United States District Court, D. Colorado
RECOMMENDATION OF UNITED STATES MAGISTRATE
Y. Wang, United States Magistrate Judge
Judge Nina Y. Wang This matter comes before the court for
recommendation on Plaintiff Residences at Olde Town Square
Association's (“Plaintiff' or
“Residences”) Motion to Amend Complaint to Add
Claim for Exemplary Damages (“Motion to Amend” or
“Motion”), filed November 21, 2018. See
[#42]. The undersigned considers the Motion pursuant to 28
U.S.C. § 636(b) and the Memorandum dated November 26,
2018 [#46]. This court concludes that oral argument will not
materially assist in the resolution of this matter.
Accordingly, having carefully reviewed the Motion and
associated briefing, the docket, and applicable law, this
court respectfully RECOMMENDS that the
Motion to Amend be DENIED.
case arises out of an insurance dispute between Plaintiff and
Defendant Travelers Casualty Insurance Company of America
(“Defendant” or “Travelers”). See
generally [#1]. Plaintiff “is a homeowners'
association which manages real property [i.e., (the
“condominiums”)]” located in Arvada,
Colorado, and is the policyholder of Travelers's
insurance policy 680-004F97913A (“the policy”).
See [id. at ¶¶ 1-3]. On or about
May 8, 2017, the condominiums “suffered a covered
loss” under the policy and submitted a claim to
Travelers for hail damage to the condominiums. See
[id. at ¶ 4].
first estimated the cost of repairs at $478, 086.09 with an
Actual Cash Value (“ACV”) of loss to be $110,
497.41 based on “recoverable depreciation of $160,
915.30 and a deductible of $206, 673.38.” See
[#1 at ¶¶ 12-15]. Residences could not determine
how Travelers calculated its deductible of two-percent, but
later learned that Travelers had increased the initial $7,
426, 300 value of the condominiums by “approximately
$2, 600, 000 over a course of approximately four months and
13 days.” See [id. at ¶ 20].
Plaintiff alleges that in violation of Colorado law and
insurance regulations, Travelers never disclosed the increase
in the value of the condominiums, which necessarily reduced
Plaintiff's coverage and Travelers's payment
obligations. See [#1 at ¶¶ 21-25].
Further, Residences alleges that Travelers never disclosed
how it calculated the initial value of the condominiums or
the increased value. See [id. at
then received a repair estimate of $735, 467.88 (which did
not include permits, a deduction, or deductible) from ASR
Companies Inc. (“ASR”), a contractor Plaintiff
contracted with to remediate the hail damage, which was
significantly higher than Travelers's first estimate.
See [id. at ¶¶ 16, 18]. ASR
allegedly sent its estimate to Travelers in or about
September 2017. See [id. at ¶¶
19, 30-32, 37, 45]. Disputes soon arose regarding the
required repairs, the amount of time needed to complete the
repairs, and what Travelers would cover. See, e.g.,
[id. at ¶¶ 33-35, 38-44, 46-47].
about November 4, 2017, given these disputes, Travelers
informed ASR and Residences that Travelers would seek another
proposal from a different contractor. See [#1 at
¶¶ 48, 53]. Travelers then received an estimate
from Dynamic Roofing and Construction (“Dynamic”)
of $538, 000, which Travelers later tendered to Plaintiff and
which included an additional $92, 276.59 ACV payment to
Plaintiff for repairs that Travelers “knew or should
have known were owed” at the time of its first
estimate. [Id. at ¶¶ 50-52, 55-60]. But
after receiving Travelers's second estimate of $538, 000
(purportedly based on Dynamic's estimate),
Dynamic submitted an estimate to Plaintiff of $571,
000; Residences believed this estimate to be unreasonably
low. See [id. at ¶¶ 63-66].
Residences believed Travelers intended “to force or
give incentive to [Plaintiff] to use Dynamic over a chosen
contractor” in violation of Colorado law. See
[id. at ¶ 70].
initiated this action on February 23, 2018 asserting two
claims under Colorado law against Travelers: (1) breach of
contract, alleging that Travelers breached the terms of the
policy by failing to cover the entire loss suffered by
Plaintiff; and (2) unreasonable delay or denial of insurance
benefits pursuant to Colo. Rev. Stat. §§ 10-3-1115,
-1116 (“statutory bad faith”), alleging that
Travelers unreasonably delayed paying the additional $92,
276.59 ACV payment to Plaintiff. See generally [#1].
Now, Plaintiff seeks to amend its Complaint to assert a claim
for exemplary damages, claiming that it recently learned in
discovery that Travelers fraudulently misrepresented its
relationship with Dynamic and how it calculated the value of
the condominiums at the time of the covered loss.
See [#42; #53]. Defendant opposes the requested,
arguing first that amendment is futile because exemplary
damages are not available for breach of contract and
statutory bad faith claims. See [#52]. Nevertheless,
Defendant also contends that even if Plaintiff can seek
exemplary damages, it does not make the requisite showing of
entitlement to exemplary damages. See [#52]. The
Motion is now ripe for Recommendation, and I turn to the
Parties' arguments below.
Rule 15(a)(2) and Rule 16(b)(4) of the Federal Rules of Civil
Procedure would apply when, as here, a party seeks to amend
its pleading after the deadline set in the Scheduling Order.
See Gorsuch, Ltd., B.D. v. Wells Fargo Nat'l Bank
Ass'n, 771 F.3d 1230, 1240 (10th Cir. 2014). But
Colo. Rev. Stat. § 13-21-102 governs proposed amendments
concerning exemplary damages. Pursuant to section
13-21-102(1.5)(a), a plaintiff cannot move for exemplary
damages in the initial pleading and may seek to amend the
pleading to add a claim for exemplary damages “only
after the exchange of initial disclosures pursuant to rule 26
of the Colorado rules of civil procedure” and if she
establishes prima facie proof of a triable issue. In finding
that there is no direct conflict between this statute and the
Federal Rules of Civil Procedure and that application of the
statute would not necessarily result in forum shopping or the
inequitable administration of the law, courts in this
District have held that § 13-21-102, rather than Rules
15(a) or 16(b), controls whether to permit the amendment of a
claim for exemplary damages. See Wollam v. Wright Medical
Group, Inc., No. 1:10-cv-3104-DME-BNB, 2012 WL 4510695,
at *9 (D. Colo. Sept. 30, 2012) (applying Colo. Rev. Stat.
§ 13-21-102 to motion to amend to add exemplary damages
claim); Witt v. Condominiums at the Boulders
Ass'n, No. 04-cv-02000-MSK-OES, 2006 WL 348086, at
*7 (D. Colo. Feb. 13, 2006) (finding the court must give
effect to Colorado statute in evaluating whether exemplary
damages claim properly brought in diversity action). See
also Am. Econ. Ins. Co. v. William Schoolcraft, M.D.,
P.C., No. 05-cv-01870-LTB-BNB, 2007 WL 160951, at *2 (D.
Colo. Jan. 17, 2007) (applying Jones v. Krautheim,
208 F.Supp.2d 1173, 1179 (D. Colo. 2002)). Even with the
application of § 13-21-102, however, the court may deny
a motion to amend to add exemplary damages because of delay,
bad faith, undue expense, or other demonstrable prejudice.
Stamp v. Vail Corp., 172 P.3d 437, 449 (Colo. 2007)
13-21-102 provides that an award of exemplary damages is
permissible when “the injury complained of is attended
by circumstances of fraud, malice, or willful and wanton
conduct.” Colo. Rev. Stat. § 13-21-102(1)(a). The
purpose of the award of punitive damages is to punish the
wrongdoer, not compensate for injuries. See Lira v.
Shelter Insurance Co., 913 P.2d 514, 517 (Colo. 1996). A
“finding that the elements of fraud [are] established
also establishe[s] the ‘circumstances of fraud'
required for punitive damages.” Berger v. Sec. Pac.
Info. Sys., Inc., 795 P.2d 1380, 1386 (Colo.App. 1990)
(upholding award of exemplary damages where the plaintiff
prevailed on her fraudulent concealment claim at trial).
the requirement of a prima facie showing, “[p]rima
facie evidence is evidence that, unless rebutted, is
sufficient to establish a fact.” Stamp, 172
P.3d at 449 (citation omitted). Such proof is established by
“a reasonable likelihood that the issue will ultimately
be submitted to the jury for resolution.” Id.
(quoting Leidholt v. Dist. Court, 619 P.2d 768, 771
n.3 (Colo. 1980)). Parties may offer this proof in
the form of discovery and by evidentiary means. Id.
“The question of whether the plaintiff has established
sufficient proof to add a claim for exemplary damages lies
within the sound discretion of the trial court.”
Id. (citation omitted). In reviewing the Motion to
Amend, this court considers only the “preliminary
question” of whether Plaintiff has made a prima facie
showing that the injury complained of is attended by
“circumstances of fraud, ” not whether it will
ultimately prevail. Am. Econ. Ins. Co., 2007 WL
160951, at *4.