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Pearson v. Ceico Casualty Co.

United States District Court, D. Colorado

May 7, 2018

ROGER PEARSON, and LONNIE MCRAE, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
GEICO CASUALTY COMPANY, and DOES 1-10, Defendants.

          RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

          Michael E. Hegarty, United States Magistrate Judge.

         Plaintiffs Roger Pearson and Lonnie McRae, on behalf of themselves and others similarly situated (“Plaintiffs”), initiated this purported class action on September 1, 2017 and filed the operative Amended Complaint on December 21, 2017 alleging, inter alia, that Defendant Geico Casualty Company (“Geico”) unlawfully failed to pay its insureds - specifically, holders of Geico automobile insurance policies - ownership tax and title and registration fees associated with a motor vehicle's total loss in the event that an automobile accident or other event results in a total loss determination by Geico for the insured's vehicle. In response, Geico filed a motion to dismiss all of the Plaintiffs' claims. The Court finds that Colo. Rev. Stat. § 10-4-639(1) does not require an insurer to pay “ownership taxes” in settlement for the total loss of a vehicle; the issue of whether claims under Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116 are subject to a one-year statute of limitations is currently before the Colorado Supreme Court and, thus, any ruling is premature at this time; the Plaintiffs' argument that certain legal issues are “a matter of first impression” is not sufficient to support dismissal of their § 10-3-1115 and bad faith breach of insurance contract claims; the Plaintiffs failed to plead a deceptive trade practice with particularity as required by Fed.R.Civ.P. 9(b); Plaintiffs do not properly state claims for monetary relief on behalf of a class under the CCPA; Plaintiffs do not oppose dismissal without prejudice of their class claims for injunctive relief under the CCPA and their claims for punitive and exemplary damages; and dismissal of the Doe Defendants at this early stage would be premature. Thus, the Court recommends that the Honorable Christine M. Arguello grant in part and deny in part Geico's motion.

         BACKGROUND

         I. Statement of Facts

         The following are factual allegations (as opposed to legal conclusions, bare assertions, or merely conclusory allegations) made by the Plaintiffs in the Amended Complaint, which are taken as true only for analysis under Fed.R.Civ.P. 12(b)(6) pursuant to Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         When they purchased a 2007 Lexus ES 350 (“2007 Lexus”), the Plaintiffs incurred an estimated $157 in ownership taxes and title and registration fees.

         For the 2015 calendar year, the Plaintiffs obtained an automobile insurance policy from Geico for the 2007 Lexus, which provided coverage in the event of total loss of the motor vehicle.

         On or about August 3, 2015, Plaintiffs' 2007 Lexus caught fire in a parking lot. Thereafter, the Plaintiffs incurred an estimated $225.03 in ownership taxes and title and registration fees related to the purchase of a 2010 Lexus RX 350 (“2010 Lexus”), which replaced the 2007 Lexus. Plaintiff Pearson also submitted a claim to Geico based on the insurance policy he had obtained for the 2007 Lexus.

         In a document dated September 1, 2015, Geico provided Plaintiffs with a “Total Loss Settlement Explanation.” Geico determined during its investigation the 2007 Lexus was a total loss as a result of the fire and provided an accounting of the insurance benefits it would pay Plaintiffs in light of the total loss. As stated in the document, Geico did not agree to pay Plaintiffs' ownership tax and title and registration fees associated with the total loss of the 2007 Lexus, including, without limitation, the total amount of ownership tax and title and registration fees incurred related to the replacement vehicle. Instead, Geico paid Plaintiffs $26.50 related to unspecified “State and Local Regulatory Fees” only. To date, Geico has not paid the Plaintiffs any such ownership tax and title and registration fees incurred for the 2007 Lexus and replacement vehicle.

         For the 2015 calendar year, Plaintiffs obtained an automobile insurance policy from Geico for the 2010 Lexus, which provided coverage in the event of total loss of the motor vehicle.

         On or about November 27, 2015, Plaintiffs' 2010 Lexus was involved in an accident. Thereafter, Plaintiffs incurred an estimated $197.55 in ownership taxes and title and registration fees related to the purchase of a 2008 Toyota Tundra (“2008 Toyota”), which replaced the 2010 Lexus. Plaintiff Pearson also submitted a claim to Geico based on the insurance policy obtained from Geico for the 2010 Lexus.

         In a document dated December 31, 2015, Geico provided Plaintiffs with a “Total Loss Settlement Explanation.” Geico determined during its investigation the 2010 Lexus was a total loss as a result of the accident and provided an accounting of the insurance benefits. As stated in that document, Geico did not agree to pay Plaintiffs' ownership tax and title and registration fees associated with the total loss of the 2010 Lexus, including, without limitation, the total amount of ownership tax and title and registration fees incurred related to the replacement vehicle. Instead, Geico paid Plaintiffs $26.50 related to unspecified “State and Local Regulatory Fees” only. To date, GEICO has not paid the Plaintiffs any such ownership tax and title and registration fees incurred for the 2010 Lexus and replacement vehicle.

         II. Procedural History

         Based on these factual allegations, Plaintiffs claim, on behalf of themselves and others similarly situated, violations of Colo. Rev. Stat. § 6-1-105, et seq. and § 10-3-1115, et seq., and bad faith breach of insurance contract. Am. Compl., ECF No. 36.

         Geico moves to dismiss these claims arguing that Plaintiffs fail to allege they are entitled to any ownership taxes or fees associated with the total loss, but regulatory fees were, in fact, paid with the settlement of the total loss of Plaintiffs' vehicles, that Plaintiffs fail to properly plead the elements of their causes of action, that Plaintiffs' third claim for relief is time barred, and that Plaintiffs' requests for punitive damages are premature.

         Plaintiffs do not oppose the dismissal of their requests for punitive damages and for class-wide injunctive relief under the CCPA (Resp. 22 n.7, 23); otherwise, Plaintiffs counter that Colorado statutory law supports their position that ownership taxes fall within the purview of Colo. Rev. Stat. § 10-4-639(1) and this section mandates the payment of such taxes and fees; they have plausibly pled the elements of all causes of action; and the actual statute of limitations for a § 10-3-1115 claim is unresolved and currently before the Colorado Supreme Court, but Plaintiffs believe the law demonstrates a one-year statute of limitations is not applicable.

         Geico replies that Plaintiffs fail to articulate any basis for how ownership taxes fall within the ambit of § 10-4-639; they fail to plead their claim for violation of the Colorado Consumer Protection Act, 6-1-101, et seq. (“CCPA”) with particularity; their admission that the interpretation of § 10-4-639 is a matter of first impression belies any allegation that Geico acted unreasonably; and they failed to oppose Geico's arguments concerning dismissal of Plaintiffs' claims for injunctive relief under the CCPA.

         LEGAL STANDARDS

         The parties do not dispute that the pleading requirements of Fed.R.Civ.P. 9(b) apply to Plaintiffs' CCPA claim; otherwise, the Court will apply Fed.R.Civ.P. 8 and applicable case law to analyze Geico's Rule 12(b)(6) motion.

         I. Pleading Requirements under Fed.R.Civ.P. 9(b)

         Pursuant to Federal Rule of Civil Procedure 9(b), a more stringent pleading standard is mandated for certain claims, such as fraud or misrepresentation. “For any claim alleging fraud, the circumstances constituting fraud or mistake must be stated with particularity.” In re Accelr8 Tech. Corp. Secs. Litig., 147 F.Supp.2d 1049, 1054 (D. Colo. 2001) (citing Fed.R.Civ.P. 9(b)). Thus, with regard to their second claim alleging a violation of the CCPA, Plaintiffs must plead “the who, what, when, where, and how of the alleged fraud” or in other words, “the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof.” United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 726-27 (10th Cir. 2006); see also HealthONE of Denver, Inc. v. UnitedHealth Grp., Inc., 805 F.Supp.2d 1115, 1120-21 (D. Colo. 2011) (“a plaintiff must meet the heightened pleading requirements pursuant to Rule 9(b) to prove a deceptive or unfair trade practice.”). In the District of Colorado, this is required regardless of whether the alleged fraud is an active representation or a passive omission. See Tara Woods Ltd. P'ship v. Fannie Mae, 731 F.Supp.2d 1103, 1114 (D. Colo. 2010).

         II. Dismissal Pursuant to Fed.R.Civ.P. 12(b)(6)

         “To survive a motion to dismiss, 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, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Plausibility, in the context of a motion to dismiss, means that the plaintiff pled facts which allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Twombly requires a two-prong analysis. First, a court must identify “the allegations in the complaint that are not entitled to the assumption of truth, ” that is, those allegations which are legal conclusions, bare assertions, or merely conclusory. Id. at 678-80. Second, the Court must consider the factual allegations “to determine if they plausibly suggest an entitlement to relief.” Id. at 681. If the allegations state a plausible claim for relief, such claim survives the motion to dismiss. Id. at 680.

         Plausibility refers “to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs ‘have not nudged their claims across the line from conceivable to plausible.'” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (quoting Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008)). “The nature and specificity of the allegations required to state a plausible claim will vary based on context.” Kan. Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1215 (10th Cir. 2011). Thus, while the Rule 12(b)(6) standard does not require that a plaintiff establish a prima facie case in a complaint, the elements of each alleged cause of action may help to determine whether the plaintiff has set forth a plausible claim. Khalik, 671 F.3d at 1191.

         However, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. The complaint must provide “more than labels and conclusions” or merely “a formulaic recitation of the elements of a cause of action, ” so that “courts ‘are not bound to accept as true a legal conclusion couched as a factual allegation.'” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). “Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, ” the complaint has made an allegation, “but it has not shown that the pleader is entitled to relief.” Id. (quotation marks and citation omitted).

         ANALYSIS

         Geico seeks dismissal of all three claims for relief alleged by the Plaintiffs: (1) violations of Colo. Rev. Stat. § 10-3-1115, et seq.; (2) violations of Colo. Rev. Stat. § 6-1-105, et seq.; and (3) bad faith breach of insurance contract. The Court will address Geico's requests for dismissal of each of these claims in turn.

         I. First Claim for Relief

         For their § 10-3-1115 claim, Plaintiffs allege:

33. C.R.S. § 10-4-639(a) [sic] provides in relevant part that an insurer shall pay title fees and any other transfer or registration fees associated with the total loss of a motor vehicle.
34. C.R.S. § 10-3-1115(1)(a) provides in relevant part that a person engaged in the business of insurance shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.
35. Despite its own determination the insured vehicles of Plaintiffs and the Class Members were total losses, when claims were submitted by Plaintiffs and the Class Members after a motor vehicle accident or other event resulted in damage to their property, GEICO failed to pay ownership tax and title and registration fees required by C.R.S. ...

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