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Philadelphia Indemnity Insurance Co. v. Cruz

United States District Court, D. Colorado

June 24, 2019

JOEY CRUZ, an individual, Defendant.


          R. Brooke Jackson United States District Judge.

         This matter is before the Court on plaintiff Philadelphia Indemnity Insurance Company (“Philadelphia”)'s motion to dismiss defendant Joey Cruz's counterclaim, ECF No. 24, and motion for summary judgement, ECF No. 27. For the reasons discussed herein, Philadelphia's motion for summary judgment is GRANTED and its motion to dismiss is MOOT.

         I. BACKGROUND

         Defendant Joey Cruz was an employee of Rocky Mountain Human Services (RMHS). Complaint, ECF No. 1 at ¶10; Answer, ECF No. 23 at ¶10. On June 10, 2015, she was involved in an automobile accident driving a car that she owned personally on her way to an appointment within the course and scope of her employment with RMHS. ECF No. 1 at ¶14; ECF No. 23 at ¶14. At the time of the accident RMHS had an effective commercial auto insurance policy from Philadelphia, policy number PHPK1336379 (“the policy”). ECF No. 1-1.

         Ms. Cruz claims to have sustained damages in excess of the at-fault driver's liability insurance limits. She asserted a claim for underinsured motorist benefits to Philadelphia under the policy issued to RMHS. ECF No. 1 at ¶19; ECF No. 23 at ¶19. In March 2018, Philadelphia filed this declaratory judgment action, asking the court to declare that the policy does not provide UM/UIM coverage to Ms. Cruz. ECF No. 1. Ms. Cruz filed an answer asserting that she is an insured under the plain language of the policy. ECF No. 23. She also asserted a counterclaim for reformation, arguing that if the policy does not grant her UM/UIM benefits, it violates Colo. Rev. Stat. § 10-4-609. This statute requires automobile liability insurers to provide UM/UIM coverage coextensive with liability coverage unless the named insured rejects such coverage in writing.

         Philadelphia filed a motion to dismiss the reformation counterclaim, arguing that it is moot, and that Ms. Cruz lacks standing to seek contractual reformation. ECF No. 24. From Philadelphia's point of view, the claim is moot because the policy provides UM/UIM insured coverage to RMHS, and Ms. Cruz lacks standing because she is not an insured under the contract or an intended beneficiary of the contract. Ms. Cruz responded to this motion, ECF No. 25, and Philadelphia replied, ECF No. 26. Philadelphia then filed a motion for summary judgment on its complaint for declaratory relief and against Ms. Cruz on her counterclaim for reformation, repeating arguments raised in its motion to dismiss. ECF No. 27. Ms. Cruz responded, ECF No. 30, and Philadelphia replied, ECF No. 31. Because Philadelphia's motion for summary judgment incorporates arguments from its motion to dismiss, I will address Philadelphia's request for declaratory relief and Ms. Cruz's counterclaim in the context of the motion for summary judgment. Accordingly, the motion to dismiss, ECF No. 24, is MOOT.


         A. Summary Judgment Standard.

         The Court may grant summary judgment if “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). The moving party has the burden to show that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The nonmoving party must “designate specific facts showing that there is a genuine issue for trial.” Id. at 324. A fact is material “if under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A material fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248.

         B. Applicable Law.

         In diversity cases, the Court applies the substantive law of the forum state. Barrett v. Tallon, 30 F.3d 1296, 1300 (10th Cir. 1994). “When federal courts are called upon to interpret state law, they must look to rulings of the highest state court, and if no such rulings exist, they must endeavor to predict how the high court would rule.” Lovell v. State Farm Mut. Auto. Ins. Co., 466 F.3d 893, 899 (10th Cir. 2016).

         As an initial matter, Plaintiff argues that whether coverage is available under an insurance policy is a question of fact making entry of summary judgment improper. Plaintiff cites Allstate Ins. Co. v. Juniel, 931 P.2d 511, 513 (Colo.App. 1996) for the proposition that “[w]hether coverage is ultimately available under the policy is a question of fact for the trier of fact.” Id. While the determination of events triggering liability for insurance coverage is a question of fact, here plaintiff has pled and defendant has judicially admitted the relevant facts about the ownership of the car and the events surrounding the collision. What remains in dispute is the meaning of the insurance policy. The interpretation of the contractual terms of an insurance policy is a matter of law properly decided in a motion for summary judgment. Thompson v. Md. Cas. Co., 84 P.3d 496, 501 (Colo. 2004); Lake Durango Water Co., Inc. v. Pub. Utils. Comm'n, 67 P.3d 12, 20 (Colo. 2003) (“Whether a written contract is ambiguous and, if not deemed ambiguous, how the unambiguous contractual language should be construed, are questions of law . . . .”). However, once it has been determined that a contract is ambiguous and that its construction depends on extrinsic facts and circumstances, then the terms of the contract become questions of fact for the trier of fact. May v. Interstate Moving & Storage Co., 739 F.2d 521, 523 (10th Cir. 1984)

         Insurance policies are construed under the same principles that govern the interpretation of any contract. Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 613 (Colo. 1999). In interpreting a contract, courts seek to give effect to the reasonable expectations of the parties. Terms are given their plain and ordinary meaning unless the intent expressed in the contract indicates an alternative interpretation should be used. Id. Colorado courts also recognize that unlike a negotiated contract, an insurance policy is often imposed on a “take-it-or-leave-it basis.” Thompson, 84 P.3d at 501 (citing Huizar v. Allstate Ins. Co., 952 P.2d 342, 344 (Colo. 1998)). “Therefore, we assume a ‘heightened responsibility' in reviewing insurance policy terms to ensure that they comply with ‘public policy and principles of fairness.'” Id. Accordingly, Colorado courts construe ambiguous terms in an insurance policy in favor of coverage. Id. at 502 (citing State Farm Mut. Auto. Ins. CO. v. Nissen, 851 P.2d 165, 166 (Colo. 1993)).

         III. ANALYSIS

         Philadelphia seeks a declaratory judgment that Ms. Cruz is not entitled to benefits under the policy for injuries from the June 10, 2015 accident. It argues that she is not an insured under the policy's general liability coverage or the policy's UM/UIM coverage, and accordingly, there is no basis to reform the policy to afford her coverage. Although Ms. Cruz is only seeking underinsured motorist coverage, the general liability coverage under the policy is relevant because Colo. Rev. Stat. § 10-4-609 requires UM/ UIM benefits to be coextensive with a policy's bodily injury liability coverage unless waived in writing. I will first address the UM/ UIM coverage under the policy and then analyze the policy's liability coverage to determine whether the policy comports with Colorado law.

         A. UM/ ...

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