United States District Court, D. Colorado
NANCY JENKINS, TERRY KIRKHAM, DAVID LING, RICHARD LING, PETER LING, & SEYLER RANCH, LLC, Plaintiffs,
STATE FARM FIRE AND CASUALTY COMPANY, an Illinois company, Defendant.
ORDER DENYING DEFENDANT'S MOTION FOR ATTORNEY
FEES AND ACTUAL REASONABLY INCURRED COSTS
CHRISTINE M. ARGUELLO United States District Judge
matter is before the Court on Defendant State Farm's
Motion for Costs and Attorney Fees. (Doc. # 86.) Because the
Court finds that Plaintiffs' claims were not frivolous,
the Defendant is not entitled to attorney fees under Colo.
Rev. Stat. § 10-3-1116 and the Court DENIES
initiated this suit in October 2015, alleging that Defendant
improperly denied them insurance coverage for losses
Plaintiffs sustained due to water damage in their vacation
cabin in Ward, Colorado. (Doc. # 1, 4.) Plaintiffs brought
claims for (1) breach of contract, (2) unreasonable denial
pursuant to §§ 10-3-1115 and 1116, and (3) bad
faith breach of insurance contract. (Doc. # 4.) This case was
tried to a jury over the course of six days in July 2017.
(Doc. ## 74, 75, 76, 77, 79, 80.)
28, 2017, as relevant here, the Court granted in part
Defendant's Oral Motion for Judgment as a Matter of
Law Pursuant to Federal Rule of Civil Procedure 50(a) on
Plaintiffs' statutory claim of unreasonable denial of
benefits, concluding that no reasonable juror could find in
Plaintiffs' favor on that claim. (Doc. # 79.) The jury
then reached a defense verdict on the remaining breach of
contract claim. (Doc. # 85.)
to § 10-3-1116, Defendant now requests attorney fees and
costs stemming from its success on Plaintiffs'
unreasonable denial claim. (Doc. # 86.) Defendant
specifically argues that it is entitled to attorney fees
because Plaintiffs' claim that Defendant unreasonably
denied payment of benefits was frivolous. In response,
Plaintiffs contend that their unreasonable denial arguments
were based upon reason and not entirely without merit and
were not, therefore, frivolous. Having thoroughly considered
the parties' arguments and applicable law, the Court
agrees with Plaintiffs that attorney fees are not warranted
in this case.
determination of whether to award attorney fees necessarily
begins with the American Rule, which precludes an award of
attorney fees absent a specific contractual, statutory, or
procedural rule providing otherwise. Alyeska Pipeline
Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247
(1975); Buder v. Sartore, 774 P.2d 1383, 1390 (Colo.
1989). Colorado law authorizes the recovery of attorney fees
where a party or its attorney brings or defends an action
that is “frivolous.” Colo. Rev. Stat. §
10-3-1116 (5). In determining whether a suit was frivolous,
the district court must review the entire course of
litigation. U.S. ex rel. Grynberg v. Praxair, Inc.,
389 F.3d 1038, 1059 (10th Cir. 2004) (citing
Christiansburg Garment Co. v. EEOC, 434 U.S. 412,
frivolous suit is one “based on indisputably meritless
legal theory, or whose factual contentions are clearly
baseless.” Thorpe v. Ancell, 367 Fed.Appx.
914, 919 (10th Cir. 2010) (citing Neitzke v.
Williams, 490 U.S. 319, 327 (1989)). A claim is
frivolous if its proponent can offer “no rational
argument based on the evidence or law in support of that
claim or defense.” W. United Realty Inc., 679
P.2d 1063, 1069 (Colo. 1984). Even if the proponent is
ultimately unsuccessful in their argument, this does not
render their claim frivolous where they put forth a
“good faith presentation of a legal theory which [i]s
arguably meritorious.” SaBell's, Inc. v. City
of Golden, 832 P.2d 974, 978 (Colo.App. 1991).
statutory claim for unreasonable denial of benefits was not
frivolous. For the Plaintiffs to prevail on that claim, they
had to prove, by a preponderance of the evidence: (1)
Defendant denied payment of the benefits to the Plaintiffs,
and (2) Defendant's denial of payment was without a
reasonable basis. Only the second element was disputed in
reasonableness of an insurer's conduct is determined
objectively, based on proof of industry standards.”
Fisher v. State Farm Mutual Auto. Ins. Co., ___ P.3d
at ___, 2015 WL 2198515, at *9. Proving the scope of industry
standards typically requires “[t]he aid of expert
witnesses.” Williams v. Auto-Owners Ins. Co.,
No. 12-CV-00999-MSK-CBS, 2014 WL 12537030, at *5 (D. Colo.
Mar. 25, 2014).
offered the following arguments to support its claim that
Defendant's denial lacked a reasonable basis: (1)
Defendant hired an outcome-oriented, and therefore biased,
engineer to complete the investigation into Plaintiffs'
loss, (2) Defendant informed the engineer of the date of the
policy inception prior to the engineer's inspection-a
date that was critical to the dispute in this case, and (3)
it was unreasonable for Defendant to rely upon an
outcome-oriented engineer's report when deciding to deny
insurance benefits. (Doc. # 88 at 3.) Plaintiff also argued
that the investigation into the claim took an unreasonably
trial, Plaintiffs attempted to present some evidence to
support these arguments. For example, they probed at
Defendant's engineer's investigation and challenged
the reasonableness of Defendant's decision to provide him
policy information before he conducted that investigation,
attempting to place doubt on the engineer's credibility
and impartiality. (Doc. # 91-1 at 9; Doc. # 88.) Likewise,
Plaintiffs' witness, Mr. Scott deLuise, a public
adjuster, testified (1) regarding the reasonableness ...