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Dakota Station II Condominium Association, Inc. v. Auto Owners Insurance Co.

United States District Court, D. Colorado

October 30, 2015

DAKOTA STATION II CONDOMINIUM ASSOCIATION, INC., a Colorado nonprofit corporation, Plaintiff,
AUTO-OWNERS INSURANCE COMPANY, a Michigan corporation, Defendant.



This matter comes before the court on the Motion for Leave to Amend Answer to Assert Defense of Insurance Fraud, Affirmative Claims Arising Out of Insurance Fraud, and to Add Co-Conspirators Scott Benglen, Claim Solutions LLC, Susan Cwik and Gunbarrel Real Estate Company as Third-Party Defendants Regarding Insurance Fraud Claims (“Motion to Amend Answer”) [#34] filed by Defendant Auto-Owners Insurance Company (“Defendant” or “Auto-Owners”) on July 17, 2015. The Motion to Amend Answer was referred to this Magistrate Judge by the Order of Reference dated February 4, 2015 [#23], the Reassignment dated February 10, 2015 [#24], and the Memorandum dated July 20, 2015 [#35]. The court held oral argument on August 26, 2015, and took the matter under advisement at that time. [#46]. Having reviewed the Parties’ briefing, the applicable case law, the court file, and being fully advised of the premises, Defendant’s Motion to Amend Answer is GRANTED.


Plaintiff Dakota Station II Condominium Association (“Plaintiff” or “Dakota Station”) initiated a lawsuit against Defendant in Jefferson County, Colorado District Court on June 5, 2014. [#1-3]. In its original Complaint and Jury Demand, Dakota Station asserted a claim under Colo. Rev. Stat. §§ 10-3-1115, 10-3-1116 for undue delay in payment of insurance benefits arising from hail damage arising from a storm on June 6, 2012. [Id. at ¶ 10]. On September 22, 2014, Plaintiff filed an Amended Complaint and Jury Demand, adding a claim for breach of contract [#1-6 at 3-4]. Auto-Owners removed the case to this court on October 17, 2014. [#1].

The court entered a Scheduling Order governing this case on January 23, 2015. [#20]. In that Order, the deadline for amendment of pleadings and joinder of Parties was set for February 27, 2015 – the date proposed jointly by both Parties. Compare [#20 at 7] with [#16 at 8]. In the Scheduling Order, the deadline for discovery was set for July 23, 2015, and dispositive motions were due on August 21, 2015. [#20 at 7]. By Order dated June 12, 2015, the court granted the Parties’ joint request to extend expert disclosure deadlines and the discovery deadline until July 22, 2015 and August 15, 2015, respectively. [#31]. The deadline for dispositive motions was extended until September 1, 2015. That same day, Plaintiff filed a Motion to Compel, seeking an order directing Defendant to produce certain documents, responses to a request for admission, and a privilege log. [#29]. By the time of the hearing on August 4, 2015, the Parties had reached a stipulation as to the discovery and the Motion to Compel was denied as moot. [#38]. The deadline for joinder of parties and/or amendment of pleadings was not extended at any time.

On July 17, 2015, Defendant filed its Motion to Amend Answer, seeking to add an affirmative defense and counterclaims of fraud/misrepresentation/concealment; breach of contract/breach of the implied duty of good faith and fair dealing; and conspiracy. [#34; #34- 13[1]. Defendant also sought to assert third-party claims against Scott Benglen, the public appraiser; his company, Claim Solutions LLC; Susan Cwik, the property manager for Dakota Station; and her company, Gunbarrel West Real Estate Company (collectively, “proposed Third-Party Defendants”). [#34 at 6, #34-13 at 1, 9-12]. The crux of Defendant’s proposed counterclaims and third-party complaint is that Plaintiff conspired with the proposed Third-Party Defendants to misrepresent that the hail damage claimed by Plaintiff occurred on or about March 15, 2012, the date of loss identified by Plaintiff to obtain insurance proceeds to replace the roofs, [#39-1], when in actuality, the losses occurred before or after Auto-Owners’ coverage period. [#34-13 at 5, 6-7]. In support of its Motion to Amend, Auto-Owners attaches several exhibits, including the Property Loss Notice submitted by Plaintiff on May 24, 2012; roofing condition reports issued prior to March 15, 2012, the reported date of loss; correspondence between Mr. Benglen, Ms. Cwik, and Ms. Haber occurring in August 2013; an excerpt of Mr. Benglen’s deposition that occurred on May 14, 2015; correspondence between Mr. Benglen and Auto-Owners from October 2013 including a second date of loss of June 6, 2012; correspondence between Mr. Benglen and Ms. Cwik from August 2013; excerpts from Rule 30(b)(6) depositions of Lallier Construction, Inc. (Plaintiff’s construction company) and Plaintiff taken on June 18 and 19, 2015, respectively; an Amended Agreement for repairs; and correspondence between the Parties from April 2015. [#34-1 - #34-12]. Defendant contends that it could not have sought to amend to its Answer prior to July 17 because the information upon which it bases its proposed amendments was not fully available to it until the Rule 30(b)(6) deposition of Plaintiff on June 19, 2015. [#34 at 6].

Plaintiff filed its response on August 7, 2015, arguing that the proposed amendment was untimely and futile. [#39 at 5-6]. In contending that the proposed Amended Answer would be futile, Plaintiff asserts that “the undisputed facts” are fatal to Auto-Owners, because Defendant lacks the facts to satisfy each element of a claim for fraud. [Id. at 7-8]. Plaintiff further argues that Defendant lacks good cause to amend the Scheduling Order under Rule 16(b) because Auto-Owners knew of the underlying factual basis for its proposed amended claims from the outset of the case, and it lacked diligence in evaluating its claims or seeking amendment prior to the Scheduling Order’s deadline. [Id. at 9-10]. In support of its Response, Plaintiff attaches several exhibits, including loss reports reflecting conversations between Defendant’s claim handling service, Ascent Claim Services, Inc. (“Ascent”) and Mr. Benglen and Ms. Haber, who is described as “work[ing] with him.” [#39-4 at 1]. The exhibits also include correspondence from October 2013 between Mr. Benglen and Mr. Burns, Defendant’s appraiser, that specifically notes that the attached amended appraisal demand includes “the hail claim from earlier this summer.” [#39-7]. In addition, Plaintiff appends correspondence from Mr. Burns to Ms. Haber as of January 17, 2014 that notes that “a significant hail storm had passed through this area on August 22, 2013 with 1 ¾’ hail reported 0.89 miles north-northwest of the property. This storm occurred after my assignment and Ms. Haber’s assignment to the claim, but prior to our first inspection on September 20, 2013, and after previous inspections for wind only claims.” [#39-8 at 5].

In Reply, Defendant contends that it is not moving for summary judgment, but rather that it only seeks to amend and the proposed Amended Answer clearly states a claim that is plausible on its face. [#40 at 3]. Defendant further argues that it could not have asserted these defenses and claims earlier because Plaintiff wrongfully withheld the information upon which they are based, and Defendant did not receive Plaintiff’s discovery responses until June 3, 2015 and could not “contextualize” the documents until the Rule 30(b)(6) deposition of Plaintiff. [Id. at 5]. Defendant further attaches correspondence from May 2012, which is described as additional evidence obtained since the filing of the Motion to Amend Answer, to support its contention that Plaintiff’s allegedly fraudulent conduct. [#40-1].


I. Applicable Law

Although neither Party addresses it in this manner, it appears there are two separate (albeit intertwined) issues before this court: (1) whether to permit Defendant to amend its Answer to include an affirmative defense and counterclaims for fraud/misrepresentation/concealment and conspiracy against the existing Plaintiff, and (2) whether to permit Defendant to assert a third-party complaint against new parties, i.e., Scott Benglen; his company Claim Solutions, LLC; Susan Cwik; and her company, Gunbarrel Real Estate Company. The court will address each issue in turn.

A. Amendment of Auto-Owners’ Answer

Under Tenth Circuit law, courts employ a two-step analysis in determining whether to allow a party to amend the pleadings after the deadline established by the Scheduling Order has passed. First, the court considers whether the moving party demonstrates good cause pursuant to Rule 16(b) of the Federal Rules of Civil Procedure. See Gorsuch, Ltd., B.C. v. Wells Fargo Nat’l Bank Assoc., 771 F.3d 1230, 1242 (10th Cir. 2014); SIL-FLO, Inc. v. SFHC, Inc., 917 F.2d 1507, 1518 (10th Cir. 1990). Next, the court weighs whether the amendment should be allowed pursuant to Rule 15(a). Gorsuch, 771 F.3d at 1242.

Rule 16(b) provides that a scheduling order “may be modified only for good cause and with the judge's consent.” Fed.R.Civ.P. 16(b)(4). “In practice, this standard requires the movant to show the ‘scheduling deadlines cannot be met despite [the movant's] diligent efforts.’” Gorsuch, 771 F.3d at 1240 (citing Pumpco, Inc. v. Schenker Int'l, Inc., 204 F.R.D. 667, 668 (D. Colo. 2001)). This burden is satisfied, for example, when a party learns of new information in a deposition or that the governing law has changed. Id. “Rule 16(b) does not focus on the bad faith of the movant, or the prejudice to the opposing party. Rather, it focuses on the diligence ...

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