McCracken v. Progressive Direct Ins. Co.

• Decision Date: 24 July 2018
• Docket Number: No. 17-1286,No. 17-1285,17-1285
• Parties: Brenda MCCRACKEN; Christa Hecht, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. PROGRESSIVE DIRECT INSURANCE COMPANY; Progressive Preferred Insurance Company, Defendants-Appellees. Jerry Archuleta, individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. USAA Casualty Insurance Company; United Services Automobile Association, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

896 F.3d 1166

Brenda MCCRACKEN; Christa Hecht, individually and on behalf of all others similarly situated, Plaintiffs-Appellants,

v.PROGRESSIVE DIRECT INSURANCE COMPANY; Progressive Preferred Insurance Company, Defendants-Appellees.

Jerry Archuleta, individually and on behalf of all others similarly situated, Plaintiff-Appellant,

v.USAA Casualty Insurance Company; United Services Automobile Association, Defendants-Appellees.

No. 17-1285

No. 17-1286

United States Court of Appeals, Tenth Circuit.

FILED July 24, 2018

Nelson A. Waneka, of Levin Sitcoff PC, Denver, Colorado (Bradley A. Levin and Susan S. Minamizono, of Levin Sitcoff PC, Denver, Colorado, and Keith R. Scranton and Patricia A. Meester, of Franklin D. Azar and Associates, P.C., Aurora, Colorado, with him on the briefs), for Plaintiff-Appellants.

Casie D. Collignon (Sammantha J. Tillotson with her on the brief), of Baker & Hostetler LLP, Denver, Colorado, for Progressive Direct Insurance Company and Progressive Preferred Insurance Company, Defendants-Appellees.

Casie D. Collignon, of Baker & Hostetler LLP, Denver, Colorado (Michael Mulvaney, Thomas Butler, and Taryn Hodinka, of Maynard Cooper & Gale, Birmingham, Alabama, and Jon F. Sands and Marilyn S. Chappell, of Sweetbaum Sands Anderson PC, Denver, Colorado, with her on the brief), for USAA Casualty Insurance Company and United Services Automobile Association, Defendants-Appellees.

Before LUCERO, PHILLIPS, and MORITZ, Circuit Judges.

MORITZ, Circuit Judge.

The plaintiffs in these consolidated appeals each settled a claim under their automobile-insurance policies with the defendants. But now the plaintiffs maintain that the defendants illegally reduced their settlement offers by taking into account certain benefits they had previously paid the plaintiffs. The district courts dismissed the plaintiffs’ putative class-action lawsuits after concluding the plaintiffs each waived their rights to collect further damages from the defendants on their settled claims.

We reverse in part and remand to the district court with instructions to vacate its judgment in favor of USAA Casualty Insurance Company because it lacked jurisdiction to hear the claims against that defendant. Otherwise, we affirm.

Background

I. Legal Background

These cases involve the interplay between two categories of automobile insurance that insurers must offer under Colorado law: uninsured/underinsured-motorist (UM/UIM) coverage and medical payments (MedPay) coverage. See Colo. Rev. Stat. §§ 10-4-609(1)(a), 10-4-635(1)(a). UM/UIM coverage insures the policyholder for injuries caused by a third-party driver without sufficient insurance to cover the policyholder’s injury. See Colo. Rev. Stat. § 10-4-609(1)(a), (4). MedPay coverage insures the policyholder for any bodily injury "resulting from the ownership, maintenance, or use of [a] motor vehicle," regardless of fault. § 10-4-635(1)(a).

In 2007, the Colorado legislature amended its insurance law to mandate that "the amount of the coverage available" under UM/UIM policies "shall not be reduced by a setoff from any other coverage, including" MedPay.¹ An Act Concerning the Payment of Uninsured Motor Vehicle Insurance as Excess to Other Insurance, § 1, 2007 Colo. Legis. Serv. 1921, 1921 (2007) (codified at § 10-4-609(1)(c) ). This amendment initially caused some confusion. Focusing on the word "coverage" in § 10-4-609(1)(c), a number of Colorado courts held that the amendment only prohibited insurers from taking a setoff from a UM/UIM claim if the setoff would effectively reduce the amount of coverage available. See, e.g. , Carrion-Kozak v. Alghamdi , No. 13CV92, slip op. at 2 (Arapahoe Cty., Colo. Dist. Ct. Dec. 13, 2013) ("While [ § 10-4-609(1)(c) ] prohibits a setoff which reduces coverage, it does not prohibit a setoff which merely adjusts the amount an insurer must pay to prevent a double recovery."); Willyard v. Am. Family Mut. Ins. Co. , No. 11CV931, slip op. at 4 (Boulder Cty., Colo. Dist. Ct. May 8, 2012) (upholding insurance contract that "allows for a setoff of the amount paid " in MedPay but "does not affect the coverage available under either the [MedPay] or the [UM/UIM] benefits policy"). In other words, these courts held that if a policyholder’s UM/UIM claim exceeded the maximum amount of coverage available under the policy, then the insurer owed the maximum coverage amount without a setoff because taking a setoff in such a situation would effectively reduce the maximum amount of coverage available under the UM/UIM policy. See Carrion-Kozak , slip op. at 3; Willyard , slip op. at 4. But in cases in which the policyholder’s claims were for amounts less than their coverage limits, these courts held that a setoff was proper to prevent double recovery. See Carrion-Kozak , slip op. at 3; Willyard , slip op. at 4. And because such claims don’t meet or exceed the coverage limit, taking the setoff in such cases wouldn’t have affected the coverage limit.² Carrion-Kozak , slip op. at 3; Willyard , slip op. at 4.

But in November 2016, the Colorado Supreme Court issued an opinion that contravened this understanding. See Calderon v. Am. Family Mut. Ins. Co. , 383 P.3d 676 (Colo. 2016). The plaintiff in Calderon had an insurance policy with the defendant that included $300,000 in UM/UIM coverage and $5,000 in MedPay coverage. Id. at 677. After the plaintiff sustained injuries in a collision with an uninsured driver, the defendant paid the plaintiff’s full $5,000 in MedPay benefits. Id. Yet the parties couldn’t agree on how much the defendant owed the plaintiff in UM/UIM benefits. Id. A jury eventually awarded the plaintiff about $68,000. Id. Following the approach many courts took at the time, the trial court reduced the jury’s award by $5,000 to set off the MedPay benefits the plaintiff had already received. Id.

The plaintiff appealed, and the Colorado Court of Appeals held that the setoff was proper under § 10-4-609(1)(c). Id. The Colorado Supreme Court granted certiorari and reversed. Id. It held that § 10-4-609(1)(c) ’s prohibition on setoffs "refers not to the coverage limit but rather to the amount of UM/UIM coverage available on a particular claim." Id. Thus, under Calderon , the amount a policyholder may claim in UM/UIM benefits is unaffected by any MedPay benefits the policyholder previously received.

II. Factual Background

The plaintiffs in the cases before us each settled a UM/UIM claim after § 10-4-609(1)(c) ’s effective date but before the Colorado Supreme Court issued Calderon . The parties thus reached these settlements under the pre- Calderon understanding of § 10-4-609(1)(c).

A. Archuleta’s Claim and Settlement

Jerry Archuleta held an insurance policy from the United Services Automobile Association (USAA). The policy included $5,000 in MedPay coverage and $50,000 per person in UM/UIM coverage. Archuleta submitted claims to USAA for MedPay and UM/UIM benefits in November 2012 after an underinsured driver injured him in a collision. USAA paid Archuleta $5,000 to satisfy his MedPay claim. It then paid Archuleta $17,000 in May 2015 to settle his UM/UIM claim.

The parties agree that when USAA calculated this settlement, it took a $5,000 setoff to account for the MedPay benefits it had previously paid Archuleta. In other words, USAA determined that Archuleta incurred $22,000 in injuries and then reduced that amount by the $5,000 it had already paid, arriving at $17,000. Archuleta accepted the $17,000 settlement and signed a form "releas[ing][ ] and forever discharg[ing]" USAA "from any and all claims" he had arising from the November 2012 collision. App. 679.

B. Hecht’s Claim and Settlement

Christa Hecht held an auto insurance policy from Progressive Preferred Insurance Company. Hecht’s policy included $5,000 in MedPay coverage and $25,000 per person in UM/UIM coverage. Hecht submitted MedPay and UM/UIM claims in August 2013 after an uninsured driver injured her in a collision. Progressive Preferred fulfilled Hecht’s MedPay claim and then reached an agreement with her to settle her UM/UIM claim for $21,678. The parties agree that when Progressive Preferred calculated this settlement, it took a setoff to reflect the MedPay benefits it had previously paid Hecht.³ Hecht also signed a form acknowledging that the payment was "in full settlement and final discharge of all claims" arising from the August 2013 collision. App. 143.

C. McCracken’s Claim and Settlement

Brenda McCracken held an insurance policy from Progressive Direct Insurance Company. McCracken’s policy included $10,000 in MedPay coverage and $50,000 in UM/UIM coverage. McCracken submitted claims to Progressive Direct for MedPay and UM/UIM benefits in August 2015 after an uninsured driver injured her in a collision. Progressive Direct fulfilled McCracken’s MedPay claims and initially paid her $30,959 for her UM/UIM claim. In September 2016, McCracken and Progressive Direct agreed to settle her final UM/UIM claim for a total of $41,000; Progressive Direct paid McCracken an additional $10,041 to satisfy this settlement.

The parties agree that the settlement incorporates a $5,000 setoff Progressive Direct took to reflect the MedPay benefits it previously paid to McCracken.⁴ Upon receiving the final payment from Progressive Direct, McCracken signed a form entitled "Full Release and Trust Agreement" in which she acknowledged receiving $41,000 "in full settlement and final discharge of a disputed claim" arising out of the August 2015 collision. App. 128.

III. Proceedings Below

A. Archuleta v. USAA

Archuleta sued USAA and USAA Casualty in Colorado state court on November 11, 2016—four days after the Colorado Supreme Court decided Calderon . Archuleta alleged that USAA violated § 10-4-609(1)(c) by taking the MedPay setoff into account when it calculated his UM/UIM settlement. He asked the court for damages for breach of contract and a declaratory judgment that averred USAA wrongly denied him UM/UIM benefits. He further purported to represent a class of...