Amica Life Ins. Co. v. Wertz

• Decision Date: 11 September 2017
• Docket Number: Civil Action No. 15–cv–1161–WJM–CBS
• Parties: AMICA LIFE INSURANCE COMPANY, Plaintiff, v. Michael P. WERTZ, Defendant.
• Court: U.S. District Court — District of Colorado

272 F.Supp.3d 1239

AMICA LIFE INSURANCE COMPANY, Plaintiff,

v.Michael P. WERTZ, Defendant.

Civil Action No. 15–cv–1161–WJM–CBS

United States District Court, D. Colorado.

Signed September 11, 2017

Alex H. Hayden, Lisa D. Stern, Michael John Miller, Drinker Biddle & Reath, LLP, Philadelphia, PA, Gregory Paul Szewczyk, Ballard Spahr, LLP, Denver, CO, for Plaintiff.

Ruth Hannah Summers, Summers & Stovall, LLC, Denver, CO, for Defendant.

ORDER GRANTING SUMMARY JUDGMENT IN PART AND SUA SPONTE CERTIFYING QUESTION OF LAW TO THE COLORADO SUPREME COURT

William J. Martinez, United States District Judge

Under the separation-of-powers principles inherent in the Colorado Constitution, a Colorado administrative agency may not lawfully promulgate rules and regulations that conflict with a Colorado statute. But, may the Colorado Legislature enact an interstate compact creating an interstate administrative agency with lawful power to promulgate rules and regulations that conflict with a Colorado statute?

The question arises in this case, sadly, from the suicide of a Colorado resident, Martin Fisher ("Fisher"), fourteen months after Plaintiff Amica Life Insurance Company ("Amica") issued him a life insurance policy. The policy contains a two-year suicide exclusion, and such an exclusion is permissible under a regulation promulgated by an administrative agency created by an interstate compact to which Colorado is a party. A Colorado statute, however, nullifies suicide exclusions longer than one year. See Colo. Rev. Stat. § 10–7–109. If Colorado may validly delegate authority to an interstate administrative agency to develop insurance standards that may conflict with Colorado insurance statutes, then Amica's two-year exclusion is valid. Otherwise, Amica's exclusion is invalid and Amica owes the death benefit to Fisher's beneficiary, Defendant Michael P. Wertz ("Wertz").

This dispute is currently before the Court on Amica's motion for summary judgment (ECF No. 67), and the proper outcome under Colorado law is unclear given Colorado's pragmatic approach to issues of legislative delegation. Yet the answer is of great public policy importance. If "yes," it demonstrates that the Colorado Legislature may, in certain circumstances, delegate to an administrative body the ability to make law superior to its own. If "no," then Colorado's ability to participate in some interstate compacts becomes significantly limited, and the entire basis of the interstate compact at issue here—the Interstate Insurance Product Regulation Compact—is called into question.

For the reasons explained below, the Court rules in Amica's favor on certain factual questions presented in Amica's summary judgment motion. However, as to the ultimate legal question, the Court sua sponte certifies it to the Colorado Supreme Court.

I. LEGAL STANDARD

Summary judgment is warranted under Federal Rule of Civil Procedure 56"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) ; see also Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is "material" if, under the relevant substantive law, it is essential to proper disposition of the claim. Wright v. Abbott Labs., Inc. , 259 F.3d 1226, 1231–32 (10th Cir. 2001). An issue is "genuine" if the evidence is such that it might lead a reasonable trier of fact to return a verdict for the nonmoving party. Allen v. Muskogee , 119 F.3d 837, 839 (10th Cir. 1997).

In analyzing a motion for summary judgment, a court must view the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal–Mart Stores, Inc. , 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). In addition, the Court must resolve factual ambiguities against the moving party, thus favoring the right to a trial. See Houston v. Nat'l Gen. Ins. Co. , 817 F.2d 83, 85 (10th Cir. 1987).

II. STATUTORY BACKGROUND

Understanding anything else in this case first requires understanding the Interstate Insurance Product Regulation Compact, which has been enacted by the Colorado Legislature at Colorado Revised Statutes § 24–60–3001 ("Insurance Compact" or "Compact"). Having enacted the Insurance Compact, Colorado participates with most of the other states in the Union in an arrangement intended "[t]o develop uniform standards" for "individual and group annuity, life insurance, disability income and long-term [care] insurance products." Id. , art. I, §§ 1, 2; see also id. , art. II, § 11.¹

The Compact creates the Interstate Insurance Product Regulation Commission ("Interstate Commission" or "Commission"), "a joint public agency" to which each compacting state may send one representative. Id. , art. III, § 1; art. V, § 1(a). The Commission is empowered to promulgate "Uniform Standards" for insurance products "which shall have the force and effect of law and shall be binding in the Compacting States." Id. , art. II, § 15; art. IV, § 1; art. VII, § 1. Insurance companies may then submit insurance products to the Interstate Commission for approval under the Uniform Standards, and such approval authorizes the insurance company to sell that product in any Compact member state in which the company is otherwise authorized to do business. Id. , art. X, §§ 1, 3. In short, the Interstate Commission acts as a near-national insurance commissioner with respect to "individual and group annuity, life insurance, disability income, and long-term [care] insurance products." Id. , art. I, § 1.

In promulgating Uniform Standards, the Insurance Compact requires the Interstate Commission to follow "a rulemaking process that conforms to the Model State Administrative Procedure Act of 1981 as amended, as may be appropriate to the operations of the Commission." Id. , art. VII, § 2. Moreover, "[b]efore the Commission adopts a Uniform Standard, the Commission shall give written notice to the relevant state legislative committee(s) in each Compacting State responsible for insurance issues of its intention to adopt the Uniform Standard." Id. Uniform Standards become effective ninety days after promulgation "or such later date as the Commission may determine." Id. , art. VII, § 3.

Any member state of the Compact may opt out of a Uniform Standard "either by legislation or regulation duly promulgated by the Insurance Department under the Compacting State's Administrative Procedure Act." Id. , art. VII, § 4. If a state opts out after a Uniform Standard has gone into effect, the opt out is prospective only. Id. , art. VII, § 5.

"[I]n the event the Commission exercises its rulemaking authority in a manner that is beyond the scope of the purposes of this [Compact], or the powers granted hereunder, then such an action by the Commission shall be invalid and have no force and effect." Id. , art. VII, § 1. But, if "any person" wishes to challenge a Uniform Standard, that person must file such a challenge within thirty days of the Uniform Standard's promulgation. Id. , art. VII, § 7. In reviewing the challenge, "[t]he court shall give deference to the actions of the Commission consistent with applicable law and shall not find the Rule² or Operating Procedure to be unlawful if the Rule or Operating Procedure represents a reasonable exercise of the Commission's authority." Id.

III. FACTS

The following facts are undisputed unless attributed to one party or another, or otherwise noted.

A. The Two–Year Suicide Exclusion Standard

Colorado enacted the Insurance Compact in 2004, with an effective date of August 4, 2005. (ECF No. 67 at 3, ¶ 1.) The Colorado Legislature designated the state insurance commissioner as Colorado's representative at the Interstate Commission. Colo. Rev. Stat. § 24–60–3001, Preamble. The Interstate Commission itself became operational in June 2006. (ECF No. 67 at 4, ¶ 4.)

On January 24, 2007, the Commission published notice of its intent to adopt its Individual Term Life Insurance Product ("ITLIP") Standards. (Id. at 6, ¶ 18.) Amica claims that, on May 1, 2007, the Commission provided notice of the pending ITLIP Standards to "the chairs, ranking members, and members of the Colorado General Assembly's (i) House Business Affairs and Labor Committee and (ii) Senate Business Labor and Technology Committee." (Id. ¶ 21.) Wertz denies this. (ECF No. 70 at 3, ¶ 21.) The Court will address whether Wertz's denial creates a genuine issue of material fact in Part V.B, below. Regardless, the parties agree that the House and Senate committees named above were the proper committees to which the Interstate Commission was required to provide notice. (ECF No. 67 at 6, ¶ 23.)

The Interstate Commission held a public hearing regarding the ITLIP Standards on May 16, 2007. (Id. at 7, ¶ 24.) That is also the date of the last written comment the Commission received regarding the ITLIP Standards. (Id. ¶ 27.)

The ITLIP Standards were formally adopted by the Interstate Commission on June 1, 2007, with a declared effective date of September 6, 2007. (Id. ¶ 31.) The ITLIP Standards declare that any suicide exclusion in an approved policy must be no longer than two years from the date the policy is issued. (Id. ¶ 32.) Colorado has never opted out of that Uniform Standard—or, for that matter, any Uniform Standard. (Id. at 13, ¶¶ 83–84.)

B. Fisher's Policy, His Suicide, and Wertz's Claim

In October 2011, the Interstate Commission approved an individual term life insurance product submitted by Amica. (Id. at 10, ¶ 55.) That product, as approved, excluded death benefits if death of the insured was caused by suicide within two years from the policy's issuance. (Id. ¶ 57.) In such a circumstance, Amica's only obligation was to refund the policy premium. (Id. )

On January 28, 2014, Amica issued to Fisher one of the aforementioned life insurance policies. (Id. ¶ 58....