Anderson v. American National Property and Casualty Co.

          ORDER TO SHOW CAUSE

          Kathleen M Tafoya United States Magistrate Judge.

         Under Federal Rule of Procedure 11(b), for every pleading, motion, or other paper presented to the court, an attorney must certify, to the best of his knowledge, information, and belief, formed after a reasonable inquiry, (1) that he isn't presenting the filing for any improper purpose, (2) that the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for changing the law, (3) that the factual contentions are warranted on the evidence or will likely have support after further investigation, and (4) that the denials of factual contentions have similar support. Fed.R.Civ.P. 11(b); King v. Fleming, 899 F.3d 1140, 1148 (10th Cir. 2018). Rule 11 establishes a standard of objective reasonableness. Adamson v. Bowen, 855 F.2d 668, 673 (10th Cir. 1988); Estate of Strong v. City of Northglenn, Colorado, No. 1:17-CV-1276-WJM-SKC, 2018 WL 6589813, at *2 (D. Colo. Dec. 14, 2018).

         In brief, after unsuccessfully demanding payment of the policy limits from her insurance carrier under underinsured motorist benefits subsequent to a January 5, 2016 automobile accident in which she was not at fault, Plaintiff brings claims against her insurance company for (1) breach of contract; (2) statutory unreasonable delay and denial of benefits under Colo. Rev. Stat. § 10-3-1115; and (3) common law bad faith breach of insurance contract. (Compl. [Doc. No. 4] at ¶¶ 53 - 69.) This Order to Show Cause addresses the Second and Third claims for relief. Currently pending before this court, inter alia, is Defendant's “Motion for Summary Judgment by Defendant” (“Mot.”) [Doc. No. 103] filed March 1, 2019.^[1]

         To establish a claim for statutory unreasonable delay or denial of her insurance benefits, the plaintiff must prove that the insurer delayed or denied payment of a covered benefit “without a reasonable basis.” Colo. Rev. Stat. § 10-3-1115(1)(a) To establish a claim for common law bad faith breach of insurance contract, Plaintiff “must establish that the insurer acted unreasonably and with knowledge of or reckless disregard for the fact that no reasonable basis existed for denying the claim.” Schultz v. GEICO Cas. Co., 429 P.3d 844, 847 (Colo. 2018). The statutory bad faith claim is a distinct cause of action from a common law bad faith claim. The statutory language in § 10-3-1115 imposes a standard of liability on insurers different from that imposed by the common law as expressed in § 10-3-1113, in that § 1115 expressly deletes the requirement that an insurer “knew that its delay or denial was unreasonable or . . . the insurer recklessly disregarded the fact that its delay or denial was unreasonable.” Kisselman v. Am. Family Mut. Ins. Co., 292 P.3d 964, 973 (Colo.App. 2011) (citing Erin Robson Kristofco, CRS §§ 10-3-1115 and -1116: Providing Remedies to First-Party Claimants, 39 Colo. Law. 69, 70- 71 (July 2010)). The court in Kisselman stated, “[W]e conclude the General Assembly intended the Statutes to impose a new statutory duty on insurers not to ‘unreasonably delay or deny payment of a claim for benefits owed,' which duty would be breached if the insurer had no ‘reasonable basis' to delay or deny the claim for benefits.” Id. at 974. In common between the two theories is that to avoid liability the insurer must take actions grounded on a reasonable basis; in other words, if there indeed was a reasonable basis for an insurer's actions, there can be no liability under either a statutory or common law claim. The catch, of course, is determining if a proffered basis was “reasonable.”

         Upon review of the Complaint and the summary judgment briefing, the court cannot ascertain any evidence set forth by the Plaintiff or Defendant that supports a conclusion that Defendant did not have a reasonable basis for refusing to pay $250, 000.00 to Plaintiff as damages caused by the automobile accident.

         Plaintiff notified her insurance company, American National Property and Casualty Company (“ANPAC”), of the accident and the underinsured motorist claim on or about January 6, 2016, the day after that accident (Compl. at ¶ 21), and on January 15, 2016, ANPAC notified Plaintiff that it had opened a UIM claim and had begun its investigation into the loss. (Id. at ¶¶ 22-23.)

         The parties do not dispute that under the underinsured motorist section of the insurance policy contract, an “underinsured motor vehicle” is defined by the policy as “a land motor vehicle, the ownership, maintenance, or use of which is insured or bonded for bodily injury or death at the time of the accident, but the bodily injury liability limits are less than the total damages for bodily injury or death that the insured person is legally entitled to collect.” (Mot., Ex. Y, [Doc. No. 103-25], Insurance Policy, at 11)(emphasis added).) Under the policy provisions, the insurance carrier, ANPAC, agrees to “pay damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an uninsured or underinsured motor vehicle.” (Id. at 10 (emphasis added).) The insurance policy defines bodily injury as “bodily injury to a human being, and sickness, disease, or death that results from it.” (Id. at 2.)

         After that time Plaintiff continued to seek and receive treatment and provide medical records and bills to ANPAC. (Id. at ¶¶ 23-25, 26, 27, 34-35, 39.) ANPAC paid for Plaintiff's therapies and treatments as she submitted bills, up to the full amount ($10, 000) of her medical payment coverage. (Id. at ¶ 37; UF^[2] No. 35.)

         The tortfeasor responsible for causing the action maintained an automobile liability insurance policy with Geico Insurance Company with bodily injury policy limits of $100, 000.00. (Compl. at ¶ 16.) Sometime between November 22, 2016 and December 14, 2016, Geico agreed to settle Plaintiff's bodily injury claim for the bodily injury limits of $100, 000.00. (Id. at ¶ 17. 26.) Additionally, in this same time period, Plaintiff began demanding that ANPAC pay the $250, 000.00 UIM policy limits of Plaintiff's underinsured motorist coverage, even though she only had incurred approximately $48, 000.00 of medical bills. (Mot., Exs. J and O; UF No. 41.) At that point ANPAC began re-evaluating the claim and requesting additional medical records. (UF Nos. 42, 44-45.) ANPAC's Claim Committee reviewed the claim on December 29, 2016. (UF No. 46.) Richard Elet, from ANPAC, testified that the claim was presented to the Committee “more due to the TBI and the inner ear concussion” that was asserted by Plaintiff. (Resp., Ex. C at 13:43-18.)^[3] Although Defendant disputed the calculations of Plaintiff's counsel, ANPAC offered $30, 000.00 in settlement of the UIM claim and sent a check in that amount on January 31, 2017. (UF Nos. 48-49.) At that time the total incurred medical expenses were approximately $55, 000.00. (Compl. at ¶ 36.)

         On approximately May 18, 2017, Plaintiff refused the settlement offer and again demanded payment of full policy limits. (UF No. 50.) On May 30, 2017, Defendant requested an independent medical examination of Plaintiff, advising that it “continues to dispute the cause and extent of your client's claimed injuries and damages as a result of the accident, and in particular, the reasonableness, necessity and relatedness of regenerative medicine treatment.” (Id.; Mot., Ex. R.)

         On July 26, 2017, plaintiff presented for an independent medical examination with Dr. Tashof Bernton, M.D., at Colorado Rehabilitation and Occupational Medicine in Aurora, Colorado. (UF No. 50.) Dr. Bernton is a licensed medical doctor, board certified in Internal Medicine and Occupational Medicine. (Mot., Ex. U, at 13.) Dr. Bernton's comprehensive thirteen-page, single spaced, report was provided to Plaintiff on or about September 12, 2017. (Compl. at ¶ 41.) Among other things Dr. Bernton stated, “In summary, the patient had persistent muscular strain as well as anxiety and some posttraumatic stress as a result of the motor vehicle accident. Specific systematic desensitization protocols have not been utilized, and the patient has been inappropriately diagnosed as having cognitive impairment due to the head injury.” (Mot., Ex. U at 12.) After review of Dr. Bernton's medical findings (See UFs 54-58), by letter dated September 12, 2017, ANPAC continued to dispute the reasonableness, necessity, and relatedness of the regenerative medicine treatment Plaintiff had received and also noted that Dr. Bernton found “some of the medical treatment that Ms. Anderson has already received does not appear clinically reasonable or medically necessary.” (Id.) Ms. Zaffuto, the ANPAC adjuster, also corrected the total amount of medical bills Plaintiff claimed to have presented of $58, 971.42, but which actually totaled $54, 397.03 -- just slightly more than half of the amount she had received from the tortfeasor. (UF No. 59; Mot., Ex. V.)

         As part of the September 12, 2017 letter, ANPAC continued to offer to settle the UIM claim for $40, 000 and, as noted previously, it appears the Claims Committee again reviewed the Plaintiff's claim, and Plaintiff continued to demand payment of $250, 000.00. (UF No. 60).

         At this point, approximately eighteen months after the accident, bodily injury medical expenses still did not rise to the level of tortfeasor payment, even including compensation for treatments the independent medical examiner found to be contra-indicated. As of November 29, 2017, the Defendant had before it medical billings with a total cost of approximately $75, 000.00, payment to Plaintiff by the tortfeasor of $100, 000.00, payment to Plaintiff by ANPAC of $10, 000.00 in medical payments, payment to Plaintiff by ANPAC of $30, 000.00 in UIM benefits, a 13 page independent medical examination report from a board certified, licensed medical physician concluding that legitimate medical expenses would not exceed the $100, 000.00 tortfeasor payment, and an offer, nevertheless, to pay an additional $10, 000.00 in UIM benefits. At that point, Plaintiff had not informed Defendant she disputed the findings from Dr. Bernton nor had she relayed concerns about Dr. Bernton's medical qualifications.

         In its Response to the summary judgment motion, Plaintiff presents a letter from her counsel to ANPAC dated November 30, 2017, with one or more attached reports from Plaintiff's treating physician, Dr. Allan. Plaintiff admits this is the first notification to ANPAC that Plaintiff questioned or disagreed with Dr. Bernton's independent medical evaluation. (Resp. at 7, lines 2-3 and Ex. B.) The Complaint was filed ...