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O'Sullivan v. Geico Casualty Co.

United States District Court, D. Colorado

February 2, 2017

DONALD O'SULLIVAN, Plaintiff,
v.
GEICO CASUALTY COMPANY, Defendant.

          ORDER DENYING SUMMARY JUDGMENT

          WILLIAM J. MARTÍNEZ UNITED STATES DISTRICT JUDGE.

         In this insurance dispute case pending under the Court's diversity jurisdiction, 28 U.S.C. § 1332, Plaintiff Donald O'Sullivan (Plaintiff, or “O'Sullivan”) brings claims for breach of contract, for breach of the duty of good faith and fair dealing, for unreasonable delay or denial of insurance benefits in violation of Colorado Revised Statutes §§ 10-3-1115 & -1116 (i.e., “statutory bad faith”), and for exemplary damages against Defendant Geico Casualty Company (Defendant, or “Geico”).

         Now before the Court is Defendant's Motion for Summary Judgment (ECF No. 60 (the “Motion, ” or “Defendant's Motion”), seeking judgment as a matter of law against all claims. For the reasons set forth below-centrally because genuine issues of material fact remain for trial as to Plaintiff's claim for contract reformation-Defendant's Motion is denied.

         I. LEGAL STANDARD

         Summary judgment is warranted under Federal Rule of Civil Procedure 56 “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A fact is “material” if, under the relevant substantive law, it is essential to proper disposition of the claim. Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). An issue is “genuine” if the evidence is such that it might lead a reasonable trier of fact to return a verdict for the nonmoving party. Allen v. Muskogee, 119 F.3d 837, 839 (10th Cir. 1997).

         In analyzing a motion for summary judgment, a court must view the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). In addition, the Court must resolve factual ambiguities against the moving party, thus favoring the right to a trial. See Houston v. Nat'l Gen. Ins. Co., 817 F.2d 83, 85 (10th Cir. 1987).

         II. BACKGROUND

         The following facts (and those further detailed in Part III.A.3.a., below), are undisputed, except where attributed to one party or another, or to specifically cited evidentiary materials.

         Plaintiff was insured by Geico under an automobile insurance policy effective as of August 17, 2013. (ECF No. 60 at 4, ¶ 1.) Plaintiff purchased this policy through Geico's website. Specifically, he first visited www.geico.com on August 9, 2013 to obtain a rate quote, then returned to Geico's website to complete the online purchase of the insurance policy on August 16, 2013. (Id. ¶ 2.)

         The central dispute raised by Geico's Motion relates to the information which Geico presented to Plaintiff regarding uninsured/underinsured (“UM/UIM”) coverage during and after his visits to Geico's website. Those facts are further detailed in the analysis below. (See Part III.A.3.a.)

         It is undisputed, however, that during Plaintiff's August 16, 2013 visit to Geico's website, he completed purchase of an auto insurance policy, and that Geico issued a policy with an effective date of August 17, 2013. His policy was issued with limits of $100, 000 per person/$300, 000 per occurrence (“100/300” lim its) for bodily injury liability (“BI”) coverage, and limits of $25, 000 per person/$50, 000 per occurrence (“25/50” limits) for UM/UIM coverage. (See ECF No. 60 at 14, ¶ 39; ECF No. 60-2 at 24.)

         Plaintiff's position, however, is that he intended to purchase a policy with the same limits for both BI and UM/UIM coverage, and that at the time he purchased the insurance policy, he believed that he had, in fact, purchased a policy with 100/300 limits for both BI and UM/UIM coverage, rather than the lower UM/UIM limits he had actually purchased. (See ECF No. 84-2 at 10 (“I thought that [the 100/300 BI limits] was all my coverage”); id. at 21.)

         While covered by his Geico policy, Plaintiff was involved in an auto accident with an uninsured/underinsured motorist, on May 9, 2014. (ECF No. 60 at 12, ¶ 48; ECF No. 72 at 12, ¶ 30.) After resolving his claims with the other driver for the full limits of her insurance (ECF No. 72 at 12-13, ¶ 31), Plaintiff filed a claim with Geico seeking payment of over $164, 000 in medical bills. (Id. ¶ 32.) Geico tendered $25, 000 in payment on Plaintiff's claim, that is, the full amount of the UM/UIM coverage limit as written in his insurance policy. (See ECF No. 72-11 at 2.) Plaintiff, through his attorney's communications and eventually in this lawsuit, has demanded that Geico provide UIM coverage up to a higher limit of $100, 000. Plaintiff argues that when Geico sold Plaintiff his insurance policy, it did not comply with its obligation, arising under Colorado Revised Statutes § 10-4-609(2), to offer Plaintiff “the right to obtain uninsured motorist coverage in an amount equal to the insured's bodily injury liability limits, ” and that Geico therefore must provide UM/UIM coverage equal to his BI coverage limits.

         III. ANALYSIS

         A. Plaintiff's Claim For Contract Reformation

         The threshold issue raised in this case is whether Plaintiff is entitled to reformation of his insurance contract to provide UIM coverage up to $100, 000, rather than the $25, 000 limit reflected in the policy as written. “Generally, the purpose of reformation of an insurance contract is to make the policy express the true intent of the parties. However, when a policy is violative of a statute, reformation is also required to assure that coverage will meet the statutory minimums.” Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d 703, 710 (10th Cir. 2005) (citing Thompson v. Budget Rent-A-Car Sys., Inc., 940 P.2d 987, 990 (Colo. App.1996)).

         1. Colorado Revised Statutes § 10-4-609(2) & Parfrey

         Here, the contested issue is whether Geico complied with Colorado Revised Statutes § 10-4-609(2), which requires insurers to offer potential customers the opportunity to purchase UM/UIM coverage at limits equal to their BI coverage limits:

Before the policy is issued or renewed, the insurer shall offer the named insured the right to obtain uninsured motorist coverage in an amount equal to the insured's bodily injury liability limits, but in no event shall the insurer be required to offer limits higher than the insured's bodily injury liability limits.

Colo. Rev. Stat.§ 10-4-609(2).

         In Allstate Insurance Co. v. Parfrey, 830 P.2d 905 (Colo. 1992), the Colorado Supreme Court interpreted this provision, holding that it requires auto insurers to provide their potential customers with notification “of the nature and purpose of UM/UIM coverage, ” and must offer them “the opportunity to purchase such coverage . . . in an amount equal to [their] [BI] liability limits.” Id. at 912. Describing how insurers must fulfill this obligation, the Parfrey court further held that insurers must “do more than merely make UM/UIM coverage available” at the higher rates, id. at 913 (emphasis added), and must provide notification to their potential customers “in a manner reasonably calculated to permit the potential purchaser to make an informed decision, ” about UM/UIM policy limits:

Our determination that an insurer has a one-time duty of notification and offer does not resolve the extent of specificity essential to the proper discharge of that duty . . . . Subsection (2) requires an insurer to do more than merely make UM/UIM coverage available at a level higher than the minimum motor vehicle liability limits of $25, 000 per person and $50, 000 per accident.
In keeping with the legislative purpose of UM/UIM coverage to protect a person against the risk of inadequate compensation for injuries and damages caused by an uninsured or underinsured motorist, we hold that an insurer's duty of notification and offer must be performed in a manner reasonably calculated to permit the potential purchaser to make an informed decision on whether to purchase UM/UIM coverage higher than the minimum statutory liability limits of $25, 000 per person and $50, 000 per accident.

Id. (emphasis added).

         Following Parfrey, the question of whether an insurer has adequately discharged this responsibility depends upon the facts in each case, but Parfrey identified several non-exclusive factors that may be informative:

In determining whether an insurer has fulfilled its statutory duty, a court may appropriately consider such factors as [1] the clarity with which the purpose of UM/UIM coverage was explained to the insured, [2] whether the explanation was made orally or in writing, [3] the specificity of the options made known to the insured, [4] the price at which the different levels of UM/UIM coverage could be purchased, and [5] any other circumstances bearing on the adequacy and clarity of the notification and offer.

Id. However, “[i]n the final analysis, the determination of the insurer's discharge of its statutory duty to notify the insured of the availability of higher UM/UIM coverage and to offer such coverage to the insured must be resolved under the totality of circumstances.” Id. at 914. Subsequent cases confirm that in applying this “totality of the circumstances” analysis, “no single factor is conclusive.” Johnson v. State Farm Mut. Auto. Ins. Co., 158 Fed.App'x 119, 122 (10th Cir. 2005) (internal quotation marks omitted; alterations incorporated).

         2. Case Law Applying Parfrey

         Since Parfrey's “totality of the circumstances” test depends upon specific facts in each case, the Court will review in some detail several cases that have applied this standard to particular factual records relevant here.

         a. Parfrey

         In Parfrey itself, after interpreting § 10-4-609(2) as detailed above, the Colorado Supreme Court applied this newly-stated rule, noting that the insurer “would be entitled to judgment as a matter of law only if it had adequately notified [the insureds] under § 10-4-609(2).” 830 P.2d at 914. The facts there showed that after initially purchasing both UM/UIM and BI coverage at statutory minimum levels, the plaintiffs later ...


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