United States District Court, D. Colorado
ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
(DKT. #114), AND DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
(DKT. #115).
N.
REID NEUREITER, UNITED STATES MAGISTRATE JUDGE
This
case is before the Court for all purposes pursuant to 28
U.S.C. § 636(c), upon the consent of the parties (Dkt.
#18) and the Order Referring Case to Magistrate Judge entered
by Judge William J. Martinez on December 6, 2016 (Dkt. #19).
The Parties have filed cross-motions for summary judgment.
They will be DENIED. The case will proceed
to trial.
1.
Background
This is
an insurance coverage dispute. Plaintiff Beverly Cribari was
in an automobile accident in February 2015. She was injured
and has had to undergo more than one surgery to her wrist as
a result. Ms. Cribari was not at fault in the accident, and
the negligent driver's insurer settled for his policy
limits of $100, 000. Based on the severity of her injuries,
future physical impairment, and economic damages, Ms. Cribari
asserts that the negligent driver was underinsured. She
therefore submitted an underinsured motorist claim to her own
insurer, Allstate Fire & Casualty Ins. Company
(“Allstate”).
On
August 29, 2016, Ms. Cribari filed claims in Colorado state
court against Allstate for breach of contract, common law bad
faith, and unreasonable delay/denial. Allstate removed the
case to this federal court on September 9, 2016. (Dkt. #1.)
Currently
before the Court are Plaintiff's Motion for Summary
Judgment (Dkt. #114) and Defendant's Motion for Summary
Judgment. (Dkt. #115.)
Just
prior to the hearing on these competing motions, held on
February 25, 2019, Defendant Allstate sent a check for full
policy limits ($250, 000) to Ms. Cribari and her counsel,
while simultaneously purporting to reserve its right to
recoup the amount if it is determined that Ms. Cribari failed
to cooperate with Allstate in the investigation of the claim,
thereby forfeiting her benefits under the policy.
In
light of the payment and Allstate's reservation of
rights, Ms. Caribari asked for the right to file an
additional brief addressing the legal implications of this
payment, suggesting that such a payment may waive and render
moot Allstate's failure to cooperate defense. The Court
granted Ms. Cribari leave to file a sur-reply, which was
filed on March 4, 2019. (Dkt. #134.) Allstate was given leave
to file their own sur-reply addressing the same issue.
Allstate's response was filed March 8, 2019. (Dkt. #136.)
Before
addressing the cross-motions for summary judgment, the Court
must first consider the impact on this case, if any, of
Allstate's payment of full policy limits subject to a
purported reservation of rights.
2.
Allstate's payment of full policy limits does not render
moot Allstate's failure to cooperate defense.
Allstate
asserts that Ms. Cribari breached the contractual duty to
cooperate. Ms. Cribari argues that by paying full policy
limits (even subject to a reservation of rights), Allstate
has waived any failure to cooperate defense to Ms.
Cribari's breach of contract claim. By Ms. Cribari's
reasoning, the purported failure to cooperate defense has
been rendered moot by Allstate's policy limits payment.
(See Dkt. #132 at 2.)
On
February 13, 2019, Allstate issued a check for $250, 000 made
payable jointly to Ms. Cribari and her counsel's law
office. (See Dkt. #134-1.) Accompanying this check
was a “reservation of rights” letter dated
February 12, 2019 from Allstate's outside counsel to Ms.
Cribari's attorney stating, in material parts, the
following:
This letter is to advise that Allstate is hereby submitting
payment of $250, 000.00 in UIM benefits (check included),
subject to a reservation of rights. Such payment shall not
operate in any way as a waiver of any rights or obligations
that either Mrs. Cribari or Allstate may have pursuant to the
subject policy or the law, nor shall it operate to invalidate
any terms or conditions of the subject policy, or any rights
that Allstate has under the subject policy or otherwise, to
assert a position that Ms. Cribari failed to cooperate during
the pendency of her claim and comply with all terms and
conditions of the policy, preventing Allstate from obtaining
material documents and information necessary for it to fully
investigate and evaluate the totality of her UIM claim.
* * *
Allstate will exercise its right to have a judge and jury
resolve any questions regarding whether Mrs. Cribari breached
her duties and failed to perform such duties pursuant to the
terms and conditions of the subject policy. Allstate is not
waiting its right to rely on any provision of the policy, or
of the law, or in equity which may now or at a later time
appear to have application to the claims made and the rights
and obligations of the parties to the subject policy.
Allstate reserves its right to conduct further investigation
to the extent additional information is disclosed or
discovered, and deny or decline coverage should a judge or
jury conclude that Mrs. Cribari failed to cooperate in the
investigation of her claim and/or failed to comply with the
terms and conditions of the subject policy.
(Dkt. #134-2 at 1-3.)
On
receipt of the check and the letter, Ms. Cribari's
counsel sent an e-mail to Allstate's outside counsel
seeking clarification “regarding the recent payment of
$250, 000 to Ms. Cribari.” (Dkt. #134-3 at 1.) Noting
that the reservation of rights letter made no mention of
“whether Allstate agrees this [check] may be cashed,
” Ms. Cribari asked for confirmation that
“regardless of what may otherwise happen in this
litigation, Allstate will not request return of any funds
later.” (Id.) Allstate refused to give any
assurance that it would not seek to recoup the funds. Its
counsel wrote back: “[M]y client has paid these
benefits subject to a reservation of its rights. Should a
judge or a jury determine that [Ms. Cribari] failed to
cooperate with the investigation of her UIM claim, we will
pursue recovery of these monies.” (Id.)
At oral
argument, Ms. Cribari's counsel expressed frustration
with this payment and the accompanying reservation of rights,
explaining in words or substance that it was not a payment at
all because Ms. Cribari could not spend the money for fear
that Allstate would seek to recoup it in the future.
Allstate's counsel effectively conceded that making the
payment while simultaneously reserving rights put Ms. Cribari
in a difficult position, and he would not be able to
recommend that she spend the money given the uncertainty
about whether Allstate would seek to recover those funds.
Ms.
Cribari argues that, absent limited exceptional
circumstances, Colorado law makes no provision for an insurer
to make a payment while reserving the right to recoup that
payment later after a trial. In Ms. Cribari's view,
“a true, operable payment by an insurance carrier of
the full amount of available UIM benefits would serve to moot
the insured plaintiff's claim for breach of contract, and
since the purported policy violation of breach of the
contractual duty to cooperate is a
‘contract' defense, that purported defense is now
also moot and no longer applicable to any remaining
claims.” (Dkt. #134 at 2) (emphasis in original.) Ms.
Cribari also argues that because there is no right to recoup
the payment in the insurance policy itself, Allstate cannot
create such a right by merely sending a reservation of rights
letter. Says Ms. Cribari, “Allstate has made a final
payment of the full amount of benefits, has no right to
recoup that payment, and both the breach of contract claim
and failure to cooperate defense are moot.”
(Id. at 4.)
Ms.
Cribari also argues that even if Colorado does allow payment
subject to a reservation of rights and later recoupment,
summary judgment should be granted on the failure to
cooperate defense anyway. Argues Ms. Cribari,
“Allstate's payment of the $250, 000 policy limit
confirms that any purported prejudice suffered by Allstate
precluding it from fully adjusting the insurance claim either
never really existed, or has been resolved, allowing it to in
fact evaluate the claim.” (Id.)
Allstate,
for its part, argues that it has acted appropriately and
there is nothing wrong with tendering payment of the full
amount of the policy while reserving the right of recoupment
if a jury ultimately finds Ms. Cribari breached the policy by
failing to cooperate. Allstate cites Auto-Owners Ins. Co.
v. Summit Park Townhome Assn., No. 14-cv-03417, 2016 WL
1321507 (D. Colo. April 5, 2016) as recognizing that it is
appropriate in Colorado for an insurer to make a payment
while simultaneously reserving the right to recoup the funds
after litigation.
Having
reviewed the cases cited by the Parties, I agree with Judge
Babcock's decision in Auto-Owners that an
insurer in Colorado is entitled to make a payment, subject to
a reservation of rights, without waiving its right to get a
final ...