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Avalon Condominium Assocation, Inc. v. Secura Insurance, A Mutual Company

United States District Court, D. Colorado

October 30, 2014



KATHLEEN M. TAFOYA, Magistrate Judge.

This matter is before the court on Plaintiff Avalon Condominium Association's "Motion to Amend Complaint." (Doc. No. 32, filed June 23, 2014.) Defendant Secura Insurance's Response was filed on July 15, 2014 (Doc. No. 38) and Plaintiff's Reply was filed on July 31, 2014 (Doc. No. 45). For the following reasons, the court recommends that Plaintiff's Motion to Amend be DENIED.

In its Complaint, Plaintiff alleges that Defendant has, in bad faith, unreasonably denied insurance coverage for damage to Plaintiff's property caused by a June 6, 2012 wind and hail storm. ( See Compl., Doc. No. 4, filed Jan. 23, 2014.) Based on these allegations, Plaintiff's Complaint asserts three claims for relief: breach of contract, common law bad faith denial of insurance coverage; and statutory bad faith, pursuant to Colo. Rev. Stat. §§ 10-3-1115, 1116. ( See id. ) Plaintiff now seeks to file an Amended Complaint (Doc. No. 32-1 [Am. Compl.]) that adds a claim for relief under the Colorado Consumer Protection Act (CCPA), Colo. Rev. Stat. § 6-1-1011, et seq. Specifically, Plaintiff seeks to assert that Defendant violated the CCPA by hiring a consultant-Corey Schrauben of Project Time & Cost Forensic Engineers (PT&C)- who allegedly has a "known bias in favor of insurers with the expectation that Plaintiff would rely on that consultant's report." (Am. Compl. ¶ 98.)


Pursuant to Federal Rule of Civil Procedure 15(a), "The court should freely give leave [to amend the pleadings] when justice so requires." See also York v. Cherry Creek Sch. Dist. No. 5, 232 F.R.D. 648, 649 (D. Colo. 2005); Aspen Orthopaedics & Sports Medicine, LLC v. Aspen Valley Hosp. Dist., 353 F.3d 832, 842 (10th Cir. 2003). The grant or denial of an opportunity to amend is within the discretion of the court, but "outright refusal to grant the leave without any justifying reason appearing for the denial is not an exercise of discretion; it is merely abuse of that discretion and inconsistent with the spirit of the Federal Rules." Foman v. Davis, 371 U.S. 178, 182 (1962). "Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment." Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993). Notably,

The Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits.

Conley v. Gibson, 355 U.S. 41, 48 (1957) abrogated on other grounds by Bell Atl. Corp. v Twombly, 550 U.S. 544 (2007).


Defendant does not argue that Plaintiff's proposed CCPA claim is unduly delayed, unduly prejudicial, or submitted in bad faith. Rather, Defendant argues that Plaintiff's proposed CCPA claim should be rejected as futile.

A proposed amendment is futile if the complaint, as amended, would be subject to dismissal. Gohier v. Enright, 186 F.3d 1216, 1218 (10th Cir. 1999) (citing Jefferson Cnty. Sch. Dist. No. R-1 v. Moody's Investor's Servs., 175 F.3d 848, 859 (10th Cir. 1999)). "The futility question is functionally equivalent to the question of whether a complaint may be dismissed for failure to state a claim, " pursuant to Fed.R.Civ.P. 12(b)(6). Id. (citations omitted).

The CCPA is a remedial statute intended to deter and punish deceptive trade practices committed by business in dealing with the public." Showpiece Homes Corp. v. Assurance Co. of Am., 38 P.3d 47, 51 (Colo. 2001). To state a claim under the CCPA, a plaintiff must allege the following elements: (1) that the defendant engaged in an unfair or deceptive trade practice; (2) that the challenged practice occurred in the course of the defendant's business, vocation, or occupation; (3) that it significantly impacts the public as actual or potential consumers of the defendant's goods, services, or property; (4) that the plaintiff suffered injury in fact to a legally protected interest; and (5) that the challenged practice caused the plaintiff's injury. Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142, 146-47 (Colo. 1998).

Defendant argues that Plaintiff's CCPA proposed claim is futile because (1) Plaintiff's allegations of an unfair or deceptive trade practice do not meet Fed.R.Civ.P. 9(b)'s heightened pleading standard; and (2) Plaintiff has not alleged facts sufficient to meet the public impact element of a CCPA claim. The court agrees with both of these arguments.

Fed. R. Civ. P. 9(b) provides that "in alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Because the CCPA is designed to protect against consumer fraud, the first element of a CCPA claim must be pled with particularity pursuant to Fed.R.Civ.P. 9(b). Duran v. Clover Foods Co., 616 F.Supp. 790, 793 (D. Colo. 1985); see also Hansen v. Auto-Owners Ins. Co, 09-cv-02736-CMA-BNB, 2010 WL 749820, at *2 (D. Colo. Mar. 4, 2010) (collecting cases). Rule 9(b) allows factual allegations to be based on "information and belief"; however the pleading must "set[] forth the specific facts upon which the belief is reasonably based." Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1330 (Fed. Cir. 2009); see also Scheidt v. Klein, 956 F.2d 963, 967 (10th Cir. 1992) (citations omitted) ("Allegations of fraud may be based on information and belief when the facts in question are peculiarly within the opposing party's knowledge and the complaint sets forth the factual basis for the plaintiff's belief.")

As to the deceptive trade practice element of its proposed CCPA claim, Plaintiff alleges, "upon information and belief, " that Defendant hired Mr. Schrauben and PT&C to inspect Plaintiff's property "because they are biased for insurers and will give them favorable, result-oriented investigations and reports to assist the insurer in either low-balling or denying an insured's claim." (Am. Compl. ¶ 25; see also id. ¶ 98.) First, other than the fact Defendant hired PT&C, this allegation is not a fact asserted upon information and belief; instead it is a purely speculative assertion regarding Defendant's mental state. Further, Plaintiff's only allegations in support of this belief are that (1) its adjuster, Peter Ridulfo, has allegedly observed PT&C engaging in similar results-oriented investigations for other insurers in the past-namely, by "willfully ignor[ing] obvious hail damage and refus[ing] to inspect all effected [sic] buildings ( id. ¶ 58)-and (2) that Defendant relied on PT&C's investigation to reject Plaintiff's insurance claim, even though it allegedly knew from Mr. Ridulfo's separate report that PT&C's report contained biased and inaccurate representations ( id. ¶¶ 43-44, 53-54). However, the first allegation does not provide support Plaintiff's belief; even if PT&C actually performed biased investigations for other insurers, this does not in any way suggest or establish that Defendant hired PT&C for that same purpose. Similarly, at best, the second allegation demonstrates only that Defendant learned that PT&C's investigation and report was inaccurate after it was issued; it ...

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