Carolina Cas. Ins. Co. v. Pinnacol Assur., No. 02-1512.

• Decision Date: 07 October 2005
• Docket Number: No. 02-1512.
• Citation: 425 F.3d 921
• Parties: CAROLINA CASUALTY INSURANCE COMPANY and Denver C. Fox, Plaintiffs-Appellants, v. PINNACOL ASSURANCE, Defendant-Appellee, American Association of People with Disabilities; The Arc in Jefferson County; The Arc of Adams County, Inc.; The Arc of Arapahoe and Douglas Counties; The Arc of Colorado-Advocating for People with Developmental Disabilities; Arc of Denver, Inc.; The Arc of the United States; Association for Community Living in Boulder County; The Association for Persons in Supported Employment; Bazelon Center for Mental Health Law; Cerebral Palsy of Colorado; Colorado Cross-Disability Coalition; Disability Rights Education and Defense Fund, Inc; Disability Rights Action Committee; Employment Link; National Association of Protection and Advocacy Systems; Self-Advocates Becoming Empowered, Amici Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

425 F.3d 921

CAROLINA CASUALTY INSURANCE COMPANY and Denver C. Fox, Plaintiffs-Appellants, v. PINNACOL ASSURANCE, Defendant-Appellee American Association of People with Disabilities; The Arc in Jefferson County; The Arc of Adams County, Inc.; The Arc of Arapahoe and Douglas Counties; The Arc of Colorado-Advocating for People with Developmental Disabilities; Arc of Denver, Inc.; The Arc of the United States; Association for Community Living in Boulder County; The Association for Persons in Supported Employment; Bazelon Center for Mental Health Law; Cerebral Palsy of Colorado; Colorado Cross-Disability Coalition; Disability Rights Education and Defense Fund, Inc; Disability Rights Action Committee; Employment Link; National Association of Protection and Advocacy Systems; Self-Advocates Becoming Empowered, Amici Curiae.

No. 02-1512.

United States Court of Appeals, Tenth Circuit.

October 7, 2005.

COPYRIGHT MATERIAL OMITTED

Timothy P. Fox (Amy F. Robertson, with him on the briefs), of Fox & Robertson, P.C., Denver, CO, for Plaintiffs-Appellants.

David R. DeMuro, of Vaughan & DeMuro, Denver, CO, (Lana L. Steven, of Vaughan & DeMuro, Denver, CO, and Michael J. Steiner, General Counsel, Pinnacol Assurance, Denver, CO, with him on the brief), for Defendant-Appellee.

Kevin W. Williams, Legal Program Director, Colorado Cross-Disability Coalition, Denver, CO; Michael W. Breeskin, Counsel, Arc of Denver, Inc., Denver, CO; Richard F. Armknecht, III, of Armknecht & Cowdell, P.C., Lindon, UT, on the brief for Amici Curiae.

Before HARTZ, McKAY, and O'BRIEN, Circuit Judges.

HARTZ, Circuit Judge.

This dispute arises out of a 1998 claim by a mentally disabled person, Jeremy Dymowski, against Rocky Mountain Job Opportunity Brigade (RMJOB), which had engaged him on a church clean-up crew. After he was injured at work, Mr. Dymowski, rather than bringing a workers' compensation claim, sued RMJOB in tort. Plaintiff Carolina Casualty Insurance Co. was RMJOB's general liability insurer. It settled with Mr. Dymowski, but only after RMJOB had unsuccessfully requested its workers' compensation carrier, Defendant Pinnacol Assurance, to participate in the settlement negotiations.

In one of the communications between RMJOB and Pinnacol, Pinnacol's lawyer wrote that Mr. Dymowski lacked the mental capacity to enter into a contract of employment and hence could not be an "employee" under the Pinnacol insurance policy. Carolina and Plaintiff Denver C. Fox, President of RMJOB, claim that by refusing to pay on this ground, Pinnacol discriminated against them on the basis of their association with a mentally disabled person in violation of the Americans with Disabilities Act (ADA), 42 U.S.C. § 12132, 28 C.F.R. § 35.130(g). Carolina also asserts its entitlement on state-law contract and promissory-estoppel grounds to reimbursement for its defense and settlement of Mr. Dymowski's suit.

We exercise jurisdiction under 28 U.S.C. § 1291 and affirm the district court's grant of summary judgment for Pinnacol. Before addressing the merits, we reject Pinnacol's contention that Carolina lacks constitutional standing. On the merits we hold that Pinnacol owed RMJOB no duty to defend Mr. Dymowski's lawsuit or contribute to the settlement. Plaintiffs concede that the absence of such duties would foreclose their claims. Because our decision on the merits with respect to Carolina's claims would also defeat Fox's claims, we need not address whether Fox has standing.

I. BACKGROUND

RMJOB trains and pays mentally disabled people to perform useful services. On February 5, 1998, Mr. Dymowski was part of an RMJOB work crew cleaning a church. During a break he attacked another worker; when he was restrained by an RMJOB supervisor, he suffered a broken arm.

On February 12 Martha J. Dymowski, Mr. Dymowski's stepmother and guardian, asked RMJOB to file a workers' compensation claim on Mr. Dymowski's behalf. On February 18 RMJOB reported the injury to Pinnacol (then known as the Colorado Compensation Insurance Authority), but on February 20 Ms. Dymowski withdrew the claim.

Eight months later, on November 2, 1998, Mr. Dymowski sued RMJOB in Colorado state court. He asserted common-law negligence and breach-of-contract claims, a state statutory deceptive-trade-practices claim on the ground that RMJOB had misrepresented its work environment as safe and appropriate for mentally disabled persons such as him, and a state statutory claim for violation of regulatory standards promulgated under the Colorado Care and Treatment of the Developmentally Disabled Act, Colo.Rev.Stat. 27-10.5-101 et seq. This was the suit that Carolina defended and settled.

Ordinarily a worker has no right to sue his employer in tort. If the worker is an "employee" and is injured while "performing service arising out of and in the course of the employee's employment," he or she is entitled to benefits under the workers' compensation system. See Colo.Rev.Stat. § 8-41-301. The benefits are available regardless of fault, see Colo. Springs Disposal v. Indus. Claims Appeals Office of Colo., 58 P.3d 1061, 1063 (Colo.App.2002), but they are limited—for example, punitive damages and pain-and-suffering damages are not included, see Colo.Rev.Stat. § 8-42-102 et seq.; Reliance Ins. Co. v. Blackford, 100 P.3d 578, 580 (Colo.App.2004) (pain-and-suffering damages not available)—and other claims against the employer ordinarily are not permitted, see Colo.Rev.Stat. § 8-43-201; Horodyskyj v. Karanian, 32 P.3d 470, 474, 478-80 (Colo.2001) (en banc) (but recognizing exception for sexual-harassment claim). Although the availability of benefits regardless of fault makes workers' compensation attractive to employees, the limitations on damages may encourage a worker to assert that he was not an employee or that the injury occurred outside the course of employment, in which case a tort claim is not barred. See Horodyskyj, 32 P.3d at 474.

The question whether an injury comes under the workers' compensation statute can be important to insurance companies as well as workers, because typically, as in this case, different policies cover workers' compensation liability and general tort liability. As a result, the insurer under one policy may seek (either directly or through the enterprise insured by both policies) assistance from the other insurer when workers' compensation coverage is debatable. That occurred here.

While the state-court suit was pending, RMJOB repeatedly asked Pinnacol to participate in its defense and settlement. Pinnacol refused. In an April 1, 1999, letter, Pinnacol (which in February 1998 had responded to the original report filed by RMJOB by contending that the injury was "Not Work-Related," R. at 91) stated that it had "several defenses," namely, that Mr. Dymowski "may not have been an employee," "has never filed a claim for compensation," and was not within the "building maintenance and light janitorial" job classifications covered by the policy. Id. at 225. In a letter the next day Pinnacol withdrew the job-classification defense but reasserted that Mr. Dymowski was neither "an employee [n]or injured within the course and scope of his employment." Id. at 228. On June 18, 1999, Pinnacol sent RMJOB a letter declining to participate in a settlement conference on the ground that Mr. Dymowski's "injury is not compensable under the Workers' Compensation Act." Id. at 230. Finally, in a July 23, 1999, letter Pinnacol claimed that its duty to defend and indemnify RMJOB did not extend to Mr. Dymowski's claim because his mental disability prevented him from contracting for employment, and thus from being an "employee" within the meaning of RMJOB's Pinnacol policy.

It was the July 23 letter that landed Pinnacol in federal court. In their November 8, 2000, second amended complaint, Carolina and Fox claim that Pinnacol's refusal to defend RMJOB and indemnify Carolina was on account of their association with the mentally disabled Mr. Dymowski, and hence a violation of the ADA. See 42 U.S.C. § 12132; 28 C.F.R. § 35.130(g).¹ Carolina also brought two state-law claims as RMJOB's subrogee. First, it contended that Pinnacol had breached its insurance contract with RMJOB. Second, it contended that Pinnacol is estopped to deny that its policy covered Mr. Dymowski as an employee because Pinnacol had promised to provide coverage for disabled employees and RMJOB had paid premiums in reliance on the promise.

The district court granted summary judgment for Pinnacol on each of Carolina's claims. It held that Pinnacol was not obliged by its workers' compensation policy to defend or indemnify RMJOB. It further reasoned that (1) because Pinnacol owed no duty under the workers' compensation policy, the breach-of-contract and promissory-estoppel claims failed, and (2) the refusal to perform an act that it had no contractual obligation to perform could not be an adverse action under the ADA.

Plaintiffs appeal the grant of summary judgment. But they stated in their reply brief that they "agree that if Pinnacol had no duty" to provide coverage, then their "claims fail," Aplt. R. Br. at 2, and they repeated this concession at oral argument. Thus, just as it did in the view of the district court, this case turns on whether Pinnacol owed RMJOB a duty to defend or indemnify in connection with Mr. Dymowski's state-court suit. If Pinnacol owed neither duty, then, by Plaintiffs' concession, we must affirm the judgment.

In addition to claiming no duty, Pinnacol contends that Plaintiffs lack (1) constitutional standing to assert any of their claims and (2) statutory standing to assert their ADA claim. For the reasons that follow, we hold that Carolina has constitutional standing and need not address the other standing issues.

II. STANDING

Article III, Section 2 of the United States Constitution extends the judicial power only to "Cases" or "Controversies." A dispute is an Article III "Case" or "Controversy" only if the...