." People v. Cordova, 293 P.3d 114, 118 (Colo. App. 2011).

[¶13] Second, the trial court recognized that the question of sufficiency of notice remains a factual issue to be resolved at trial, but found " the overwhelming majority of State Farm insureds who had multiple vehicles purchased UM/UIM coverage on all their vehicles after the DeHerrera notice" and this " is circumstantial evidence of non-reliance." Plaintiffs dispute relevance, arguing that " [a]bsent the assumption that State Farm provided proper disclosure, the [SF] Data were irrelevant and had no evidentiary value as to the conduct of informed insureds." But the court correctly differentiated between weight and admissibility when assessing the relevance of the SF Data. See People v. Trefethen, 751 P.2d 657, 659 (Colo. App. 1987) (" Whether evidence is too remote to be relevant is within the trial court's discretion . . . [and] affects only the weight to be given to evidence, not its admissibility." ).

[¶14] Third, we agree with the trial court that the reversal of summary judgment in Young does not preclude admission of the SF Data, for two reasons. First, the heightened standard for summary judgment and the lower standard for admission of evidence require different analyses. Second, Young did not mention the SF Data in the part of its opinion reversing the summary judgment order, but only identified, as a disputed issue of material fact, the adequacy of the insurer's DeHerrera notice to its insureds.

[¶15] Accordingly, we conclude that the trial court did not abuse its discretion in admitting the SF Data and considering this data when denying class certification.

III. The Trial Court Acted within Its Discretion in Concluding that Plaintiffs Failed to Establish Predominance under C.R.C.P. 23(b)(3)

A. Standard of Review

[¶16] An order denying class certification is reviewed for an abuse of discretion. Farmers Ins. Exch. v. Benzing, 206 P.3d 812, 818 (Colo. 2009). Under this highly deferential standard, " so long as the trial court rigorously analyzes the evidence, it retains discretion to find to its satisfaction whether the evidence supports each C.R.C.P. 23 requirement." Jackson v. Unocal Corp., 262 P.3d 874, 884 (Colo. 2011). But the trial court's legal conclusions underlying the order denying class certification are reviewed de novo. See BP Am. Prod. Co. v. Patterson, 263 P.3d 103, 108 (Colo. 2011).

B. C.R.C.P. 23(b)(3) Predominance

[¶17] To be certified as a class under C.R.C.P. 23(b)(3), plaintiffs must establish that common questions of law or fact predominate over individual questions. This inquiry begins with the elements of the underlying cause of action, see Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S.,, 131 S.Ct. 2179, 2185, 180 L.Ed.2d 24 (2011), to test whether the proposed class " is sufficiently cohesive to warrant adjudication by representation." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997).

[¶18] When assessing predominance, a court may neither " decide the substantive claims and defenses of the parties" nor " determine whether the class will ultimately succeed in establishing each element necessary to prove its claims." Benzing, 206 P.3d at 820. Rather, it must engage in a " fact-driven, pragmatic inquiry," Medina v. Conseco Annuity Assur. Co., 121 P.3d 345, 348 (Colo. App. 2005), to determine whether " the plaintiff advances a theory by which to prove or disprove an element on a simultaneous,

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class-wide basis," Benzing, 206 P.3d at 820 (internal quotation marks omitted). For example, in affirming denial of class certification, the court in Benzing explained that the record " appeared to support the defendant's argument that individual inquiries as to whether the defendants caused injury to each of the class members might be required, and thus that issues individual to the class might predominate over common ones." Id. at 819. But if a plaintiff successfully advances such a theory, then classwide " proof obviates the need to examine each class member's individual position." Id.

C. Application to Fraudulent Concealment Claim

[¶19] If plaintiffs satisfy the predominance requirement, their " fraudulent concealment claim [would be otherwise] amenable to class-wide adjudication." Patterson, 263 P.3d at 112. To do so, plaintiffs must show that questions of law or fact common to the class would predominate in ...

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