United States District Court, D. Colorado
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 ...