United States District Court, D. Colorado
ROGER T. REICH, and STEPHANIE BARRON, Plaintiffs,
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant.
Kristen L. Mix, United States Magistrate Judge
This matter is before the Court on Plaintiffs’ Motion to Apply Statutory Penalty [#71] (the “Statutory Penalty Motion”), Plaintiffs’ Motion for Prejudgment Interest [#72] (the “Prejudgment Interest Motion”), and Plaintiffs’ Motion for Attorneys’ Fees and Costs [#73] (the “Fees and Costs Motion”) (collectively, the “Motions”). Defendant filed a Response to each of the Motions [#78, #77, #74]. No Replies were filed. The Court has reviewed the pleadings, the case file and the applicable law and is fully advised in the premises. For the reasons set forth below, the Statutory Penalty Motion [#71] is GRANTED, the Prejudgment Interest Motion [#72] is DENIED, and the Fees and Costs Motion [#73] is GRANTED in part, DENIED in part and DENIED without prejudice in part.
Plaintiffs brought claims for breach of contract and violation of Colo. Rev. Stat. § 10- 3-1115 relating to Defendant’s alleged failure to pay and delay in paying benefits under a residential property insurance policy. Final Pretrial Order [#29] at 2. After a three-day jury trial, the jury found for Plaintiffs on both claims, finding that the insurance company failed to pay $15, 714.63 in benefits and unreasonably delayed in paying $465, 318.11 in benefits. Following the verdict, Plaintiffs requested that the Court apply the “statutory penalty” of “two times the covered benefit” to the judgment regarding unreasonably delayed benefits, and also sought an award of prejudgment interest, attorneys’ fees and costs.
A. The Statutory Penalty Motion
Colo. Rev. Stat. § 10-3-1116(1) reads: “A first-party claimant as defined in section 10-3-1115 whose claim for payment of benefits has been unreasonably delayed or denied may bring an action in a district court to recover reasonable attorney fees and court costs and two times the covered benefit.” The parties do not dispute that Plaintiffs are first-party claimants as defined in Colo. Rev. Stat. § 10-3-1115. Plaintiffs assert that the statutory language regarding “two times the covered benefit” requires the Court to award them twice the verdict amount for delayed benefits (i.e., $930, 636.22) as a statutory penalty. Statutory Penalty Motion [#71] at 5. Defendant asserts that the statutory language is ambiguous and that “‘two times the covered [benefit]’ must be deemed to be inclusive of the benefit itself, ” because Plaintiffs’ construction of the language would amount to an impermissible “duplication of damages” or “double recovery.” Response [#78] at 2-3.
The Court agrees with Plaintiffs. This Court has repeatedly held that
[N]owhere does the section state that “two times the covered benefit” shall include or account for those benefits already paid or sought in another claim. Nor does it state that an insured-plaintiff’s total recovery is capped at two times the amount of covered benefits or that the court must subtract from the . . . verdict any benefits already paid or awarded elsewhere. [Colo. Rev. Stat.] section 1116 prescribes what a plaintiff may recover under a claim brought thereunder, not what a plaintiff may be left with after aggregating a section 1116 award, other claims, and prior payments. . . .
Rabin v. Fidelity Nat’l Prop. & Cas. Ins. Co., 863 F.Supp.2d 1107, 1111-112 (D. Colo. 2012); see also Etherton v. Owners Ins. Co., No. 10-cv-00892-PAB-KLM, 2013 WL 5443068, at *3 (D. Colo. Sept. 30, 2013) (holding “[t]he Court . . . concludes that the phrase ‘covered benefit’ as used in § 10-3-1116(1) does not incorporate the amount of contract damages into the amount plaintiff can recover, but rather uses the covered benefit as a unit for measuring the amount of the penalty.”); D. R. Horton, Inc. v. Mountain States Mut. Cas. Co., No. 12-cv-01080-RBJ, 2013 WL 6169120, at *6 (D. Colo. Nov. 25, 2013) (holding “the plain language of the statute creates a distinct penalty defined as ‘two times the covered benefit, ’ presumably in an effort to discourage insurers from unreasonably delaying or denying a contractual benefit.”); Nigro v. Encompass Indem. Co., No. 14-cv-03464-MEH, 2015 WL 855069, at *2 (D. Colo. Feb. 26, 2015) (same).
Moreover, the Colorado Court of Appeals has reached the same conclusion. See Hansen v. American Fam. Mut. Ins. Co., No. 11CA1430, 2013 WL 6673066, at *9 (Colo.App. 2013), cert. granted, No. 14SC99, 2014 WL 5510047 (Colo. 2014) (“According to the statute the award to be made to the prevailing claimant is not the damages suffered by the claimant caused by the delay in the payment of the benefit, but rather two times the covered benefit the payment of which was unreasonably delayed or denied.”) Federal court jurisdiction in this case rests solely on diversity of citizenship. [#29] at 2. In that circumstance, when 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 has failed to convince the Court that the Colorado Supreme Court will disagree with the Court of Appeals’ conclusion in Hansen.
Accordingly, the Statutory Penalty Motion [#71] is granted.
B. The Prejudgment Interest Motion
Plaintiffs seek prejudgment interest in the amount of $21, 717.85 relating to the jury’s verdict in their favor regarding unreasonably delayed benefits in the amount of $465, 318.11. Prejudgment Interest Motion [# 72] at 5. They base their request not on their breach of contract damages or the bad faith statute, but instead on Colo. Rev. Stat. § 5-12-102(1)(b), which generally permits recovery of interest “when money or property has been wrongfully withheld.” Id. at 2. Defendant asserts that both Colo. Rev. Stat. § 10-3-1115 and § 10-3-1116 “are penal statutes, and penal awards are not subject to prejudgment interest.” Response [#77] at 1. They point out that a District Judge of this court has concluded that a prevailing plaintiff “is not entitled to prejudgment interest on any damages awarded pursuant to Colo. Rev. Stat. § 10-3-1116 . . . [because the statute] is penal in ...