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Peden v. State Farm Mutual Automobile Insurance Co.

United States Court of Appeals, Tenth Circuit

November 15, 2016

WENDY L. PEDEN, Plaintiff - Appellant,

         Appeal from the United States District Court For the District of Colorado (D.C. No. 1:14-CV-00982-LTB-KLM)

          Bradley A. Levin, Levin Sitcoff PC, Denver, Colorado (Nelson A. Waneka, Levin Sitocoff PC, Denver, Colorado, Gary Doehling and Keller Caubarreaux, Gary Doehling, P.C., Grand Junction, Colorado, with him on the briefs), for Plaintiff-Appellant.

          Heather A. Salg, Harris, Karstaedt, Jamison & Powers, P.C., Englewood, Colorado, for Defendant-Appellee.

          Before LUCERO, BALDOCK, and BACHARACH, Circuit Judges.

          BACHARACH, Circuit Judge.

         This case involves the handling of a claim under policies providing underinsured-motorist coverage. The tortfeasor, Mr. Terrill Graf, bought his fiancée a van for her 50th birthday. Celebrating the birthday and new purchase, Mr. Graf drank liquor and then gathered four friends in the van. The plaintiff, Ms. Wendy Peden, was one of those friends. She says that she expected Mr. Graf only to show off the van and to photograph the group. But Mr. Graf drove away with his friends in the van. He crashed, causing serious injuries to Ms. Peden. She obtained $240, 000 in insurance benefits. But Ms. Peden claimed more under her coverage for underinsured-motorist benefits.

         The insurer (State Farm) initially denied the claim, but ultimately paid her an additional $350, 000, the maximum amount that she could receive under the underinsured-motorist coverage. Ms. Peden sued State Farm under Colorado's common law and statutory law, claiming an unreasonable denial or delay in paying benefits. We must decide whether a reasonable fact-finder could conclude that State Farm unreasonably denied or delayed payment of benefits. The district court answered "no." We disagree and reverse.

         1. Ms. Peden sought two payments from State Farm: one from Mr. Graf's liability coverage and one from Ms. Peden's underinsured-motorist coverage.

         Ms. Peden's injuries triggered Mr. Graf's liability coverage and Ms. Peden's underinsured-motorist coverage. State Farm, coincidentally, insured both Mr. Graf for his liability[1] and Ms. Peden for underinsured- motorist coverage. Thus, State Farm bore dual responsibilities:

• to indemnify Mr. Graf for liability to his passengers, including Ms. Peden, and
• to pay Ms. Peden the amount that she was unable to recoup from Mr. Graf because of his lack of adequate liability coverage.

         Mr. Graf's liability coverage had a cap of $500, 000 for the accident. After investigating, State Farm recognized that Mr. Graf would likely incur liability to the four passengers for at least $500, 000; thus, State Farm allocated the $500, 000 among the four passengers in the van. Out of this $500, 000, Ms. Peden obtained $210, 000. She also obtained another $30, 000 in medical payment benefits.

         But she claimed that Mr. Graf owed more. If Ms. Peden were right, Mr. Graf would be considered "underinsured, " triggering coverage for underinsured-motorist benefits. These benefits totaled $350, 000 from two separate policies:

1. Mr. Graf's fiancée, who owned the van, had $250, 000 in underinsured-motorist coverage under a State Farm policy. This coverage extended to Ms. Peden as a passenger.
2. Ms. Peden had her own State Farm policy with $100, 000 in underinsured-motorist coverage.

          Ms. Peden demanded the full $350, 000 from State Farm, which would have brought her total payments to $590, 000. To justify this amount, Ms. Peden stated that she had seven forms of injury, totaling more than $647, 484.76 to $1, 115, 504.76:

Nature of Injury

Amount Demanded

1. Past medical bills

$ 114, 352.55

2. Past wage losses

$ 7, 500.00

3. Future wage losses


4. College tuition that Ms. Peden had to forfeit

$ 7, 622.21

5. Noneconomic damages

$ 468, 010 to $936, 030

6. Prejudgment interest


7. Costs

$ 50, 000 (at minimum)


$ 647, 484.76 to $ 1, 115, 504.76 (plus a "substantial" amount for future wage loss and an unspecified amount for prejudgment interest)

         State Farm denied the claim, stating that the prior payment of $240, 000 had fairly compensated Ms. Peden for the amount that Mr. Graf owed.

         2. Ms. Peden sued, and the district court granted summary judgment to State Farm.

         Dissatisfied, Ms. Peden sued State Farm, invoking Colorado common law and statutory law and alleging an unreasonable denial or delay in paying benefits. During the litigation, State Farm obtained additional information and ultimately paid Ms. Peden the complete $350, 000 in underinsured-motorist coverage.

         Though Ms. Peden had now received the most she could recoup under the policies, she claimed that State Farm had unreasonably denied or delayed payment. State Farm moved for summary judgment, arguing that the handling of the claim was reasonable as a matter of law; Ms. Peden moved for partial summary judgment on her statutory claim.[2] The district court granted State Farm's motion, which led the court to deny Ms. Peden's motion as moot.

         3. Engaging in de novo review, we apply Colorado substantive law.

         We engage in de novo review, viewing the evidence and drawing all reasonable inferences in favor of Ms. Peden. Birch v. Polaris Indus., Inc., 812 F.3d 1238, 1251 (10th Cir. 2015). In this manner, we consider whether State Farm has shown the absence of a genuine dispute of material fact. Fed.R.Civ.P. 56(a).

         We assess Ms. Peden's claims under Colorado law. See Etherton v. Owners Ins. Co., 829 F.3d 1209, 1223 (10th Cir. 2016) ("When jurisdiction is based on the parties' diverse citizenship, a federal court must assess state law claims based on the substantive law of the state."). In this context, we defer to the decisions of the Colorado Supreme Court, id., and "follow the Colorado Court of Appeals' reasoning . . . unless we are convinced that ...

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