Bowers v. Buckeye State Mutual Insurance Co.

          ORDER GRANTING DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR DECLARATORY JUDGMENT

          CHRISTINE M. ARGUELLO, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Plaintiff Kelsi Bowers' Motion for Declaratory Judgment (Doc. # 23) and Defendant Buckeye State Mutual Insurance Company's Cross-Motion for Summary Judgment or, Alternatively, Motion for Determination of Law (Doc. # 24). Both Motions have been fully briefed. (Doc. ## 31, 33, 37, 46.) The Court exercises jurisdiction pursuant to 28 U.S.C. 1332 (diversity of citizenship). For the reasons that follow, the Court grants Defendant's Motion and denies Plaintiff's Motion.

         I. BACKGROUND

         On February 9, 2016, Plaintiff was driving in Northglenn, Colorado when she was involved in a collision with another driver. (Doc. # 23 at 2.) As a result of the collision, Plaintiff sustained serious injuries which required extensive medical care. (Id.) Police at the scene determined that the other driver, Joseph Boocker, was at fault and issued him a citation for careless driving. (Id. at 3.)

         At the time of the collision, Plaintiff was driving a 2010 Chevy Impala ("the Impala"). (Id. at 4.) The Impala was covered by an automobile insurance policy ("the Policy") that Defendant issued to Danny Bowers, Plaintiffs Father, who is a resident of Kansas. (Doc. # 31 at 10.) The Policy had an effective term of April 13, 2015, through April 13, 2016, which included the date of the collision. (Id.) The Policy indicated that the "Drivers Covered" were Danny and Janelle Bowers. (Doc. # 24-9 at 3.) Plaintiff was not a named insured driver under the Policy at the time of the 2016 accident. (Doc. # 24-8 at 1-14.) On August 3, 2016, Defendant paid Plaintiff $4, 500 in Personal Injury Protection benefits in accordance with Defendant's obligations under the Policy. (Doc. # 23 at 6-7; Doc. # 24-1 at 2.)

         The Policy additionally includes Uninsured Motorist ("UIM") coverage with a policy limit of $100, 000 per person. (Doc. #21-4 at 25; Doc. # 21-16 at 1.) Under the terms of the UIM provision, an "Insured" is defined as, among other things, an individual occupying a vehicle covered by the Policy, such as the Impala Plaintiff was driving at the time of the February 2016 collision. (Id.) Further, the Policy defines an "underinsured motor vehicle" as a vehicle "to which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is less than the limit of liability for this coverage." (Id.) In effect, the Policy's UIM provision applies where an insured receives less than $100, 000 from another driver's insurance company. In such a case, the insured can use the Policy's UIM coverage to supplement the compensation from the other driver.

         The driver at fault for the February 2016 collision, Mr. Boocker, was insured through Allstate Fire and Casualty Insurance Company ("Allstate"). (Doc. #21-10 at 3.) In the fall of 2016, Allstate tendered Mr. Boocker's insurance policy limits of $100, 000 to Plaintiff in full and final settlement of Mr. Boocker's liability to Plaintiff. (Doc. # 23 at 7.) However, the funds Plaintiff received from Allstate were insufficient to cover the medical costs of her collision-related injuries. (Id. at 10.) As a result, Plaintiff informed Defendant that she intended to pursue a claim for UIM benefits. On October 19, 2016, Defendant informed Plaintiff that, based on the terms of the Policy and Kansas law, Plaintiff was not eligible for UIM benefits. Specifically, Defendant indicated that "because the $100, 000 per-person limit of [the Policy's] UM/UIM coverage does not exceed the $100, 000 per-person limit of the [Allstate] policy, there is no available UIM coverage." (Doc. #21-6 at 2.)

         Defendant's decision that Plaintiff was not entitled to UIM benefits under the Policy gave rise to the instant action. On June 28, 2018, Plaintiff filed a Motion for Declaratory Judgment seeking a determination from this Court that Colorado law controls the interpretation of the Policy's UIM provision and that under Colorado law, Defendant is obligated to pay Plaintiff UIM benefits. (Doc. # 23.) Subsequently, on July 2, 2018, Defendant filed a Cross-Motion for Summary Judgment, or Alternatively, Motion for Determination of Law seeking a determination from this Court that Kansas law applies and that under Kansas law and the terms of the Policy, Defendant is not required to provide UIM benefits to Plaintiff. (Doc. # 24.)

         II. DECLARATORY JUDGMENT AND SUMMARY JUDGMENT STANDARDS

         Under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, the Court may enter a judgment declaring "the rights and other legal relations of any interested party seeking such declaration. . . ." 28 U.S.C. § 2201. Such a judgment or decree is reviewable as a final judgment. Id. In the instant case, the parties do not dispute that the issues can be resolved as a matter of law through a declaratory judgment.

         Summary judgment is warranted when "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). A fact is "material" if it is essential to the proper disposition of the claim under the relevant substantive law. Wright v. Abbot Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). A dispute is "genuine" if the evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party. Allen v. Muskogee, Okl., 118 F.3d 837, 839 (10th Cir. 1997).

         When reviewing motions for summary judgment, a court may not resolve issues of credibility, and must view the evidence in the light most favorable to the nonmoving party-including all reasonable inferences from that evidence. Id. However, conclusory statements based merely on conjecture, speculation, or subjective belief do not constitute competent summary judgment evidence. Bones v. Honeywell Int'l, Inc., 366 F.3d 869, 875 (10th Cir. 2004).

         III. ANALYSIS

         When more than one state's law may be applicable to a claim or issue, a court need not choose which body of law to apply unless there is an outcome determinative conflict between the potentially applicable bodies of law. Sec. Serv. Fed. Credit Union v. First Am. Mortg. Funding, LLC, 861 F.Supp.2d 1256, 1264 (D. Colo. 2012) (citations omitted). In the instant case, it is undisputed that an outcome determinative conflict exists between Colorado and Kansas law with regard to the principles governing underinsured motorist provisions in insurance policies. Plaintiff argues Colorado law applies. Defendant, on the other hand, argues that Kansas law applies.

         A. GOVERNING CONFLICT OF LAW RULES

         Where, as here, a federal court is sitting in diversity jurisdiction, the conflict of law rules of the forum state apply. Klaxon Co. v. StentorElec. Mfg. Co., 313 U.S. 487, 498 (1941); Sec. Serv. Fed. Credit Union, 861 F.Supp.2d at 1267. Colorado has adopted the "most significant relationship" approach set forth in the Restatement (Second) of Conflicts of Law ("the Restatement"). Wood Bros. Homes v. Walker Adjustment Bureau, 601 P.2d 1369, 1372 (Colo. 1979) (contract claims); First Nat'l Bank v. Rostek, 514 p.2d 314, 320 (Colo. 1973) (tort claims). Under the most significant relationship approach, the specific Restatement rule applied to a given conflict of law dispute depends on the nature of the underlying substantive claim.

         In the instant case, the parties dispute whether Plaintiff has asserted a tort claim, a contract claim, or both. Plaintiff raises two claims for relief: (1) declaratory relief that Colorado law controls in this case; and (2) declaratory relief that Colorado law does not relieve Defendant of its obligation to provide Plaintiff with the "coverage for which she contracted." (Doc. # 4 at 5-6.) Plaintiff argues that "tort conflict-of-law principles apply here because the crux of Plaintiffs claim against Defendant is that [Defendant] acted in bad faith when handling her claim" and a bad faith breach of contract cause of action sounds in tort.^[1] (Doc. # 37 at 3); see Travelers Prop. Cas. Co. of Am. v. Stresscon Corp., 2016 CO 22M, ¶ 16 (noting it is "well-settled" that "an insurer's bad faith breach [of contract]. . . gives rise to tort liability.").

         However, the substantive allegations of the Complaint do not raise an implication that Defendant breached its contractual obligations in bad faith. The Colorado Supreme Court has held that the relevant inquiry as to whether an insurer has breached its duties of good faith and fair dealing with its insured is whether "the facts pleaded show the absence of any reasonable basis for denying the claim, i.e., would a reasonable insurer under the circumstances have denied or delayed payment of the claim under the facts and circumstances." Farmers Grp., Inc. v. Trimble, 691 P.2d 1138, 1142 (Colo. 1984) (citations omitted). Plaintiffs Complaint, by contrast, alleges not that there was an absence of any reasonable basis for denying Plaintiffs claim but that Defendant's cited reasoning behind its decision is "mistaken." (Doc. # 4 at 5.) Therefore, despite Plaintiff's assertions to the contrary, there are no grounds to consider what law would apply to a tortious bad faith breach of contract claim because Plaintiff's allegations do not support such a claim.

         Even interpreted in the light most favorable to Plaintiff, at best Plaintiff states only claims based on breach of contract. As such, the Court agrees with Defendant that "the crux of this case is whether benefits are available under the insurance policy under either Kansas law or Colorado law." (Doc. # 46 at 12.)

         B. APPLICATION OF SECOND RESTATEMENT PRINCIPLES

         The Restatement provides the following with regard to insurance contracts in particular:

The validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.

         Restatement § 193; Mitchell v. State Farm Fire & Cas. Co., 902 F.2d 793 (10th Cir. 1990) (noting that under the "most significant relationship" test, "the law of the state in which the insured property, object or other risk is located normally governs issues concerning the validity or effect of the insurance contract.") (citations omitted). The insured risk, which is "the object or activity which is the subject matter of the insurance, has its principal location ... in the state where it will be during at least the major portion of the insurance period." Restatement § 193 cmt. (b). The Restatement further explains that "in the case of an automobile liability policy, the parties will usually know beforehand where the automobile will be garaged at least during most of the period in question." Id. More specifically,

The [insurance] policy will usually be solicited in the state of the insured's domicile and usually the insured risk will also be located there. In the normal case, therefore, the policy will have been solicited and delivered and the last act necessary to make the contract binding will have taken place in the state where the insured is domiciled or incorporated, and where the risk is located. This state, in such a situation, will usually be the state of the applicable law, at least with respect to most issues.

Id. Finally, the Restatement indicates that if the insured risk "will be in a particular state for the major portion of the insurance period, the risk's principal location is the most important contact to be considered in the choice of the applicable law . . ." because that location "has an intimate bearing upon the risk's nature and extent and is a factor upon which the terms and conditions of the policy will frequently depend." Id. at (b-c).

         However, as a caveat, § 193 indicates that circumstances may exist in which "following the issuance of the policy the principal location of the risk is shifted to some other state" in which case "this other state will have a natural interest in the insurance of the risk and it may be that its local law should be applied to determine at least some issues arising under the policy." Id. at cmt. (d). The stated rationale for the exception from the standard practice involving insurance contracts is that "application of the local law of the other state would hardly be unfair to the insurance company ... if the company had reason to foresee when it issued the policy that there might be a shift to another state of the principal location of the risk." Id. However, the exception is limited in its application.

         Courts have held that the principal location of an insured risk shifts when: (1) both the insured and the insured risk are located in a different forum than the one in which the contract was formed for the majority of the contract term; (2) the underlying contract is silent as to what law applies; and (3) the insurer had knowledge that the insured risk had shifted to another location. See Clay v. Sun Ins. Office, Ltd., 377 U.S. 179, 182 (1964) (finding Florida law applied to contract formed in Illinois when the "contract did not even attempt" to clarify what law applied and "[s]hortly after the contract was made, [the insured] moved to Florida and there he lived for several years . . . [h]is property was there all that time . . . [and] the [insurer] knew this fact.").

         The factual circumstances of the instant case show that the exception to § 193 is inapplicable and the principal location of the insured risk did not shift.

         1. Location of Insured Risk During the Contract Term

         The "principal location" of an insured risk is defined by § 193 Comment (b) as "the state where [the insured risk] will be during at least the major portion of the insurance period." Comment (b) notes that "the significance of the state of the risk's principal location diminishes with the length of time that it can be anticipated the chattel will be in other states during the term of the insurance." However, Comment (b) further provides that if "the risk will be in a particular state for the major portion of the insurance period, the ...