United States District Court, D. Colorado
CHURCH MUTUAL INSURANCE COMPANY, a Wisconsin corporation, Plaintiff,
PHILLIP MARSHALL COUTU, an individual, POWER ADJUSTERS, INC., a Colorado corporation, JUDAH LEON BENSUSAN, an individual, and ATLANTIS CLAIMS SERVICES, LLC, a Florida limited liability company, Defendants.
RECOMMENDATION OF UNITED STATES MAGISTRATE
Y. Wang United States Magistrate Judge.
matter is before the court on the Joint Motion To Dismiss
(“Motion to Dismiss” or “Motion”)
filed by Defendants Phillip Marshall Coutu (“Mr.
Coutu”), Power Adjusters, Inc. (“Power
Adjusters”), Judah Leon Bensusan (“Mr.
Bensusan”), and Atlantis Claims Services, LLC's
“Defendants”). [#65,  filed June 5, 2017]. The
undersigned considers the Motion pursuant to 28 U.S.C. §
636(b), the Order Referring Case dated March 30, 2017 [#33],
and the memorandum dated June 5, 2017 [#66]. Upon careful
review of the Motion and associated briefing, the entire case
file, applicable law, and the comments offered at the
September 7, 2017 Motion Hearing, this court respectfully
RECOMMENDS that the Motion to Dismiss be GRANTED IN PART and
DENIED IN PART for the reasons stated herein.
following facts are drawn from the First Amended Complaint
& Jury Demand (“FAC”) [#49], and are presumed
to be true for the purposes of the instant Motion. Plaintiff
Church Mutual Insurance Company (“Plaintiff” or
“Church Mutual”) is a Wisconsin corporation with
its principal place of business in Merill, Wisconsin, and is
licensed to issue property and casualty insurance to
individuals and companies located in Colorado. [#49 at ¶
1]. Mr. Coutu is a resident of Florida who holds a
non-resident public adjuster license in Colorado, and
allegedly owned, operated, controlled, or was otherwise
employed by or involved with Power Adjusters, a Colorado
corporation. [Id. at ¶¶ 2-3, 5]. Mr.
Bensusan, a resident of Colorado, once held a Colorado
resident public adjuster's license in Colorado, and
allegedly owned, operated, controlled, or was otherwise
employed by or involved with Atlantis Claims, a Florida
limited liability company. [Id. at ¶¶ 4,
6-8]. Both Power Adjusters and Atlantis Claims provide
services to “policyholders in connection with disputes
with insurance companies.” [Id. at
¶¶ 5, 8].
relevant here, Church Mutual issued Policy No.
0226224-02-92707 (the “Policy”) to Montview
Boulevard Presbyterian Church (“Montview”) for a
period of July 27, 2009, through July 27, 2012. [Id.
at ¶¶ 14-15]. On May 5, 2012, Montview submitted
Claim No. 1186476 (the “claim”) to Church Mutual
for benefits owed under the Policy to recover roof repair
costs incurred following a wind and hailstorm. [Id.
at ¶ 16]. On or about September 11, 2012, Plaintiff
remitted $41, 183.44 to Montview under the claim-Plaintiff
then remitted an additional $48, 397.92 under the claim to
Montview on or about February 12, 2013. [Id. at
Plaintiff continued to adjust the claim, Montview hired Mr.
Coutu and Power Adjusters as its public adjuster to represent
it in the adjustment of the claim on October 10, 2012.
[Id. at ¶ 19]. Mr. Coutu allegedly entered into
a “consulting” agreement with Integrity Roofing,
Montview's roofing contractor, at this same time but did
not disclose the existence of this agreement with Plaintiff.
[#49 at ¶ 19]. At some point, Plaintiff proposed that an
independent adjuster visit Montview's property to conduct
a re-inspection in the presence of a contractor and engineer
to assess the alleged damage; however, Mr. Coutu allegedly
refused to participate and instead sought to have a personal
meeting with the independent adjuster. [Id. at
Coutu then indicated that he would go directly to the
appraisal process, despite Plaintiff's ongoing adjustment
of the claim, and, in accordance with Mr. Coutu's urging,
Montview issued a written demand, via email, for appraisal
(the “Appraisal Demand”) on or about January 23,
2013. [Id. at ¶¶ 21-22, 24]. The Appraisal
Demand named Mr. Bensusan of Atlantis Claims as the purported
impartial appraiser under the Policy's appraisal clause.
See [id. at ¶¶ 23-24]. On January
31, 2013, Plaintiff acknowledged and accepted the Appraisal
Demand and nominated William McConnell, P.E. as its
appraiser. [Id. at ¶ 25]. Mr. McConnell also
agreed to Mr. Bensusan's nomination of John Kezer, Esq.
of Jones & Keller, P.C. to serve as the umpire.
See [id. at ¶ 26].
about September 30, 2013, an appraisal award issued for $268,
168.54 (the “Appraisal Award”). [Id. at
¶ 26]. Then, on or about October 11, 2013, Church Mutual
remitted $154, 410.68 to Montview as an actual cash value
payment under the claim and the Appraisal Award.
[Id. at ¶ 29]. That same day, Montview's
facilities manager Bob Cloud, met with Messrs. Coutu and
Bensusan as well as Integrity Roofing to discuss the
Appraisal Award and to divide the proceeds. [Id. at
¶ 32]. Allegedly, at this meeting, Mr. Cloud first
learned that Mr. Bensusan's compensation was a percentage
of the Appraisal Award, not an hourly fee. [Id. at
¶¶ 33, 49]. According to Plaintiff, Messrs. Coutu
and Bensusan have a de facto partnership amongst
themselves, Power Adjusters and Atlantis Claims, and with Mr.
Kezer. See [id. at ¶¶ 35-45].
Plaintiff then remitted an additional $14, 176.50 as
recoverable depreciation under the claim on November 1, 2013.
[Id. at ¶ 30].
about May 1, 2014, Montview filed a complaint against Church
Mutual in the District Court for the City and County of
Denver, later removed to the District of Colorado, asserting
claims for common law bad faith breach of an insurance
contract as well as violations of Colo. Rev. Stat.
§§ 10-3-1115, -1116 (“statutory bad
faith”) related to the claim. [Id. at
¶¶ 46-48]. Church Mutual asserted a counterclaim
against Montview, seeking to vacate the Appraisal Award
given, inter alia, Mr. Bensusan's undisclosed
financial interest in the outcome of the appraisal.
[Id. at ¶¶ 50-51]. Ultimately, Church
Mutual and Montview settled their case, but Plaintiff alleges
that it suffered damages defending against the action-the
action Messrs. Coutu and Bensusan urged Montview to file and
which both stood to gain from financially. [Id. at
¶¶ 56-58]. Moreover, Plaintiff alleges that Messrs.
Coutu and Bensusan actively concealed the nature of their
financial and business relationships, despite an independent
duty to disclose this information. See [id.
at ¶¶ 59-71, 72-88, 92-93]. Further, that these
misrepresentations of material facts would have relieved
Church Mutual from any payment obligations under the Policy,
see [id. at ¶¶ 70-71], and that
Messrs. Coutu and Bensusan seek additional compensation by
urging policyholders to file suit against Church Mutual for
delaying and/or withholding benefits and, in doing so, have
committed mail and wire fraud. [Id. at ¶¶
92-93, 96, 97-104].
initiated this action by filing its Complaint in this
District on January 23, 2017. [#1]. Plaintiff's Complaint
alleged two claims against the Defendants: (1) civil
conspiracy and (2) fraudulent concealment. [Id.].
Following several extensions of time to answer or otherwise
respond to Plaintiff's Complaint, see, e.g.,
[#20; #25; #29; #38], and prior to the Rule 16(b) Scheduling
Conference, the undersigned granted the Parties' request
to set a deadline of April 25, 2017, for Plaintiff to file
its FAC, and granted Defendants one final extension of May
16, 2017, to answer or otherwise respond to Plaintiff's
FAC. See [#46]. Plaintiff filed its FAC on April 25,
2017, and levied several new claims against Defendants. The
operative claims in this matter are: (1) civil conspiracy
against all Defendants (“Claim I”); (2)
fraudulent concealment against all Defendants (“Claim
II”); (3) federal civil violations of the Racketeer
Influenced and Corrupt Organizations Act (“RICO”)
against all Defendants (“Claim III”); (4) federal
civil RICO conspiracy against Messrs. Coutu and Bensusan
(“Claim IV”); and (5) state civil violations of
the Colorado Organized Crime Control Act
(“COCCA”) against Messrs. Coutu and Bensusan
(“Claim V”). [#49].
undersigned then held a Status Conference on May 10, 2017,
setting a Scheduling Conference for June 23, 2017. [#56]. On
June 5, 2017, Defendants filed the instant Motion to Dismiss
directed at all five claims [#65], as well as a Motion to
Stay discovery [#64] that the undersigned denied.
See [#103]. Plaintiff then filed a Response [#95],
and Defendants filed a Reply. [#110]. On September 7, 2017, the
undersigned held a Motion Hearing on the Motion to Dismiss,
and took the Motion under advisement. [#115]. Because the
Motion is ripe for Recommendation, this court considers the
Parties' arguments below.
Rule 12(b)(6) a court may dismiss a complaint for
“failure to state a claim upon which relief can be
granted.” Fed.R.Civ.P. 12(b)(6). In deciding a motion
under Rule 12(b)(6), the court must “accept as true all
well-pleaded factual allegations . . . and view these
allegations in the light most favorable to the
plaintiff.” Casanova v. Ulibarri, 595 F.3d
1120, 1124 (10th Cir. 2010) (quoting Smith v. United
States, 561 F.3d 1090, 1098 (10th Cir. 2009)).
Nevertheless, a plaintiff may not rely on mere labels or
conclusions, “and a formulaic recitation of the
elements of a cause of action will not do.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Rather, “a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 129
S.Ct. 1937, 1949 (2009); see also Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008)
(explaining that plausibility refers “to the scope of
the allegations in a complaint, ” and that the
allegations must be sufficient to nudge a plaintiff's
claim(s) “across the line from conceivable to
plausible.”). The ultimate duty of the court is to
“determine whether the complaint sufficiently alleges
facts supporting all the elements necessary to establish an
entitlement to relief under the legal theory proposed.”
Forest Guardians v. Forsgren, 478 F.3d 1149, 1160
(10th Cir. 2007).
Fraudulent Concealment - Claim II
Colorado law,  to plead a plausible fraudulent
concealment claim Church Mutual must allege that: (1)
Defendants concealed a material fact that in equity and good
conscience should have been disclosed; (2) Defendants knew it
was concealing such a fact; (3) Plaintiff was ignorant to the
concealed fact; (4) Defendants intended Plaintiff to act upon
the concealed fact; and (5) Plaintiff acted on the concealed
fact to its detriment. See Wood v. Houghton Mifflin
Harcourt Publ'g. Co., 589 F.Supp.2d 1230, 1254 (D.
Colo. 2008) (applying Colorado law); Baker v. Wood, Ris
& Hames, Prof'l Corp., 364 P.3d 872, 883 (Colo.
2016). The indispensible component of a fraudulent inducement
claim is that the tortfeasor owed the plaintiff a duty to
disclose material information yet neglected that duty.
See Mallon Oil Co. v. Bowen/Edwards Assocs., Inc.,
965 P.2d 105, 111 (Colo. 1998) (“A defendant has a duty
to disclose to a plaintiff with whom he or she deals material
facts that in equity or good conscience should be
disclosed.” (internal quotation marks and citation
omitted)). “The question of whether a duty exists is a
question of law.” Level 3 Commc'ns, LLC v.
Liebert Corp., 535 F.3d 1146, 1163 (10th Cir. 2008)
(internal quotation marks and citation omitted).
issue here is whether Defendants owed Plaintiff such a duty
under the circumstances of this case-a question that appears
unanswered in Colorado and in this District. See Etherton
v. Owners Ins. Co., 829 F.3d 1209, 1223 (10th Cir. 2016)
(noting that when jurisdiction is based on the parties'
diversity, the federal court must predict how the state's
highest court would rule on a question of substantive law if
the state's highest court has yet to do so). The Parties
offer diametrically opposed views on this point: Plaintiff
argues that a duty unequivocally exists under Colorado common
law, wholly apart from the insurance contract entered between
Church Mutual and Montview, whereas Defendants contend that
there is no such duty and that this fact is fatal to the
entire FAC. Compare [#65; #110] with [#95].
Additionally, Defendants aver that, even if they owed
Plaintiff such a duty, Colorado's economic loss rule bars
Claim II because the allegedly breached duty arose from the
Policy. See [#65 at 14-18, 21; #110 at 15-17].
addressing these arguments, this court first addresses an
issue interwoven, and at times conflated, throughout the
Parties' positions. Throughout their Motion to Dismiss,
Defendants argue that, because they are Montview's
agents, their alleged unsatisfactory performance under the
Policy (i.e., their partiality) insulates them from
Plaintiff's fraudulent concealment claim. See
[#65 at 11-14, 20-21]. Rather, Plaintiff's sole remedy
was to deny Montview's appraisal award based on this
alleged misconduct. See generally [id.].
Plaintiff responds that Defendants breached a duty to
disclose owed to Plaintiff, because Defendants, even as
Montview's agents, are liable for their own tortious
conduct. [#95 at 23-27]. Plaintiff also contends that without
such an independent duty, their only recourse would be to
penalize the innocent insured. [Id. at 14].
Defendants generally agree with this proposition, but argue
that these conclusions do not create an independent duty to
disclose material facts to Plaintiff. [#110 at 13-14]. At
oral argument, Defendants continued to insist that as agents
of a party to an insurance contract, they cannot be
independently liable for breach of contract. See,
e.g., [#119 at 6:4-10, 6:23-7:13]. This court finds
Defendants' arguments misplaced.
initial matter, as recognized by Plaintiff, there is a
distinction between the role of a public adjuster and an
appraiser-a distinction that this court finds to be important
to discuss even if it is not dispositive of the issues before
it. A public adjuster is an adjuster employed by an insured
to assist the insured in making a claim to its insurer.
See Colo. Rev. Stat. § 10-2-103(8.5);
Colorado Hosp. Servs. Inc. v. Owners Ins. Co., No.
14-CV-001859-RBJ, 2015 WL 4245821, at *2 (D. Colo. July 14,
2015). Therefore, a public adjuster is considered an agent of
the insured. See Republic Ins. Co. v. Jernigan, 753
P.2d 229, 231 (Colo. 1988) (describing a public adjuster as
an agent of the insured). But it is not clear that an
appraiser selected under the Policy is an agent of the
insured. “Agency ‘is the fiduciary relation which
results from the manifestation of consent by one person to
another that the other shall act on his behalf and subject to
his control, and consent by the other so to act.'”
Mullin v. Hyatt Residential Grp., Inc., 82 F.Supp.3d
1248, 1258 (D. Colo. 2015) (quoting Stortroen v.
Beneficial Fin. Co. of Colorado, 736 P.2d 391, 395
(Colo. 1987)). Defendants cite no authority, and this court
could find none, that an appraiser, who is required to be
“impartial” under the Policy, would be
appropriately considered an agent of the insured. Cf.
Norwich Union Fire Ins. Soc., Ltd., of Norwich, England v.
Cohn, 68 F.2d 42, 44 (10th Cir. 1933) (“But while
appraisers are appointed by the parties, they are not subject
to the control of the parties. They are not agents in law and
ought not to be in practice. If appraisers were subject to
the direction of the parties, the whole proceeding would be a
useless ceremony . . . .” (internal citations
assuming an appraiser could be appropriately considered an
agent of the insured, Defendants may still be liable for
their tortious actions independently. It is well-settled that
“[a] principal may be bound by an agent's actions
if the agent acts pursuant to either actual or apparent
authority, regardless of whether the principal has knowledge
of the agent's conduct.” Citywide Banks v.
Armijo, 313 P.3d 647, 652 (Colo.App. 2011).
“However, an agent may be held personally liable for
torts committed by him including his own misrepresentations,
even though the tortious acts were done on behalf of his
principal.” Galie v. RAM Assocs. Mgmt. Servs.,
Inc., 757 P.2d 176, 177 (Colo.App. 1988);
accord Restatement (Third) of Agency § 7.01
(“An agent is subject to liability to a third party
harmed by the agent's tortious conduct.”). While
Defendants may not be liable for any breach by Montview of
the Policy, Defendants can be liable for their own tortious
conduct, even for acts conducted as Montview's agents.
This court understands Plaintiff to be arguing that
Defendants owed it a duty to disclose certain material facts
outside of any contractual duty imposed by the Policy that
Montview to select an independent and impartial appraiser.
court now turns to the more difficult question of whether an
extra-contractual duty to disclose particular financial
information ran from Defendants to Plaintiff under the
Mutual asserts that Defendants owed it a duty to disclose
their financial and business relationships, Mr.
Bensusan's financial interest in the Appraisal Award, and
their financial interest in any damages awarded to Montview
in the underlying litigation between Plaintiff and Montview.
See, e.g., [#49 at ¶¶ 59-67, 72,
111a.-j.]. Plaintiff asserts that this duty to disclose
emanates from the common law, the Policy, Colorado statutes,
and Colorado regulations. [Id. at ¶¶
72-88]. Defendants move to dismiss Claim II on the basis that
they owed Plaintiff no duty to disclose this information
under the common law, the Policy, Colorado's statutes and
regulations, or otherwise. See [#65 at 11-14, 18-23;
#110 at 5-15]. For the following reasons, this court
respectfully concludes that Defendants' owed Plaintiff a
duty to disclose their financial and business relationships
under the particular circumstances of this
Common Law Duty
Nature of the Relationship
court first considers Defendants' argument that there is
no, and can be no, common law duty that runs between
Defendants and the insurance company because of the
nature of the relationship. In making these arguments,
Defendants primarily rely on two cases that this court finds
non-dispositive under these circumstances.
in Building On Our Best LLC v. Sentinel Insurance Company
Limited, the court did not directly consider whether a
public adjuster or appraiser owed any duty to an insurance
company. Instead, the court dismissed the plaintiffs'
Colorado Consumer Protection Act (“CCPA”) claim
against the engineering company hired by the insurer's
adjuster, because the plaintiffs (as insureds) could not
establish that the engineering company's conduct had a
public impact on its customers (i.e., the insurance
company), and did not allege a factual basis to demonstrate
that the engineering company's “phony engineering
reports” amounted to anything more than a bias in favor
of insurers, which does not constitute an unfair and
deceptive trade practice under the CCPA. No. 15-cv-00669-RBJ,
2015 WL 7014445, at *4-5 (D. Colo. Nov. 12, 2015). In
reaching this conclusion, the Building On Our Best
court observed that bias on the part of the engineering
company toward the insurer did not constitute an unfair or
deceptive trade practice, “any more than an
insured's retention of a ‘public adjuster'
known to be favorable to the insured would necessarily
establish actionable wrongdoing on the public adjuster's
part.” Id. at *4.
urge this court to construe the Building On Our Best
court's ruling as one that establishes that a public
adjuster or appraiser has no duty to a third party, but such
a conclusion is not warranted. As an initial matter, the
court's observation is just that-an observation-and not a
legal holding that a public adjuster owes no duty to anyone
other than his client under all circumstances. Instead, the
Building On Our Best decision is more applicable to
Mr. Bensusan's as an appraiser selected by the public
adjuster, but still not dispositive. The court in
Building On Our Best, and in other cases, observed
that repeated engagement of an expert alone is not a basis to
conclude that the expert is impermissibly biased. See
Id. at *5; Colorado Hosp. Servs. Inc., 2015 WL
4245821, at *2. But Plaintiff's allegations in this
matter exceed an assertion of mere bias. Rather, Plaintiff
alleges that Defendants had an independent duty to disclose
their financial and business interests in the outcome of the
particular Appraisal Award and the underlying Montview
litigation, and that Defendants' failure to do so caused
it the specific injuries of paying “more than it
otherwise would have paid had the appraisal award not
involved an undisclosed conflicted appraiser (Bensusan). . .
. [and] significant attorneys' fees defending the
Underlying Action and bringing counterclaims in the
Underlying Action, which it would not have had to do had the
Defendants not engaged in their fraudulent conspiracy.”
[#49 at ¶ 58]. Thus, Plaintiff avers that Defendants
withheld information regarding a direct pecuniary interest to
further contrast to Building On Our Best, where the
court found that the Amended Complaint set forth no factual
allegations to support the plaintiffs' belief that the
engineering report was “assembled in bad faith, ”
reliant upon “inaccurate data and irrelevant sources,
and was created for the sole purpose of misleading Plaintiffs
to believe that Sentinel's denial was justified, ”
see 2015 WL 7014445, at *4-5, the FAC in this action
alleges specific facts to support its assertions of material
omissions about Mr. Bensusan's motive and incentive to
increase the Appraisal Award. For example, Mr. Bensusan's
compensation was not hourly but, rather, a percentage of the
Appraisal Award [#49 at ¶ 33]; Messrs. “Coutu and
Bensusan had an undisclosed agreement whereby Bensusan was
compensated, either directly or indirectly, from the proceeds
of the appraisal awards in numerous appraisals or litigated
bad faith cases where Bensusan had been appointed as
appraiser by Coutu (or appointed by the insured at
Coutu's suggestion)” [id. at ¶ 35];
from at least January to September 2013, Mr. Bensusan had
check writing, deposit, and fund withdrawal authority from
Mr. Coutu's company bank account [id. at ¶
36]; in that same time period, Mr. Bensusan held an equitable
interest in Mr. Coutu's company, Power Adjusters
[id. at ¶ 37]; also in that same time frame,
Power Adjusters paid for Mr. Bensusan's personal
residence in the tune of tens of thousands of dollars
[id. at ¶ 39]; and that the various actors
concealed these facts to create the false impression that Mr.
Bensusan was an independent and impartial appraiser, thereby
allowing Defendants to improperly inflate the Appraisal Award
to Plaintiff's detriment [id. at ¶ 70].
While this court concurs that a particular predisposition
toward one side or another in litigation is, in itself,
unlikely to be actionable, Plaintiff's allegations, taken
as true, plead more than garden-variety bias. Rather, the FAC
articulates specific facts to support the conclusion that
Defendants had an ongoing financial relationship that
incentivized and facilitated an inflated Appraisal Award, and
Defendants did, in fact, reap excessive financial gains at
Plaintiff's expense. Accordingly, this court finds that
Building On Our Best does not support the conclusion
that a public adjuster or appraiser can never owe a duty to
an insurance company.
in Meridian Security Insurance Company v. Hoffman
Adjustment Company, the Indiana Court of Appeals held
that, under Indiana agency law, the insurer-plaintiff could
not hold the insureds' public adjuster, as the
insureds' agent, liable for alleged fraud and breach of
contract. 933 N.E.2d 7, 12-13 (Ind.Ct.App. 2010). Though
somewhat factually similar, and despite Defendants'
fervent attempt to persuade this court to reach a similar
outcome here, Meridian is inapposite.
Meridian is based on Indiana principles of
agency law that do not hold agents economically liable to
anyone but their principals. Id. at 12 (citing
Greg Allen Const. Co., Inc. v. Estelle, 798 N.E.2d
171, 174 (Ind. 2003)). But as explained, an agent can be
liable to parties other than its principal for its tortious
conduct under Colorado law. See Galie, 757
P.2d at 177. Further, the court in Meridian
emphasized that Meridian predicated its claims on trying to
hold the public adjuster liable for acts that breached the
policyholders' insurance policy. As explained in more
detail below, if Church Mutual's only allegations were
that Defendants breached the Policy's “impartial
appraiser” language by having multiple engagements
together, then this court would likely conclude that such
claims were barred, given Defendants' status as
non-parties to the Policy and the conclusion by multiple
courts that “[t]he suggestion that retention of an
expert on multiple engagements renders the expert other than
impartial is a slippery slope.” Colorado Hosp.
Servs. Inc., 2015 WL 4245821, at *2 n. 2. Here, however,
there is a different dimension-Defendants tortiously withheld
material information regarding their pecuniary interests in
the Appraisal Award and the underlying Montview litigation
that they were required to disclose in addition to any duties
arising under the Policy.
Section 551(2) & Colorado ...