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Jones v. American Family Mutual Insurance Company

United States District Court, D. Colorado

March 23, 2017

RENEE JONES, Plaintiff,
v.
AMERICAN FAMILY INSURANCE COMPANY, Defendant.

          RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          Michael E. Hegarty United States Magistrate Judge

         Before the Court is Plaintiff's Revised Opposed Motion to Amend Complaint to Include Prayer for Exemplary Damages [filed February 3, 2017; ECF No. 31]. In accordance with 28 U.S.C. § 636(b)(1)(B) and D.C. Colo. LCivR 72.1, the matter has been referred to this Court for recommendation. The motions are fully briefed, and oral argument would not materially assist the Court in its adjudication of the motion. For the reasons that follow, the Court respectfully recommends that the Honorable Christine M. Arguello grant in part and deny in part the Plaintiff' smotion as set forth herein.[1]

BACKGROUND

         Plaintiff initiated this action on August 17, 2016 asserting claims for bad faith breach of contract, statutory delay, and outrageous conduct against Defendant based on the following allegations. See Compl., ECF No. 1. Plaintiff, secondarily insured by Defendant (with State Farm Mutual Automobile Insurance Company being primary), struck a bicyclist (David Leistikow) while driving her automobile. Both Defendant and State Farm, whose counsel represented Plaintiff in that lawsuit, offered policy limits; however, Defendant then attached certain other conditions to its offer. Leistikow's attorney explained why he could not accept the conditions and gave a deadline for a non-restricted offer. After the deadline passed, Leistikow sued Plaintiff and obtained a jury verdict in excess of $1 million (reduced by 45% for Leistikow's comparative negligence). Plaintiff claims Defendant improperly handled and never informed her of the settlement offers, and now she “remains obligated to Dr. Leistikow for approximately a half-million dollars caused by American Family's decision not to make timely payment of her policy limits and [to] condition payment of her policy limits on conditions Dr. Leistikow could not meet.” Id. ¶ 68.

         After some discovery, Plaintiff seeks to add a prayer for exemplary damages to the operative pleading. Plaintiff contends that, by concealing from Plaintiff the settlement offers at the time they were made; by admitting it missed the deadline to settle Leistikow's claims; by inducing Plaintiff to trust the attorney it assigned to her defense; and by assigning a “conflicted” attorney who represented both the insurer and the Plaintiff (Steven Anderson), Defendant engaged in “willful, wanton[, ] and reckless behavior toward [Plaintiff's] rights and feelings.” Proposed Am. Compl. ¶¶ 123, 124.

         Defendant counters that the March 8, 2016 letter assigning Steven Anderson as the Plaintiff's attorney was issued inadvertently and that Plaintiff “never contacted Mr. Anderson to discuss his representation of her, and she continued to be represented by [Debra] Sutton [assigned by State Farm].” Resp. 4. Defendant contends that Plaintiff's reliance on the erroneous letter provides an insufficient basis for a claim of punitive damages, particularly because Plaintiff fails to demonstrate any prejudice to her resulting from the letter. Further, Defendant asserts that because “it remained open to settlement pending receipt of information concerning Medicare, ” there was no “refusal” to settle and, thus, no actionable claim. Finally, Defendant argues it was reasonable to seek information regarding a possible Medicare lien given Plaintiff's eligibility for Medicare and Leistikow's attorney's “admission” that it was possible to obtain a written confirmation of no lien.

         Plaintiff replies that Anderson referenced the March 8, 2016 assignment letter in a subsequent July 5, 2016 letter to Plaintiff refusing to pay the excess verdict, and neither he nor anyone at American Family ever stated the letter was issued “erroneously” or “inadvertently.” Moreover, Plaintiff cites to the deposition testimony of Defendant's adjustor (who substituted for the primary adjustor while he was on vacation at the time of the settlement offer) saying that she and the primary adjustor never discussed the Plaintiff or her conversation with Leistikow's attorney, Scott Larson. Finally, Plaintiff contends that Defendant's delay in seeking lien information and/or responding to Leistikow's July 10, 2015 unrestricted offer was unreasonable since Defendant was “never in danger of being subjected to potential double payment of medical liens” because no liens had been asserted and Leistikow agreed to satisfy all liens from the settlement paid.

         LEGAL STANDARDS

         Rule 15 of the Federal Rules of Civil Procedure provides that, following a 21-day period for service of the original pleading or service of a responsive pleading or Rule 12 motion, a party may amend its pleading only by leave of the court or by written consent of the adverse party. Fed.R.Civ.P. 15(a) (2013). Rule 15 instructs courts to “freely give leave when justice so requires.” Id. “If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits.” Foman v. Davis, 371 U.S. 178, 182 (1962).

         The grant or denial of leave is committed to the discretion of the district court. See Duncan v. Manager, Dep't of Safety, City & Cnty. of Denver, 397 F.3d 1300, 1315 (10th Cir. 2005). Leave to amend should be refused “only on a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment.” Id.; see also Foman, 371 U.S. at 182.

         ANALYSIS

         Here, Plaintiff seeks to amend her Complaint to add factual allegations and a claim of exemplary damages against Defendant concerning Defendant's handling of the settlement offers made in the underlying lawsuit and its assignment of a “conflicted” lawyer to represent Plaintiff. In Colorado, exemplary or punitive damages are available only by statute. Stamp v. Vail Corp., 172 P.3d 437, 447 n.12 (Colo. 2007) (en banc) (citing Kaitz v. Dist. Court, 650 P.2d 553, 556 (Colo. 1982)). Plaintiff seeks to amend under Colorado's general exemplary damages provision, Colo. Rev. Stat. § 13-21-102(1). Subsection (1.5)(a) of the statute provides:

A claim for exemplary damages in an action governed by this section may not be included in any initial claim for relief. A claim for exemplary damages in an action governed by this section may be allowed by amendment to the pleadings only after the exchange of initial disclosures pursuant to rule 26 of the Colorado rules of civil procedure and the plaintiff establishes prima facie proof of a triable issue. After the plaintiff establishes the existence of a triable issue of exemplary damages, the ...

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