United States District Court, D. Colorado
FRONT RANGE CHRISTIAN MINISTRIES d/b/a Front Range Christian School, a Colorado corporation, Plaintiff,
THE TRAVELERS INDEMNITY COMPANY OF AMERICA, a Connecticut corporation, Defendant.
A. BRIMMER United States District Judge
matter is before the Court on defendant's Motion to
Dismiss Count II of Plaintiff's Complaint [Docket No. 10]
pursuant to Fed.R.Civ.P. 12(b)(6). The Court has jurisdiction
pursuant to 28 U.S.C. § 1332.
case concerns an insurance claim for hail damage. Defendant
issued a property insurance policy to RYMILY, LLC for
property located in Littleton, Colorado. Docket No. 4 at 1-2,
¶ 2-3. Plaintiff is the assignee of rights under that
insurance policy. Id. at 1, ¶ 2. The insured
property was damaged by a hail storm on or about June 5,
2014. Id. at 2, ¶ 7. Plaintiff acknowledges
that defendant adjusted the claim and made partial payment on
the loss, but alleges that defendant recklessly failed to
investigate plaintiff's claim and properly estimate the
damage. Id. at 3, ¶ 22-24.
3, 2016, plaintiff filed its complaint in the District Court
for the City and County of Denver, Colorado . Docket No. 4.
Plaintiff's complaint includes two claims for relief: (1)
breach of contract under the assigned insurance policy,
id. at 3-4; and (2) unreasonable delay and denial of
payment of covered benefits pursuant to Colo. Rev. Stat.
§§ 10-3-1115 and 10-3-1116 (“statutory bad
faith claim”). Id. at 4-5. Defendant removed
the case to this Court on July 28, 2016. Docket No. 1.
August 4, 2016, defendant filed its motion to dismiss the
second claim. Docket No. 10. Defendant argues that such claim
is punitive in nature and therefore not assignable under
Colorado law. Id. at 3 (citing Kruse v.
McKenna, 178 P.3d 1198, 1201 (Colo. 2008)). Plaintiff
responds that its statutory bad faith claim is remedial in
nature, rather than punitive, and therefore assignable.
Docket No. 12 at 6. Plaintiff also argues that it is a
“first-party claimant” within the meaning of
§ 10-3-1115 and therefore it is able to bring a claim
under § 10-3-1116. Id.
STANDARD OF REVIEW
Court's function on a Rule 12(b)(6) motion for failure to
state a claim upon which relief can be granted is not to
weigh potential evidence that the parties might present at
trial, but to assess whether the plaintiff's complaint
alone is sufficient to plausibly state a claim. Fed.R.Civ.P.
12(b)(6); see also Dubbs v. Head Start, Inc., 336
F.3d 1194, 1201 (10th Cir. 2003) (citations omitted). In
doing so, the Court “must accept all the well-pleaded
allegations of the complaint as true and must construe them
in the light most favorable to the plaintiff.”
Alvarado, 493 F.3d at 1215 (quotation marks and
citation omitted). At the same time, however, a court need
not accept conclusory allegations. Moffett v. Halliburton
Energy Servs., Inc., 291 F.3d 1227, 1232 (10th Cir.
Colorado law, claims are assignable if they would survive the
death of the person initially entitled to assert the claim.
Kruse, 178 P.3d at 1200 (quoting Micheletti v.
Moidel, 32 P.2d 266, 267 (Colo. 1934) (“The
general rule is that assignability and descendibility go hand
in hand.”)). Consequently, courts look to
Colorado's survival statute, Colo. Rev. Stat. §
13-20-101, to determine if claims can be assigned. The
statute states that “punitive damages shall not be
awarded nor penalties adjudged after the death of the person
against whom such punitive damages or penalties are
claimed.” Id. Thus, if claims are “claims
for ‘penalties' that do not survive according to
this statute, then those claims could not be validly
assigned” and the assignor lacks standing to bring
them. Kruse, 178 P.3d at 1200. The Colorado Supreme
Court has adopted a three-part test to determine whether a
statute is penal and claims under it are assignable.
Id. at 1201. Courts look to “whether (1) the
statute asserted a new and distinct cause of action; (2) the
claim would allow recovery without proof of actual damages;
and (3) the claim would allow an award in excess of actual
statute can be both penal and remedial in nature. Moeller
v. Colorado Real Estate Comm'n, 759 P.2d 697, 701
(Colo. 1988). “When a statute is both remedial and
penal in nature, the remedial and penal elements are
separated and the appropriate standard is applied to
each.” Id. (citing Credit Men's
Adjustment Co. v. Vickery, 161 P. 297, 298 (Colo. 1916)
(“Vickery”)). The determination of
whether a portion of the statute is penal or remedial depends
on the facts of the case. Id. Vickery
examined a now-repealed statute that allowed creditors to
recover on corporate debts directly from the directors of a
corporation if the corporation failed to file an annual
report. 161 P. at 297. The court determined that, while the
statute penalized the directors, it was remedial with respect
to the creditors because it only allowed them to collect the
amount of their debt. Id. at 297-98. Therefore, the
court determined the creditors' claims were assignable
and their assignees could bring claims against the directors
to collect on the debt. Id. at 298.
Colorado Supreme Court has distinguished between penal and
remedial remedies even when they arise from a single
statutory section. In Carlson v. McCoy, 566 P.2d
1073 (Colo. 1977), the court analyzed Colo. Rev. Stat. §
38-12-103, which provides remedies where a landlord does not
return a portion of a tenant's security deposit and does
not provide written reasons for doing so. Such a landlord is
“liable for treble the amount of that portion of the
security deposit wrongfully withheld from the tenant,
together with reasonable attorney fees and court
costs.” Colo. Rev. Stat. § 38-12-103(3)(a). The
court reasoned that this statute is “both penal and
remedial in nature.” Carlson, 566 P.2d at
1075. The court held the treble damages remedy was penal, but
that “the right of recovery of the deposit, and the
award of attorney's fees which helps to vindicate that
right, act not as punishment for the public good, but as
redress for private wrongs.” Id. Accordingly,
the court applied the one-year statute of limitations
applicable to penal statutes to the treble damages remedy and
the six-year statute of limitation applicable to remedial
statutes under Colo. Rev. Stat. § 13-80-110(1) to the
attorney fees remedy.
statutory bad faith claim allows a successful plaintiff to
“recover reasonable attorney fees and court costs and
two times the covered benefit.” Colo. Rev. Stat. §
10-3-1116(1). This Court has previously addressed the issue
of whether a statutory bad faith claim is a penalty in the
context of determining the statute of limitations for such
claims. Gerald H. Phipps, Inc., 2015 WL 5047640, at
*3. The Court held that “Section 10-3-1116(1) satisfies
all three elements of the Kruse test and is thus
properly characterized as a statutory penalty.”
Id. (citing Hernandez v. Am. Standard Ins. Co.
of Wisc., No. 11-cv-03076-RBJ, 2013 WL 6633392, at *3-*4
(D. Colo. Dec. 16, 2013) (applying the Kruse test
and holding that claims under Colo. Rev. Stat. §§
10-3-1115 and 10-3-1116 are penalties and therefore
unassignable)). Other judges in this district who have
addressed this issue concur that the remedy available under
§ 10-3-1116 is a penalty. Hernandez, 2013 WL
6633392, at *4 (collecting cases).
November 17, 2016, the Colorado Court of Appeals decided
Casper v. Guarantee Trust Life Ins. Co., 2016 COA
167, 2016 WL 6803070 (Colo.App. Nov. 17, 2016), reh'g
denied Dec. 15, 2016, and cert. pet. filed sub nom
Guarantee Trust Life v. Estate of Casper, Michael, No.
2017SC000002 (Colo. 2017). In Casper, the plaintiff
died between the time that the jury returned a verdict in his
favor on his statutory bad faith claim and the time that the
trial court entered final judgment awarding attorney fees.
Id. at *2. The court of appeals considered whether
Mr. Casper's statutory bad faith claim survived his death
and distinguished between the two remedies available in
analyzing whether the statute was punitive. Id. at
*10 (citing Moeller, 759 P.2d at 701). It reasoned
that, “[a]lthough section 10-3-1116 may be penal in the
sense that the General Assembly intended for it to punish
insurance companies and deter them from unreasonably denying
the claims of their insureds, see [Kisselman v.
Am. Family Mut. Ins. Co., 292 P.3d 964, 972 (Colo.App.
2011)], the penal nature of the statute only manifests itself
in the ability to recover two times the amount of the covered
benefit.” Id. (citing Gerald H. Phipps,