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Arline v. American Family Mutual Insurance Co.

Court of Appeals of Colorado, Third Division

May 31, 2018

Anitra Arline, Plaintiff-Appellant,
v.
American Family Mutual Insurance Company, Defendant-Appellee.

          City and County of Denver District Court No. 16CV34390 Honorable Elizabeth A. Starrs, Judge

          Bradley A. Levin, Susan S. Minamizono, Denver, Colorado; Patricia Meester, Keith R. Scranton, Aurora, Colorado, for Plaintiff-Appellant

          Faegre Baker Daniels LLP, Michael S. McCarthy, Todd P. Walker, Matthew D. Clark, Denver, Colorado, for Defendant-Appellee

          OPINION

          RICHMAN, JUDGE

         ¶ 1 Plaintiff, Anitra Arline, appeals a district court's judgment dismissing her complaint pursuant to C.R.C.P. 12(b)(1). Arline sought class action certification and damages resulting from her receipt of benefits under her uninsured motorist/underinsured motorist (UM/UIM) policy and the allegedly unenforceable release and trust agreement (Agreement) she concurrently entered into with defendant, American Family Mutual Insurance Company (American). We affirm.

         I. Background

         ¶ 2 Arline's complaint alleges that she was injured by an underinsured motorist in November 2014. She submitted claims to American under insurance policies which provided $5000 in MedPay coverage and a total of $50, 000 in individual UIM coverage. American paid $5000 in MedPay benefits on Arline's behalf to medical providers. American negotiated Arline's damages under her UIM coverage to be $27, 000 after subtracting the $5000 in MedPay benefits already paid. Arline alleges that American confirmed the subtraction of $5000 in a letter to Arline in June 2015.

         ¶ 3 In November 2015, Arline, represented by counsel, accepted the $27, 000 payment and signed the Agreement stating, as relevant here, as follows:

For the sole consideration of Twenty-Seven Thousand Dollars . . . paid by [American], . . . receipt of which is hereby acknowledged, Anitra Arline hereby fully and forever release(s) and discharge(s) [American] from all claims, demands, actions and rights of action, of whatever kind or nature which she now has or may hereafter have against [American] under [her UIM policy], on account of bodily injury sustained [as a result of the November 2014 accident].
Anitra Arline understand(s) and agree(s) that the sum paid as consideration for this Release and Trust Agreement was agreed to as a compromise to avoid expense and to terminate all controversy or claims for benefits [under the UIM policy for the November 2014 accident] and that her acceptance of such payment shall be a complete bar to any causes of action or claims against [American] now existing or which may arise in the future . . . .

(Emphasis added.)

         ¶ 4 In November 2016, one year after Arline settled, the supreme court held for the first time that section 10-4-609(1)(c), C.R.S. 2017, prohibits insurers from reducing the UIM benefits paid on a claim by the amount of MedPay benefits paid on that claim, which the court termed a "setoff." See Calderon v. Am. Family Mut. Ins. Co., 2016 CO 72, ¶ 16 ("To the extent that [the plaintiff's] insurance purports to allow the setoff in this case, it is contrary to the setoff prohibition of section 10-4-609(1)(c) and is unenforceable."); see also § 10-4-609(1)(c) ("The amount of the coverage available pursuant to this section shall not be reduced by a setoff from any other coverage, including, but not limited to, . . . medical payments coverage."). Calderon's counsel now represents Arline.

         ¶ 5 Shortly after the Calderon decision, Arline sued American on her own behalf, asserting breach of contract based on the facts described above, and seeking class certification based on the assertion that American had unlawfully reduced UIM payments to similarly situated class members using a MedPay setoff. American responded that the Agreement was a complete bar to the cause of action in simultaneous motions to dismiss for (1) lack of standing, pursuant to C.R.C.P. 12(b)(1); and (2) failure to state a claim upon which relief can be granted, pursuant to C.R.C.P. 12(b)(5).

         ¶ 6 Arline argued that the Agreement was unenforceable because it was contrary to applicable law and public policy. However, the district court found that Arline's arguments were relevant only to the terms of her insurance policy and not to the Agreement. Accordingly, the court found that the Agreement was enforceable, granted American's motion to dismiss for lack of ...


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