United States District Court, D. Colorado
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT AND TERMINATING CASE
William J. Martinez United States District Judge
The
case arises, sadly, from the suicide of a Colorado resident,
Martin Fisher (“Fisher”), fourteen months after
Plaintiff Amica Life Insurance Company (“Amica”)
issued him a life insurance policy. The policy contains a
two-year suicide exclusion, which is lawful under a
regulation promulgated by an administrative agency created by
an interstate compact to which Colorado is a party. A
Colorado statute, however, nullifies suicide exclusions
longer than one year. See Colo. Rev. Stat. §
10-7-109. If Colorado may validly delegate authority to an
administrative agency to develop insurance standards that may
conflict with Colorado insurance statutes, then Amica's
two-year exclusion is valid. Otherwise, Amica's exclusion
is invalid and Amica owes the death benefit to Fisher's
beneficiary, Defendant Michael P. Wertz
(“Wertz”). Invoking this Court's diversity
jurisdiction, [1] Amica brought this lawsuit for declaratory
judgment that it properly denied payment of Fisher's
death benefit in light of the interstate two-year exclusion.
Currently before the Court on Amica's motion for summary
judgment. (ECF No. 67.)
The
proper outcome ultimately turns on the extent of the Colorado
Legislature's authority under the Colorado Constitution
to delegate regulatory power to an administrative body. This
Court therefore sua sponte certified the question to
the Colorado Supreme Court per Colorado Appellate Rule 21.1.
See Amica Life Ins. Co. v. Wertz, 272 F.Supp.3d
1239, 1255 (D. Colo. 2017) (ECF No. 73)
(“Wertz” or “Prior Order”).
Precisely three weeks later, the Colorado Supreme Court
declined to accept the certified question. (See ECF
No. 75.) That court thus returned a weighty question of
Colorado constitutional law to the undersigned, whose
decisions, particularly regarding state law, bind no one but
the parties before him.[2]
The
Court then accepted supplemental briefs from the parties (ECF
Nos. 81, 82, 86-1) as well as an amicus brief from
the National Association of Insurance Commissioners
(“NAIC”) in support of Amica (ECF No. 79-1); an
amicus brief from the Interstate Insurance Product
Regulation Commission (“Interstate Commission” or
“Commission”), also in support of Amica (ECF No.
80-1); and Wertz's response to these amicus
briefs (ECF No. 85). The Court reviewed these briefs and
called for limited further briefing on certain matters. (ECF
No. 89.) All parties and amici filed briefs in
response. (See ECF Nos. 90-93.)
The
Court has thoroughly studied all of these materials,
including the parties' original summary judgment briefs
(ECF Nos. 67, 70, 72), the legal authorities cited by the
parties and amici, and what appears to be the only
treatise on interstate compacts, see Michael L.
Buenger et al., The Evolving Law and Use of Interstate
Compacts (2d. ed. 2016) (“Interstate
Compacts”). The Court concludes-to its
surprise-that the Colorado Legislature may validly delegate
to an administrative agency the power to promulgate a
regulation that modifies a statute. Moreover, there is no
barrier to the Colorado Legislature delegating such authority
to an interstate administrative agency, so the two-year
exclusion applicable to Fisher's policy is valid and
Amica properly denied payment of the death benefit.
For
ease of the seemingly inevitable appellate review, the
explanation that follows is not confined to the legal
question of what the Colorado Legislature may validly
delegate to an administrative agency, but also repeats
verbatim much of the Prior Order, including rulings regarding
certain factual disputes. In other words, the purpose of this
order is to address all matters resolved through the Prior
Order and all matters left open there, so that one need only
read this order to understand the full dispute and the
Court's holdings.
I.
LEGAL STANDARD
Summary
judgment is warranted under Federal Rule of Civil Procedure
56 “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a);
see also Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248-50 (1986). A fact is “material” if,
under the relevant substantive law, it is essential to proper
disposition of the claim. Wright v. Abbott Labs.,
Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). An issue
is “genuine” if the evidence is such that it
might lead a reasonable trier of fact to return a verdict for
the nonmoving party. Allen v. Muskogee, 119 F.3d
837, 839 (10th Cir. 1997).
In
analyzing a motion for summary judgment, a court must view
the evidence and all reasonable inferences therefrom in the
light most favorable to the nonmoving party. Adler v.
Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.
1998) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986)). In addition, the
Court must resolve factual ambiguities against the moving
party, thus favoring the right to a trial. See Houston v.
Nat'l Gen. Ins. Co., 817 F.2d 83, 85 (10th Cir.
1987).
II.
STATUTORY BACKGROUND
Understanding
anything else in this case first requires understanding the
Interstate Insurance Product Regulation Compact, which has
been enacted by the Colorado Legislature at Colorado Revised
Statutes § 24-60-3001 (“Insurance Compact”
or “Compact”). Having enacted the Insurance
Compact, Colorado participates with most of the other states
in the Union in an arrangement intended “[t]o develop
uniform standards” for “individual and group
annuity, life insurance, disability income and long-term
[care] insurance products.” Id., art. I,
§§ 1, 2; see also id., art. II, §
11.[3]
The
Compact creates the Interstate Commission, “a joint
public agency” to which each compacting state may send
one representative. Id., art. III, § 1; art. V,
§ 1(a). The Commission is empowered to promulgate
“Uniform Standards” for insurance products
“which shall have the force and effect of law and shall
be binding in the Compacting States.” Id.,
art. II, § 15; art. IV, § 1; art. VII, § 1.
Insurance companies may then submit insurance products to the
Interstate Commission for approval under the Uniform
Standards, and such approval authorizes the insurance company
to sell that product in any Compact member state in which the
company is otherwise authorized to do business. Id.,
art. X, §§ 1, 3. In short, the Interstate
Commission acts as a near-national insurance commissioner
with respect to “individual and group annuity, life
insurance, disability income, and long-term [care] insurance
products.” Id., art. I, § 1.
In
promulgating Uniform Standards, the Insurance Compact
requires the Interstate Commission to follow “a
rulemaking process that conforms to the Model State
Administrative Procedure Act of 1981 as amended, as may be
appropriate to the operations of the Commission.”
Id., art. VII, § 2. Moreover, “[b]efore
the Commission adopts a Uniform Standard, the Commission
shall give written notice to the relevant state legislative
committee(s) in each Compacting State responsible for
insurance issues of its intention to adopt the Uniform
Standard.” Id. Uniform Standards become
effective ninety days after promulgation “or such later
date as the Commission may determine.” Id.,
art. VII, § 3.
Any
member state of the Compact may opt out of a Uniform Standard
“either by legislation or regulation duly promulgated
by the Insurance Department under the Compacting State's
Administrative Procedure Act.” Id., art. VII,
§ 4. If a state opts out after a Uniform Standard has
gone into effect, the opt out is prospective only.
Id., art. VII, § 5.
“[I]n
the event the Commission exercises its rulemaking authority
in a manner that is beyond the scope of the purposes of this
[Compact], or the powers granted hereunder, then such an
action by the Commission shall be invalid and have no force
and effect.” Id., art. VII, § 1. But, if
“any person” wishes to challenge a Uniform
Standard, that person must file such a challenge within
thirty days of the Uniform Standard's promulgation.
Id., art. VII, § 7. In reviewing the challenge,
“[t]he court shall give deference to the actions of the
Commission consistent with applicable law and shall not find
the Rule[4] or Operating Procedure to be unlawful if
the Rule or Operating Procedure represents a reasonable
exercise of the Commission's authority.”
Id.
III.
FACTS
The
following facts are undisputed unless attributed to one party
or another, or otherwise noted.
A.
The Two-Year Suicide Exclusion Standard
Colorado
enacted the Insurance Compact in 2004, with an effective date
of August 4, 2005. (ECF No. 67 at 3, ¶ 1.)[5] The Colorado
Legislature designated the state insurance commissioner as
Colorado's representative at the Interstate Commission.
Colo. Rev. Stat. § 24-60-3001, Preamble. The Interstate
Commission itself became operational in June 2006. (ECF No.
67 at 4, ¶ 4.)
On
January 24, 2007, the Commission published notice of its
intent to adopt its Individual Term Life Insurance Product
(“ITLIP”) Standards. (Id. at 6, ¶
18.) Amica claims that, on May 1, 2007, the Commission
provided notice of the pending ITLIP Standards to “the
chairs, ranking members, and members of the Colorado General
Assembly's (i) House Business Affairs and Labor Committee
and (ii) Senate Business Labor and Technology
Committee.” (Id. ¶ 21.) Wertz denies
this. (ECF No. 70 at 3, ¶ 21.) The Court will address
whether Wertz's denial creates a genuine issue of
material fact in Part V.B, below. Regardless, the parties
agree that the House and Senate committees named above were
the proper committees to which the Interstate Commission was
required to provide notice. (ECF No. 67 at 6, ¶ 23.)
The
Interstate Commission held a public hearing regarding the
ITLIP Standards on May 16, 2007. (Id. at 7, ¶
24.) That is also the date of the last written comment the
Commission received regarding the ITLIP Standards.
(Id. ¶ 27.)
The
ITLIP Standards were formally adopted by the Interstate
Commission on June 1, 2007, with a declared effective date of
September 6, 2007. (Id. ¶ 31.) The ITLIP
Standards declare that any suicide exclusion in an approved
policy must be no longer than two years from the date the
policy is issued. (Id. ¶ 32.) Colorado has
never opted out of that Uniform Standard-or, for that matter,
any Uniform Standard. (Id. at 13, ¶¶
83-84.)
B.
Fisher's Policy, His Suicide, and Wertz's
Claim
In
October 2011, the Interstate Commission approved an
individual term life insurance product submitted by Amica.
(Id. at 10, ¶ 55.) That product, as approved,
excluded death benefits if death of the insured was caused by
suicide within two years from the policy's issuance.
(Id. ¶ 57.) In such a circumstance, Amica's
only obligation was to refund the policy premium.
(Id.)
On
January 28, 2014, Amica issued to Fisher one of the
aforementioned life insurance policies. (Id. ¶
58.) Fisher committed suicide about fourteen months later, on
March 12, 2015. (Id. at 11, ¶ 71.) On May 1,
2015, Defendant Wertz, who was Fisher's named beneficiary
under the policy, submitted a claim for the death benefit,
citing Colorado Revised Statute § 10-7-109.
(Id. at 12, ¶ 72.) That section reads in
relevant part as follows: “The suicide of a
policyholder after the first policy year of any life
insurance policy issued by any life insurance company doing
business in this state shall not be a defense against the
payment of a life insurance policy . . .
.”[6] In other words, Wertz believed
Colorado's one-year exclusion applied, not the
policy's Commission-approved two-year exclusion. Amica
stood by the two-year exclusion, denied Wertz's claim,
and refunded the premium. (Id. ¶ 73.)
IV.
PROCEDURAL HISTORY
Anticipating
that Wertz would file suit, Amica filed a declaratory
judgment action in this Court in June 2015. (ECF No. 1.)
Wertz answered and affirmatively defended that the two-year
suicide exclusion violated Colorado law and must be declared
unenforceable. (ECF No. 24 at 4, ¶ 20.) Wertz also
counterclaimed for reformation of the policy, breach of
contract, and common-law bad faith breach of insurance
contract. (Id. at 9-12.)
At
first, the parties agreed “the material facts of this
matter were not in dispute” (ECF No. 39 ¶ 2) and
the resolution “depended entirely upon a question of
law” (ECF No. 45 at 1), namely, which source of
authority controls: Colorado Revised Statute § 10-7-109
or the ITLIP Standards? Amica therefore filed what was, in
effect, a motion for judgment on the pleadings to resolve the
question of law. (ECF No. 25; see also ECF No. 49 at
3 n.1.) Amica naturally argued that Colorado had enacted the
Insurance Compact and, in so doing, declared that the
Interstate Commission's duly promulgated Uniform
Standards have the force and effect of law; therefore, the
ITLIP Standards apply. Wertz's primary response was that
the Compact, or at least its application in this case,
violates the Colorado Constitution. Specifically, Wertz
argued that the Compact is an unconstitutional delegation of
legislative power, violates separation-of-powers principles,
and violates the guarantees of equal protection and freedom
from special legislation. (ECF No. 30-1 at 3-18.)
In
reply, Amica relied heavily on the Compact's opt-out
provisions. (ECF No. 33 at 5-6.) Amica characterized the
ability to opt out as “the ultimate safeguard against
the exercise of unbridled discretion by the Commission”
(ECF No. 33 at 5), thus mollifying the Colorado Supreme
Court's charge that “individuals be protected
against the unnecessary and uncontrolled exercise of . . .
discretionary power” by bodies to whom legislators have
delegated rulemaking authority. Cottrell v. City &
Cnty. of Denver, 636 P.2d 703, 709 (Colo. 1981).
Two
months after Amica filed its reply, and before this Court had
decided Amica's motion, Wertz filed a motion to amend his
answer and counterclaims. (ECF No. 39.) Wertz there claimed
“ongoing investigation and research under further
inquiry” which has led him to “believe[] that the
Commission failed to promulgate the [ITLIP Standards] in
accordance with the Compact's terms.” (Id.
¶ 2.) Therefore, according to Wertz, the ITLIP Standards
might be invalid under the Compact's own terms. Wertz
claimed that this would “impact the constitutionality
of the Compact statute.” (ECF No. 39 ¶ 2.) Another
implication, of course, would be that this Court might not
need to reach the constitutional questions, should Wertz turn
out to be correct.
The
Court resolved Amica's and Wertz's respective motions
by denying the former without prejudice and granting the
latter. (ECF No. 49.) The Court reasoned that “the
constitutionality of the Compact is a weighty issue that this
Court should avoid if there is a colorable possibility that
the case can be decided on other grounds, such as the
potential procedural irregularity that Wertz raises.”
(Id. at 7.) The Court therefore sent the parties to
discovery on the question of “the procedural regularity
of the [ITLIP] Standards.” (Id. at 8.)
That
discovery is now closed, and Amica has filed its motion for
summary judgment, claiming no genuine dispute of material
fact on the procedural regularity of the ITLIP Standards, and
renewing its argument that those Standards control over
Colorado Revised Statute § 10-7-109. (ECF No.
67.)[7]
V.
ANALYSIS OF FACTUAL DISPUTES
A.
Timeliness of Wertz's Challenge
The
Insurance Compact requires that any action seeking judicial
review of a Uniform Standard be brought within thirty days of
promulgation. Colo. Rev. Stat. § 24-60-3001, art. VII,
§ 7. The ITLIP Standards were promulgated on June 1,
2007. Wertz raised his current counterclaim
theory-i.e., that the Interstate Commission did not
give proper pre-promulgation notice of the ITLIP Standards to
the Colorado Legislature-for the first time on January 21,
2016. (ECF No. 39.) Amica accordingly argues that “any
procedural challenge” to the ITLIP Standards is now
foreclosed as untimely. (ECF No. 67 at 24.)
There
are colorable counterarguments to this position. For example,
is a challenge in the context of a dispute between insurer
and beneficiary the same as “judicial review”
under the Insurance Compact (which presumably has in mind an
action against the Interstate Commission directly)? Or, may
the Colorado Legislature, consistent with due process, create
a statute of limitations as short as thirty days? But Wertz
does not raise these arguments. In fact, he entirely ignores
Amica's timeliness argument. The Court therefore deems
him to have conceded that his challenge to the procedural
regularity of the ITLIP Standards is untimely.
B.
Lack of a Genuine Dispute of Material Fact
Alternatively,
the Court finds that there is no genuine dispute of material
fact over whether the Interstate Commission provided proper
pre-promulgation notice of the ITLIP Standards to the
Colorado Legislature.
The
sole relevant factual dispute-genuine or otherwise-is whether
the Interstate Commission actually sent notice of
the ITLIP Standards to the Colorado Legislature ahead of
those Standards' promulgation. Amica offers the affidavit
of Karen Schutter, the Interstate Commission's executive
director. (ECF No. 67-1 at 1, ¶ 1.) Schutter claims to
be an authorized records custodian for the Commission.
(Id. at 2, ¶ 6.) Schutter says that the
requisite notice to the Colorado Legislature was sent on May
1, 2007 (id. ¶ 14), which obviously predates
the ITLIP Standards' promulgation on June 1, 2007.
Schutter attaches to her affidavit a document (“Exhibit
D”) that appears to be a sort of cover letter, directed
to all relevant state legislative committees and announcing
the Interstate Commission's consideration of the ITLIP
Standards, among others. (ECF No. 67-1 at 31.) Schutter does
not claim that Exhibit D was the notice itself, but rather
describes it as the “content of the notice” sent
to the Colorado Legislature. (Id. at 6, ¶ 14.)
Wertz's
response is essentially twofold. First, Wertz points out that
the Interstate Commission, in response to his records
request, stated that the May 2007 notice to state
legislatures has already been destroyed pursuant to the
Commission's five-year records retention schedule. (ECF
No. 70 at 3, ¶ 21.) Thus, he attacks Exhibit D-
although, surprisingly, not on authenticity grounds.
He does not, for example, dispute that Exhibit D embodied the
“content of the notice.” He instead simply
asserts,
Exhibit D to the Schutter Affidavit does not establish that
the Commission sent the requisite Legislative Notice on May
1, 2007, or any other time prior to adopting the ITLIP
Standards. Nor does Exhibit D establish that the Commission
sent the requisite Legislative Notice to the proper members
of the Colorado General Assembly.
(Id.; see also id. at 20 (repeating the
same arguments).) Second, Wertz notes that Schutter began her
employment with the Interstate Commission in December 2008,
after the May 2007 notice was allegedly sent, and therefore
she lacks personal knowledge regarding that matter.
(Id. at 3, ¶ 21.)
Wertz's
arguments are somewhat misdirected. In Colorado,
administrative action is entitled to a presumption of
regularity. Marshall v. Civil Serv. Comm'n, 401
P.3d 96, 101 (Colo.App. 2016), cert. denied sub nom.
Marshall v. City & Cnty. of Denver, No. 16SC905,
2017 WL 3594017 (Colo. Aug. 21, 2017). If Wertz had brought a
timely judicial review challenge directly against the
Interstate Commission, Wertz would have borne the burden to
rebut the presumption of regularity. Id.; see
also 3 Charles H. Koch, Jr. & Richard Murphy,
Administrative Law & Practice § 9:13 (3d
ed., Feb. 2017 update). Wertz offers no reason why he does
not bear the same burden as to his counterclaim against Amica
based on the alleged irregularity of the ITLIP Standards, nor
does the Court independently discern any
reason.[8] The Court holds, therefore, that the
burden of proof rests on Wertz, just as it would in a normal
action for judicial review.
In that
light, it was Wertz's burden in his summary judgment
response brief to present the evidence by which a reasonable
jury could conclude that the May 2007 legislative notice was
never sent. Viewing Wertz's response generously, it
appears he proffers only two items of evidence: (1) the
Interstate Commission's admission that it no longer
possesses the actual May 2007 notice; and (2) the fact that
the Commission was able to produce legislative notices sent
in 2008 and 2010, both of which also should have been
destroyed under the Commission's five-year retention
schedule (see ECF No. 70 at 19 n.1)-apparently
insinuating that the retention schedule explanation as to the
May 2007 notice is suspect.
The
Court holds that these two items, viewed together and in the
light most favorable to Wertz, are no more than a scintilla
of evidence that the Interstate Commission failed to provide
pre-promulgation notice of the ITLIP Standards to the
Colorado Legislature on May 1, 2007. In other words, no
reasonable jury could find that Wertz carried his burden on
this question. Accordingly, there is no genuine
dispute of material fact as to pre-promulgation notice.
C.
The “Consider Fully” Clause
Wertz
also advances a rather creative alternative argument that the
ITLIP Standards were invalidly promulgated. His argument is
grounded in the following two sentences of the Insurance
Compact:
Before the Commission adopts a Uniform Standard, the
Commission shall give written notice to the relevant state
legislative committee(s) in each Compacting State responsible
for insurance issues of its intention to adopt the Uniform
Standard. The Commission in adopting a Uniform Standard shall
consider fully all submitted materials and issue a concise
explanation of its decision.
Colo. Rev. Stat. § 24-60-3001, art. VII, § 2. Wertz
interprets the second sentence to mean that the Interstate
Commission must “‘consider fully' all
materials submitted in response” to the notice given in
the first sentence. (ECF No. 70 at 20.) Therefore, he says,
“[n]otice must be sent in a timeframe that allows
sufficient time for the legislature to react and
respond.” (Id.) But, he continues, the notice
was allegedly sent on May 1, 2007, and the Colorado
Legislature's 2007 session ended on May 4, 2007.
(Id.) Thus, the Commission supposedly violated its
“consider fully” duty by not giving the Colorado
Legislature time to submit any response or comment.
Wertz's
interpretation simply has no support in the statutory
language. The second sentence quoted above speaks of the
rulemaking process generally. It has nothing to do with
waiting for a particular legislature to submit written
materials. This argument therefore fails as a matter of law.
VI.
ANALYSIS OF LEGAL DISPUTES
A.
Matters Not in Question
Given
the foregoing, the constitutional question cannot be avoided.
In approaching that question, the Court first notes the
following.
Despite
the many arguments made by the parties and amici,
this case is not about:
• Whether the Colorado Legislature may delegate
rulemaking authority to an administrative agency. Without
question, it may.
• Whether the Colorado Legislature may delegate
rulemaking authority to an interstate administrative
agency ...