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Rooftop Restorations, Inc. v. American Family Mutual Insurance Co.

United States District Court, D. Colorado

February 8, 2017

ROOFTOP RESTORATIONS, INC., a Colorado Corporation, Plaintiff,



         This matter is before the Court on Defendant American Family Mutual Insurance Company's Motion for Partial Summary Judgment. (ECF No. 22.) The motion has been fully briefed (see ECF Nos. 26, 27), and presents a single, discrete legal issue: Whether Plaintiff's claim for unreasonable delay or denial of insurance benefits arising under Colorado Revised Statutes §§ 10-3-1115 & -1116 is subject to the one-year statute of limitations applicable to actions arising under “penal statutes, ” Colo. Rev. Stat. § 13-80-103(d).

         Because the Court concludes that this issue may be case-determinative and it appears no controlling precedent from the Colorado Supreme Court resolves it, the Court, on its own motion, certifies this question of law to the Colorado Supreme Court, as set out below. See C.A.R. 21.1(a) & (b).

         I. BACKGROUND

         Pursuant to Colorado Appellate Rule 21.1(c)(2), the Court concludes that the following facts and background are relevant to the question of law to be certified and fully show the nature of the controversy in which this question arises.

         In this insurance dispute, the insureds held a homeowners policy issued by Defendant (“American Family”). (See generally ECF No. 22 at 1.) On August 30, 2013, the insureds asserted a claim for hail damage. (Id. at 1-2.) On September 3, 2013, American Family estimated that the cost to repair the damage was less than the policy's $1, 000 deductible. (Id. at 2; ECF No. 22-1.) At some point thereafter, the insureds assigned their claim against American Family to their contractor, Plaintiff Rooftop Restoration, Inc. (“Rooftop”).[1] On May 13, 2014, Rooftop sent American Family an estimate that the relevant cost of repairs was nearly $70, 000. (Id. at 2; ECF No. 22-2.) Following a reinspection, on May 28, 2014, American Family increased its estimate of the covered damage to approximately $4, 000, and sent the insureds a payment for that amount, less the deductible, or approximately $3, 000. (Id. at 2-3; ECF No. 22-3.)

         This lawsuit followed. Rooftop filed its Complaint against American Family in Denver District Court on September 11, 2015. (ECF No. 1-5.) On November 23, 2015, American Family removed the case to this Court pursuant to federal diversity jurisdiction, 28 U.S.C. § 1332. (ECF No. 1.) Rooftop asserts two causes of action: breach of contract, and unreasonable delay or denial of insurance benefits, Colo. Rev. Stat. §§ 10-3-1115 & -1116 (i.e., “statutory bad faith”). (See ECF No. 1-3 at 4-5; ECF No. 34 at 2.)


         Given the timeline above, it is undisputed that Rooftop's claims were filed more than one year after they accrued. American Family argues that Rooftop's statutory bad faith claim is therefore time-barred by § 13-80-103(d) because that provision applies to “penal statutes, ” and Colo. Rev. Stat. § 10-3-1116 is such a “penal” statute, when analyzed under the test articulated in Kruse v. McKenna, 178 P.3d 1198, 1201 (Colo. 2008); see also Palmer v. A.H. Robins Co., 684 P.2d 187, 214 (Colo. 1984). Under that test, courts address: (1) whether the statute asserted a new and distinct cause of action; (2) whether the claim would allow recovery without proof of actual damages; and (3) whether the claim would allow an award in excess of actual damages. Kruse, 178 P.3d at 1201.

         Given the large number of cases litigated under §§ 10-3-1115 & -1116, it is surprising that neither the Colorado Supreme Court nor any division of the Colorado Court of Appeals has resolved whether the one-year statute of limitations (Colo. Rev. Stat. § 13-80-103(d)) applies to such claims, or decided whether § 1116 is a “penal statute” under Kruse. One explanation for this lack of controlling authority may be that many such cases are removed from the Colorado courts to this Court pursuant to 28 U.S.C. § 1332, by insurance companies headquartered outside Colorado. Indeed, this frequently-recurring question of law question has been addressed both directly and indirectly by many of the judges of this Court.[2] Some of these decisions have squarely held that because § 10-3-1116 is penal in nature, claims arising under it are subject to a one-year statute of limitations. Phipps, 2015 WL 5047640, at *3; see also Mascarenas v. Am. Family Mut. Ins. Co., 2015 WL 8303604, at *8 (D. Colo. Dec. 8, 2015). Others have concluded the statute is penal under the Kruse test, without directly addressing the statute of limitations issue. Rooftop I, 2015 WL 9185679, at *4 (holding statute is penal under Kruse and that claims therefore cannot be assigned); Hernandez, 2013 WL 6633392, at *3-4 (same).

         The undersigned finds the analysis in Hernandez and Phipps to be persuasive. However, this Court's role is not to reach its own judgment regarding open questions of Colorado law, but to follow the decisions of the Colorado Supreme Court, and, “[w]here no controlling state decision exists . . . to predict what the state's highest court would do, ” using “guidance from decisions rendered by lower courts in the relevant state.” Wade v. EMCASCO Inc. Co., 483 F.3d 657, 665-66 (10th Cir. 2007).

         Here, the Court finds it impossible to predict with confidence what the Colorado Supreme Court would do. On the one hand, the decisions in this Court have persuasively applied the controlling test articulated by the Colorado Supreme Court in Kruse to conclude the statute is penal. See supra note 2; MacKinney, 2016 WL 7034977, at *8 (collecting and summarizing cases); Pinewood Townhome, 2017 WL 131789, at *4 n.2 (same). On the other hand, language and analysis in recent Colorado Court of Appeals opinions casts doubt upon earlier decisions of this Court, but these decisions have not resolved the statute of limitations issue, and have not applied the Kruse test. In particular, the panel in Casper v. Guarantee Trust Life Ins. Co., ___P.3d___, 2016 WL 6803070, at *8 (Colo.App. Dec. 15, 2016) “disagree[d] that the statute is penal and instead conclude[d] that section 10-3-1116 is remedial in nature.” However, Casper reached that conclusion in a distinct context (whether attorneys' fees awarded under § 10-3-1116 are considered damages), and without analysis under Kruse.[3] See also Stresscon Corp. v. Travelers Prop. Cas. Co., 373 P.3d 615, 639 (Colo.App. 2013) (describing § 10-3-1116 as a “remedial statutory scheme, ” but without citation to Kruse), rev'd on other grounds, 370 P.3d 140 (Colo. 2016).

         Given these decisions, the undersigned agrees with the recent observation of U.S. Magistrate Judge Nina Y. Wang that “the law regarding the applicable statute of limitations remains uncertain.” MacKinney, 2016 WL 7034977, at *8 (reviewing cases). Moreover, more than three years have passed since U.S. District Judge R. Brooke Jackson wrote that “[u]ltimately, this issue will be resolved by Colorado's appellate courts, ” Hernandez, 2013 WL 6633392, at *3, yet the issue remains both unresolved and frequently-recurring. And, no matter how many statutory bad faith claims cases are removed to this Court, it cannot definitively resolve this question of Colorado law. See Wade, 483 F.3d at 666. Accordingly, the Court certifies this issue to the Colorado Supreme Court, as set out below.[4]

         III. ...

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