Benson v. Allstate Fire and Casualty Insurance Co.

          ORDER

          Kathleen M. Tafoya United States Magistrate Judge

         This matter is before the court on Defendant's “Motion for Summary Judgment.” ([“Motion”], Doc. No. 86.) Plaintiff has responded in opposition to the Motion, and Defendant has replied. ([“Response”], Doc. No. 89; [“Reply”], Doc. No. 94.)

         On April 2, 2015, Plaintiff Austin Benson was involved in a single-vehicle car accident. (Doc. No. 13 at 4-7 [“Undisputed Facts”], at 5 ¶ 1.) As a result of the accident, Plaintiff reportedly suffered various injuries. ([“Complaint”], Doc. No. 4 at 2 ¶ 9.) After settling the liability portion of his claim against the at-fault party for the maximum limits of that individual's insurance policy, Plaintiff filed this lawsuit, on March 9, 2017, against his own automobile insurance provider, Defendant Allstate Fire and Casualty Insurance Company [“Allstate”], to recover underinsured motorist [“UIM”] benefits.^[1] (Undisputed Facts 5 ¶¶ 2-4; see Compl. 3-8 ¶¶ 11-67.) In his Complaint, Plaintiff asserts the following causes of action: (1) unreasonable delay and denial of UIM benefits, pursuant to C.R.S. §§ 10-3-1115 and 10-3-1116; (2) declaratory judgment regarding entitlement to UIM benefits; and (3) bad faith breach of an insurance contract. (Compl. 3-8 ¶¶ 11-67.)

         As part of his original UIM claim, Plaintiff sought compensation for lost wages, in the amount of $16, 800.00, which he claimed to have incurred as a result of the car accident.^[2](Undisputed Facts 5; Mot. Ex. B at 10.) On June 4, 2018, Defendant received permission to amend its Answer in this lawsuit, to add an affirmative defense for insurance fraud relating to Plaintiff's wage loss claim. (Doc. Nos. 23, 33.) Specifically, Defendant alleges that Plaintiff made material misrepresentations with respect to his lost wages, as well as the reasons for the termination of his employment prior to the accident. (Doc. No. 23 at 3.) Defendant contends that those misrepresentations were sufficient to trigger the fraud clause of Plaintiff's insurance policy, voiding his coverage thereunder. (Id. at 5.) Defendant now moves for summary judgment, in its favor, based on that affirmative defense. (Mot. 8-17.)

         STANDARD OF REVIEW

         Summary judgment is appropriate if “the movant shows that 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); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the initial burden of showing an absence of evidence to support the nonmoving party's case. Celotex, 477 U.S. at 325. “Once the moving party meets this burden, the burden shifts to the nonmoving party to demonstrate a genuine issue for trial on a material matter.” Concrete Works, Inc. v. City & County of Denver, 36 F.3d 1513, 1518 (10th Cir. 1994) (citing Celotex, 477 U.S. at 325). The nonmoving party may not rest solely on the allegations in the pleadings, but instead, must designate “specific facts showing that there is a genuine issue for trial.” Celotex, 477 U.S. at 324; see also Fed. R. Civ. P. 56(c).

         “A ‘judge's function' at summary judgment is not ‘to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.'” Tolan v. Cotton, 572 U.S. 650, 656 (2014) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986)). Whether there is a genuine dispute as to a material fact depends upon “whether the evidence presents a sufficient disagreement to require submission to a jury, ” or conversely, whether the evidence “is so one-sided that one party must prevail as a matter of law.” Carey v. U.S. Postal Service, 812 F.2d 621, 623 (quoting Anderson, 477 U.S. at 251-52). A disputed 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, 477 U.S. at 248). A dispute is “genuine” if the evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party. Thomas v. Metropolitan Life Ins. Co., 631 F.3d 1153, 1160 (10th Cir. 2011) (citing Anderson, 477 U.S. at 248). “Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine issue for trial.'” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968)).

         In evaluating a motion for summary judgment, a court may consider admissible evidence only. See Johnson v. Weld Cnty., 594 F.3d 1202, 1209-10 (10th Cir. 2010). The factual record and reasonable inferences therefrom are viewed in the light most favorable to the party opposing summary judgment. Concrete Works, 36 F.3d at 1517. However, this standard does not require the court to make unreasonable inferences in favor of the non-moving party. Carney v. City & Cnty. of Denver, 534 F.3d 1269, 1276 (10th Cir. 2008). The nonmovant must establish, at a minimum, an inference of the presence of each element essential to the case. Hulsey v. Kmart, Inc., 43 F.3d 555, 557 (10th Cir. 1994).

         ANALYSIS

         In its Motion, Defendant argues that it is entitled to summary judgment on all of Plaintiff's claims, because Plaintiff violated his insurance policy's fraud clause. (Mot. 17.) Defendant contends, specifically, that Plaintiff “knowingly and intentionally made material misrepresentations as to whether he quit or was terminated from his job prior to the accident and his ability or inability to work.” (Id.) Defendant is adamant that, pursuant to the terms of the insurance policy, Plaintiff's “egregious fraudulent conduct voids coverage of the entire UIM claim.” (Id. at 3.)

         The insurance policy at issue here contains the following clause: “We may not provide coverage for any insured who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident of loss for which coverage is sought under this policy.” (Mot. Ex. I at 7.)

         Such fraud clauses have been found to be enforceable by both Colorado and Tenth Circuit courts. See, e.g., Am. Diver's Supply & Mfg. Corp. v. Boltz, 482 F.2d 795, 797-98 (10th Cir. 1973); Martinez v. Hartford Underwriters Ins. Co., No. 12-cv-02405-MJW, 2014 WL 2016569, at *2 (D. Colo. May 15, 2014); Nw. Nat'l Ins. Co. v. Barnhart, 713 P.2d 1360, 1361-62 (Colo.App. 1985). And, importantly, violation of a fraud clause voids the entire claim, not just the portion to which the fraud pertains. See Am. Diver's, 482 F.2d at 797 (“[T]he fraud clause intentionally imposes different standards of responsibility and damages-absolute honesty and forfeiture of all benefits of the policy and not merely unintended benefits[.]”) (emphasis in original).

         To establish fraud arising from the violation of a fraud clause, an insurer must prove three elements: (1) that the insured misrepresented or omitted some fact; (2) that the misrepresentation or omission was “material;” and (3) that there was “intent to deceive on the part of the insured.” Sunflower Condo. Ass'n, Inc. v. Owners Ins. Co., No. 16-CV-2946-WJM-NYW, 2018 WL 2196089, at *3 (D. Colo. May 14, 2018) (quoting Martinez, 2014 WL 2016569, at *2); see Am. Diver's, 482 F.2d at 797. Here, Defendant argues that Plaintiff made material, intentional misrepresentations with respect to two issues: (1) the nature of his separation from the job he held prior to the car accident; and (2) his ability to work during the 210 days for which he claimed lost wages. (Mot. 3.)

         A. Plaintiff's Statements Concerning his ...