United States District Court, D. Colorado
BROOKSHIRE DOWNS AT HEATHERRIDGE CONDOMINIUM ASSOCIATION, INC., a Colorado corporation, Plaintiff,
v.
OWNERS INSURANCE COMPANY, a foreign corporation, Defendant.
ORDER DISCHARGING ORDER TO SHOW CAUSE
WILLIAM J. MARTINEZ UNITED STATES DISTRICT JUDGE.
Plaintiff
Brookshire Downs at Heatherridge Condominium Association,
Inc. (“Plaintiff”) sues Defendant Owners
Insurance Company (“Defendant”) for breach of
insurance contract and unreasonable delay or denial of
insurance benefits under Colorado Revised Statutes
§§ 10-3-1115 and -1116. (See ECF No. 1.)
By way of a summary judgment motion filed by Plaintiff, the
parties previously presented to the Court a potentially
dispositive legal issue. Specifically, the insurance policy
in question states that lawsuits seeking coverage
(i.e., breach of contract) must be brought within
two years from the date of loss. See Brookshire Downs at
Heatherridge Condo. Ass'n, Inc. v. Owners Ins. Co.,
324 F.Supp.3d 1201, 1203 (D. Colo. 2018) (ECF No. 71)
(“Brookshire I”). But the loss at issue
here, hail damage, occurred on September 29, 2014, and
Plaintiff did not file suit until April 7, 2017. Id.
Given this, Defendant asserted in its second affirmative
defense that the contractual statute of limitations had
expired. (See ECF No. 16 at 9, ¶ 2.) Plaintiff
then moved for summary judgment that this affirmative defense
fails as a matter of law in light of a Colorado statute that
invalidates such contractual limitations periods in
“homeowners” insurance policies. (See
ECF No. 36.)
The
Court denied Plaintiff's motion, holding that
Plaintiff's insurance policy was not a
“homeowners” policy within the meaning of the
statute. Brookshire Downs, 324 F.Supp.3d at 1203-06.
Thus, it appeared that this lawsuit should be dismissed as
untimely. But Defendant had not cross-moved for summary
judgment. Pursuant to Federal Rule of Civil Procedure 56(f),
the Court ordered Plaintiff to show cause why summary
judgment should not enter in Defendant's favor.
Id. at 1206-07.
Plaintiff
responded with what was, for the most part, a veiled summary
judgment motion. (ECF No. 77.) Plaintiff asserted
Colorado's “reasonable expectations doctrine”
(discussed below) as an alternative basis for disregarding
the contractual statute of limitations, and also argued that
its statutory unreasonable delay/denial claim could go
forward regardless. The Court then entered an order
construing Plaintiff's submission as a second summary
judgment motion and agreeing to entertain it as such in the
interest of justice. (ECF No. 79.)
The
Court resolved Plaintiff's as-construed second summary
judgment motion by holding that the reasonable expectations
doctrine did not overcome the contractual statute of
limitations, and therefore Plaintiff's breach of contract
claim fails as a matter of law. Brookshire Downs at
Heatherridge Condo. Ass'n, Inc. v. Owners Ins. Co.,
2019 WL 764480, at *5-8 (D. Colo. Feb. 21, 2019) (ECF No. 89)
(“Brookshire II”). As for the alleged
independence of Plaintiff's statutory unreasonable
delay/denial claim, the parties agreed that it could go
forward subject to its own statute of limitations, which had
not expired by the time this lawsuit was filed. See
id. at *8. The Court noted its surprise at the
parties' agreement on this matter because the Court
usually holds that unreasonable delay/denial claims are
derivative of successful breach of insurance contract claims,
which no longer exists in this case. Id. The Court
accordingly called for supplemental briefing to better
understand the parties' positions about litigating and
unreasonable delay/denial claim not tethered to a viable
breach of contract claim. (ECF No. 90.)
The
Court has received and reviewed the parties' supplemental
briefs on this matter. (ECF Nos. 91-92.) The parties'
cited authorities, and the Court's own research, convince
the Court of two things. First, if a claim for breach of
insurance contract fails on its merits, then a claim for
statutory unreasonable denial of insurance benefits likewise
fails. See, e.g., Am. Family Mut. Ins. Co. v.
Hansen, 375 P.3d 115, 122 (Colo. 2016).[1] Second, it is a
question of first impression whether statutory unreasonable
delay/denial may go forward if the claim for breach of
insurance contract fails solely on timeliness grounds. The
Court must therefore predict what the Colorado Supreme Court
would rule if presented with the question in the context of
this lawsuit. See Wade v. EMCASCO Ins. Co., 483 F.3d
657, 666 (10th Cir. 2007). For the following reasons, the
Court predicts that the Colorado Supreme Court would agree
with Plaintiff that its statutory unreasonable delay/denial
claim may go forward.
Colorado
Revised Statutes §§ 10-3-1115 and -1116 create a
separate cause of action-separate from breach of contract,
that is-whose triggering event is an allegedly unreasonable
delay or denial of insurance benefits. The Colorado Supreme
Court confirms that actions under the statute may proceed
independent of a claim for breach of contract, but a party
that does not bring a breach of contract claim cannot recover
as much as a party who brings both types of claims. Am.
Family Mut. Ins. Co. v. Barriga, 418 P.3d 1181, 1185-86
(Colo. 2018). Moreover, the Colorado Supreme Court gives
§§ 10-3-1115 and -1116 every benefit of the doubt
in favor of the cause of action and its remedies. See
Guarantee Tr. Life Ins. Co. v. Estate of Casper, 418
P.3d 1163 (Colo. 2018); Rooftop Restoration, Inc. v. Am.
Family Mut. Ins. Co., 418 P.3d 1173 (Colo. 2018);
Barriga, supra.
Accordingly,
the Court predicts that the Colorado Supreme Court would hold
that a time-barred breach of contract claim does not
foreclose a timely statutory unreasonable delay/denial claim.
To establish the “covered benefit” (a requirement
for calculating damages under the statute) when alleging
unreasonable denial, the plaintiff may need to put
on a case materially indistinguishable from a breach of
contract claim, but only as an element of establishing that
the benefit is indeed “covered.” To establish the
“covered benefit” when alleging unreasonable
delay, the evidence is simply the amount that the plaintiff
eventually received but believes should have been paid
earlier. In both cases, there must be evidence that the
denial or delay was “without a reasonable basis.”
Colo. Rev. Stat. § 10-3-1115(2).
Accordingly,
the Court DISCHARGES its Order to Show Cause (ECF No. 71 at
10) as to Plaintiff's claim for unreasonable delay/denial
of insurance benefits under Colorado Revised Statutes
§§ 10-3-1115 and -1116. By separate order, the
Court will resolve the parties' remaining pretrial
motions, and reset this case for trial.
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Notes:
[1] Theoretically an unreasonable delay
claim could be viable independent of a breach of contract
claim-e.g., where the insurer has paid the policy
limits but only after an inordinate amount of time. Under
such a scenario, it would seem to be no basis for claiming
breach of contract because the insurer cannot be required,
under the contract, to pay more than the policy limits. But
the question of unreasonable delay might remain, as suggested
by the Colorado Supreme ...