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Evans v. Northwestern Mutual Life Insurance Co.

United States District Court, D. Colorado

February 9, 2016

RICHARD EVANS, M.D., individual, Plaintiff,
v.
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin insurance company, Defendant.

ORDER OVERRULING OBJECTION (DOC. # 31), ACCEPTING MAGISTRATE’S RECOMMENDATION (DOC. # 24), AND DENYING MOTION TO PARTIALLY DISMISS (DOC. # 12)

CHRISTINE M. ARGUELLO United States District Judge

This matter is before the Court on Defendant Northwestern Mutual Life Insurance Company’s Objection to Recommendation of the United States Magistrate Judge. (Doc. # 31.) Northwestern Mutual objects to Magistrate Judge Wang’s recommendation that its partial motion to dismiss be denied. (Doc. # 24.) For the reasons set forth below, the Court accepts Magistrate Judge Wang’s recommended disposition.

I. STANDARD OF REVIEW

Pursuant to Federal Rule of Civil Procedure 72(b)(3), a district judge “must determine de novo any part of the magistrate judge’s disposition [on a dispositive motion] that has been properly objected to.” Following its de novo review, the district judge “may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.” Fed.R.Civ.P. 72(b)(3).

II. BACKGROUND

Plaintiff Richard Evans, M.D., is the holder of a disability insurance policy that was issued by Defendant in 1994. (Doc. # 12-1.) Plaintiff asserts that a disability prevents him from practicing medicine, and he submitted a claim for disability benefits to Defendant on August 6, 2014. (Doc. # 16 at ¶¶ 7, 10.) In his amended complaint, Plaintiff alleges that, since submitting his claim, “Defendant has unreasonably delayed the payment of Plaintiff’s claim, has unreasonably failed to pay Plaintiff’s entire claim, has unreasonably denied part of Plaintiff’s claim, and has unreasonably failed to agree to pay lifetime benefits.” (Doc. # 16 at ¶ 11.) Plaintiff’s amended complaint asserts the following claims: breach of contract (first claim); breach of the duty of good faith (second claim); and a violation of Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116 (third claim).[1](Doc. # 16 at 2-4.)

On August 27, 2015, Defendant filed a motion to partially dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. # 12.) Defendant argues that Plaintiff’s statutory claim must be dismissed because Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116 took effect after the effective date of Plaintiff’s disability insurance policy. According to Defendant, permitting Plaintiff to assert a statutory claim under these circumstances “would violate the Colorado Constitution’s prohibition against a statute being applied retrospectively such that it impairs a vested right, creates a new obligation, or imposes a new duty.” (Doc. # 12 at 2.)

The Court referred Defendant’s motion to partially dismiss to Magistrate Judge Wang on August 28, 2015. (Doc. # 13.) On November 12, 2015, Magistrate Judge Wang issued her recommendation that Defendant’s motion to partially dismiss be denied. (Doc. # 24.) Magistrate Judge Wang’s recommendation relies, in part, on two opinions of the Colorado Court of Appeals: Kisselman v. American Family Mutual Insurance Co., 292 P.3d 964 (Colo.App. 2011), and Vaccaro v. American Family Insurance Group, 275 P.3d 750 (Colo.App. 2012). Defendant filed a timely objection to Magistrate Judge Wang’s recommendation on November 30, 2015 (Doc. # 31), and Plaintiff filed a timely response to Defendant’s objection on December 14, 2015 (Doc. # 35).

III. ANALYSIS

Defendant presents two arguments in its objection to Magistrate Judge Wang’s recommendation: (1) “the Court is not required to follow the decisions of the Colorado Court of Appeals because the decisions did not consider the issue raised in Northwestern Mutual’s Motion to Dismiss, ” and (2) “the Magistrate failed to properly apply the test for retroactivity and retrospectivity to the facts as pled here and ignores the fact that [Plaintiff] seeks to apply [Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116] to a contract that was negotiated, executed, and in full force and effect for 14 years before [Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116] came into existence.” (Doc. # 31 at 2-3.) The Court will address each of Defendant’s arguments in turn.

A. Whether the Magistrate’s Reliance on Kisselman and Vaccaro was misplaced

Defendant does not contest the standard set forth by Magistrate Judge Wang in her recommendation regarding when a federal court in Colorado should follow a decision of the Colorado Court of Appeals. That standard, as stated by the Tenth Circuit, provides that “‘where jurisdiction rests solely on diversity of citizenship and there is no controlling decision by the highest court of a state, a decision by an intermediate court should be followed by the Federal court, absent convincing evidence that the highest court would decide otherwise.’” United Fire & Cas. Co. v. Boulder Plaza Residential, LLC, 633 F.3d 951, 957 (10th Cir. 2011) (quoting Webco Indus., Inc. v. Thermatool Corp., 278 F.3d 1120, 1126 (10th Cir. 2002)). Defendant does not argue that there is a decision by the Colorado Supreme Court that controls in this matter, nor does Defendant argue that there is convincing evidence that the Colorado Supreme Court would decide this matter differently than the Colorado Court of Appeals. Instead, Defendant argues that the Court is not required to follow the decisions of the Colorado Court of Appeals because those decisions do not specifically addressed the particular issue raised in Defendant’s motion to dismiss-namely, whether Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116 can be applied when the insurance policy was issued before the effective date of the statutes. (Doc. # 31 at 4.) Defendant’s argument, however, is unavailing.

The first Court of Appeals case relied on by Magistrate Judge Wang-Kisselman v. American Family Mutual Insurance Co., 292 P.3d 964 (Colo.App. 2011)-involved a plaintiff who was injured in a car accident on April 4, 2005. Id. at 966. In its opinion, the Court of Appeals explicitly noted that, “[a]t the time of the accident, Kisselman was covered by an American Family insurance policy.” Id. The plaintiff filed a claim for benefits under the insurance policy on June 30, 2006. Id. In January 2008, the plaintiff demanded arbitration because he and his insurance carrier were unable to resolve their dispute regarding the payment of the plaintiff’s claim. Id. In April 2008, the plaintiff sued in order to avoid having his legal claims barred by the statute of limitations. Id. While the parties were negotiating the procedural details of the arbitration, the Colorado General Assembly enacted Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116, which took effect on August 5, 2008. Id. at 967. In April 2009, the plaintiff amended his complaint to add a claim alleging a violation of Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116. Id. The plaintiff moved for a determination from the trial court as to whether the statutes applied to the alleged misconduct of his insurer that occurred after August 5, 2008-the effective date of the statutes. Id. The trial court rejected the plaintiff’s argument that the statues applied, likening the plaintiff’s statutory claims to a common law bad faith claim and finding that an insurer’s continuing refusal to pay benefits does not result in the accrual of a new cause of action with each new act of refusal. Id. at 968.

The Court of Appeals reversed the trial court’s decision. At the beginning of its analysis, the Court of Appeals explicitly noted that “the only issue presented on appeal concerns the prospective applicability of sections 10-3-1115 and -1116 to Kisselman’s case, ” id. at 970, and framed the question presented as “whether sections 10-3-1115 and -1116 applied prospectively to alleged post-effective date acts of unreasonable delay, ” id. at 971. The Court of Appeals held that “the Statutes are applicable to American Family’s alleged post-effective date acts of unreasonable delay stemming from Kisselman’s pre-effective date claim for benefits, ” relying, in part, on its finding that “the General Assembly intended the Statutes to apply prospectively to all post-effective date conduct of insurer.” Id. at 972. Key to this finding was the Court of Appeals’ conclusion that the statutory language “shows that the General Assembly intended to prohibit conduct by insurers in their handling of claims for benefits owed to their insureds” and, ...


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