Adams v. Farmers Ins. Group

• Decision Date: 28 June 1999
• Docket Number: No. 98SC42.,98SC42.
• Citation: 983 P.2d 797
• Parties: Michelle ADAMS and Chris Williams, Petitioners, v. FARMERS INSURANCE GROUP, Respondent.
• Court: Colorado Supreme Court

983 P.2d 797

Michelle ADAMS and Chris Williams, Petitioners, v. FARMERS INSURANCE GROUP, Respondent.

No. 98SC42.

Supreme Court of Colorado, En Banc.

June 28, 1999.

Rehearing Denied August 9, 1999.¹

The Leventhal Law Firm, P.C., Bruce J. Kaye, Beth Krulewitch, Denver, Colorado, Buchanan, Jurdem & Zulauf, P.C., Karen M. Zulauf, Denver, Colorado, Attorneys for Petitioners.

Patterson & Nuss, P.C., Franklin D. Patterson, Englewood, Colorado, Attorney for Respondent.

McDermott & Hansen, William J. Hansen, Denver, Colorado, Attorney for Amicus Committee of the Colorado Trial Lawyers Association.

Seaman and Giometti, P.C., Thomas J. Seaman, Englewood, Colorado, Attorney for Amicus Committee of the Colorado Defense Lawyers Association.

Justice RICE delivered the Opinion of the Court.

The petitioners, Michelle Adams and Chris Williams, seek review of a court of appeals opinion denying them statutory attorney fees following an action in which they were awarded personal injury protection (PIP) benefits under the Colorado Auto Accident Reparations Act, sections 10-4-701 to 10-4-726, 3 C.R.S. (1998) (No-Fault Act or Act). Specifically, the petitioners argue that the court of appeals erred in holding that a trial court may not grant attorney fees to a successful party absent a predicate factual finding that the PIP benefits were "overdue." Petitioners further emphasize the fact that the merits of the underlying PIP benefits claim were not appealed in the instant case. The petitioners argue that the court of appeals' holding not only disregards the plain language of the attorney fees provision of the Act which gives the trial court discretion to grant fees to a "successful" party, but also controverts the beneficent legislative purpose of the Act which favors liberal construction of the Act in favor of insureds. Given our agreement with the petitioners' arguments, we reverse the holding of the court of appeals and remand to that court with directions to reinstate the trial court's judgment of attorney fees.

I.

In April 1992, the petitioners, who were insured under a policy with the Farmers Insurance Group (respondent), were injured in an automobile accident. The respondent failed to pay a number of medical and rehabilitation bills submitted by the petitioners. On April 6, 1994, the petitioners filed suit against the respondent, asserting inter alia a claim for statutory PIP benefits pursuant to the No-Fault Act.² The petitioners also requested attorney fees pursuant to section 10-4-708(1.7)(c), 3 C.R.S. (1998), of the Act.

As the trial court later noted in its attorney fees order, the discovery phase of this case was particularly contentious. Notably, the petitioners' insurance policy was among the first policies offered by the respondent which allowed for the processing of claims for medical and rehabilitation treatment by a managed care arrangement. See § 10-4-706(2)(a), 3 C.R.S. (1997). Farmers utilized a Preferred Provider Organization (PPO) and hired Sloans Lake Managed Care (Sloans Lake) to administer its PPO arrangement. Significant administrative difficulties marked the initial stages of the respondent's PPO relationship with Sloans Lake. As a result, the petitioners' claims were processed by four of the respondent's employees and seven Sloans Lake employees. Despite these difficulties, the respondent refused to admit responsibility for the actions of Sloans Lake in processing the petitioners' PIP claims. As the trial court noted, this refusal increased the attorney fees involved in this action because it forced the petitioners to move for a continuance, undertake extensive discovery of the seven Sloans Lake employees involved with the petitioners' files, and file a motion for summary judgment on a novel legal issue: the responsibility of the insurer for the actions of the managed care providers in the denial of PIP benefits.³

At trial, the petitioners claimed medical bills totaling $58,120.54; however, the jury only awarded them $22,000. This award represented thirty-eight percent of the total PIP benefits sought. Over the respondent's objection, the petitioners requested that the jury answer a series of special interrogatories on the verdict form. The first four interrogatories asked the jury to assess the total amount of the petitioners' medical, rehabilitation, and occupational retraining bills that were "reasonable and necessary."⁴ However, these interrogatories did not address whether the bills were timely paid by the respondent. Instead, the timeliness of the respondent's payment was addressed in two identical special interrogatories that the petitioners prepared and submitted to the jury, to wit:

Did [the respondent] fail to pay medical bills, rehabilitation bills, occupational retraining bills, or lost wages claimed by [the petitioners] within 30 days of receiving reasonable proof of the fact and amount of the expense (except [the respondent] may accumulate claims for periods not exceeding one month, and benefits are not overdue if paid within fifteen days after the period of accumulation)?

(Emphasis added.) The jury answered "No" to both of these interrogatories.

Following the jury's $22,000 verdict in favor of the petitioners on their statutory PIP benefits claim, the petitioners filed a motion for attorney fees pursuant to section 10-4-708(1.7), 3 C.R.S. (1998). While the respondent initially opposed the petitioners' motion on the basis that it claimed an unreasonable amount of fees given the fact that the petitioners had only met with partial success at trial, the respondent subsequently filed a supplemental motion alleging that any award of attorney fees would contradict the mandate of the court of appeals' recent decision in Bunting v. RTD, 919 P.2d 924 (Colo.App. 1996). In this motion, the respondent argued that Bunting stood for the proposition that a trial court may not grant attorney fees unless the factfinder has first determined that PIP benefits were "overdue." In contrast, the petitioners argued that Bunting gave trial courts broad discretion to award attorney fees. After a lengthy hearing, the trial court agreed with the petitioners⁵ and awarded them $99,106.38 in fees, which represented thirty-eight percent of the fees billed during the trial and 100 percent of the post-trial fees. In explaining its award, the trial court stated:

This was a messy case. I'm not blaming the attorneys in the case for that — it was quite obvious that that is how this case was delivered to the attorneys from all of the Defendants. The number of people that were involved in this case, the documents that were involved in this case and tracing the people with the documents took an extensive amount of time. And for all the attorneys in this case to take that material that was in disarray ... it was obvious that it was a very difficult case to organize, and it took a lot of work and a lot of time.

On appeal, the respondent argued that the petitioners were not entitled to attorney fees because, although the jury found that the petitioners had proven that $22,000 in various medical bills were "reasonable and necessary," it simultaneously found that the PIP benefits were not "overdue." Despite these arguably inconsistent factual findings, however, the respondent did not appeal the jury's award of $22,000 in PIP benefits. Rather, the respondent only challenged the validity of the trial court's attorney fees award, arguing that an "overdue" finding was a prerequisite for an attorney fees award under the Act.

Relying heavily on the Bunting case, the court of appeals reversed the trial court's order granting attorney fees.⁶ This appeal followed.

II.

The petitioners argue that the court of appeals erred in concluding that, regardless of the jury's verdict, attorney fees awards pursuant to section 10-4-708(1.7)(c) are contingent upon a factual finding that PIP benefits were "overdue" pursuant to section 10-4-708(1). Specifically, the petitioners contend that, under the factual circumstances of this case, the court of appeals disregarded the plain language and the purpose of the Act when it denied attorney fees, despite the petitioners' success in the proceedings on the merits below.

When construing statutory provisions, we seek to effectuate the intent of the General Assembly. In order to discern such intent, we first must look to the statutory language itself, giving words and phrases their commonly accepted and understood meaning. See Allstate Ins. Co. v. Smith, 902 P.2d 1386, 1387 (Colo.1995)

. Moreover, we must choose a construction that advances the purpose of the particular legislative scheme. See Farmers Group, Inc. v. Williams, 805 P.2d 419, 422 (Colo.1991). As the court of appeals failed to follow either of these governing standards of statutory interpretation, we reverse its denial of attorney fees and reinstate the trial court's findings regarding same.

A.

The Act only requires insurers to pay medical expenses for a variety of treatments that are reasonable, necessary, and accident-related. See § 10-4-706(1)(b), 3 C.R.S. (1998). While the petitioners recognize that the payment of PIP benefits must have been "overdue" before an insured may bring a cognizable claim under the Act, they argue that the plain language of the attorney fees provision only requires a plaintiff to have been "successful" in the proceedings below in order to be eligible to recover attorney fees. Therefore, they contend that courts may not inquire as to whether the jury's award was premised on inconsistent verdicts before awarding attorney fees, absent an appeal of the underlying substantive claim. We agree.

In the absence of a statute, court rule, or private contract to the contrary, attorney fees are not recoverable by a prevailing party in either a contract or a tort action. See Bernhard v. Farmers Ins. Exch., 915 P.2d 1285, 1287 (Colo.1996)

. However, section 10-4-708(1.7) of the Act expressly provides for the...