Amica Life Ins. Co. v. Wertz

• Decision Date: 19 October 2018
• 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

350 F.Supp.3d 978

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 October 19, 2018

Alex H. Hayden, Lisa D. Stern, Michael John Miller, Cozen O'Connor, Philadelphia, PA, Gregory Paul Szewczyk, Ballard Spahr, LLP, Denver, CO, for Plaintiff.

Ruth Hannah Summers, The Law Office of Ruth Summers, LLC, Boulder, CO, for Defendant.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND TERMINATING CASE

William J. Martinez, United States District Judge

The case arises, 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, which is lawful 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 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"). Invoking this Court's diversity jurisdiction,¹ Amica brought this lawsuit for declaratory judgment that it properly denied payment of Fisher's death benefit in light of the interstate two-year exclusion. Currently before the Court on Amica's motion for summary judgment. (ECF No. 67.)

The proper outcome ultimately turns on the extent of the Colorado Legislature's authority under the Colorado Constitution to delegate regulatory power to an administrative body. This Court therefore sua sponte certified the question to the Colorado Supreme Court per Colorado Appellate Rule 21.1. See Amica Life Ins. Co. v. Wertz , 272 F.Supp.3d 1239, 1255 (D. Colo. 2017) (ECF No. 73) (" Wertz " or "Prior Order"). Precisely three weeks later, the Colorado Supreme Court declined to accept the certified question. (See ECF No. 75.) That court thus returned a weighty question of Colorado constitutional law to the undersigned, whose decisions, particularly regarding state law, bind no one but the parties before him.²

The Court then accepted supplemental briefs from the parties (ECF Nos. 81, 82, 86-1) as well as an amicus brief from the National Association of Insurance Commissioners ("NAIC") in support of Amica (ECF No. 79-1); an amicus brief from the Interstate Insurance Product Regulation Commission ("Interstate Commission" or "Commission"), also in support of Amica (ECF No. 80-1); and Wertz's response to these amicus briefs (ECF No. 85). The Court reviewed these briefs and called for limited further briefing on certain matters.

(ECF No. 89.) All parties and amici filed briefs in response. (See ECF Nos. 90–93.)

The Court has thoroughly studied all of these materials, including the parties' original summary judgment briefs (ECF Nos. 67, 70, 72), the legal authorities cited by the parties and amici , and what appears to be the only treatise on interstate compacts, see Michael L. Buenger et al., The Evolving Law and Use of Interstate Compacts (2d. ed. 2016) ("Interstate Compacts "). The Court concludes—to its surprise—that the Colorado Legislature may validly delegate to an administrative agency the power to promulgate a regulation that modifies a statute. Moreover, there is no barrier to the Colorado Legislature delegating such authority to an interstate administrative agency, so the two-year exclusion applicable to Fisher's policy is valid and Amica properly denied payment of the death benefit.

For ease of the seemingly inevitable appellate review, the explanation that follows is not confined to the legal question of what the Colorado Legislature may validly delegate to an administrative agency, but also repeats verbatim much of the Prior Order, including rulings regarding certain factual disputes. In other words, the purpose of this order is to address all matters resolved through the Prior Order and all matters left open there, so that one need only read this order to understand the full dispute and the Court's holdings.

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, § 11.³

The Compact creates the Interstate 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 Rule⁴ 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.)⁵ 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...