Andres Trucking Co. v. United Fire & Cas. Co.

• Decision Date: 20 September 2018
• Docket Number: Court of Appeals No. 17CA1672
• Citation: 488 P.3d 425
• Court: Colorado Court of Appeals
• Parties: ANDRES TRUCKING COMPANY, Plaintiff-Appellant, v. UNITED FIRE AND CASUALTY COMPANY, Defendant-Appellee.

488 P.3d 425

ANDRES TRUCKING COMPANY, Plaintiff-Appellant,

v.UNITED FIRE AND CASUALTY COMPANY, Defendant-Appellee.

Court of Appeals No. 17CA1672

Colorado Court of Appeals, Division VII.

Announced September 20, 2018

McGill Professional Law Corporation, Scott A. McGill, Robert L. Grover, Steamboat Springs, Colorado, for Plaintiff-Appellant

Stuart D. Morse & Associates, LLC, Stuart D. Morse, Joseph P. Kiley, Greenwood Village, Colorado, for Defendant-Appellee

Opinion by JUDGE HARRIS

¶ 1 Plaintiff, Andres Trucking Company (Andres Trucking), appeals the judgment entered on its breach of contract and statutory bad faith claims in favor of defendant, United Fire and Casualty Company (United), after the district court determined that the completion of the appraisal process called for in the parties' policy necessarily resolved those claims.

¶ 2 Among questions we answer is whether Andres Trucking's participation in the contractual appraisal process resolved its claims against United and effectively ended the litigation.

¶ 3 We conclude that the appraisal process did not fully resolve Andres Trucking's claims. The appraisal process determined the value of the insured property, but it did not determine United's liability for breach of contract or statutory bad faith delay under sections 10-3-1115 and - 1116, C.R.S. 2017. Accordingly, we affirm the order approving the appraisal value but reverse the judgment and remand for reinstatement of the complaint.

I. Background

¶ 4 Andres Trucking operates a dump truck in Steamboat Springs, Colorado. The truck was insured by United under a policy that included the following provision:

If you and we disagree on the amount of "loss," either may demand an appraisal of the "loss." In this event, each party will select a competent appraiser. The two appraisers will select a competent and impartial umpire. The appraisers will state separately the actual cash value and amount of the "loss." If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding.

....

If we submit to an appraisal, we will still retain our right to deny the claim.

¶ 5 In June 2015, while covered by the insurance policy, the truck caught fire. Both parties agreed the truck was a total loss but disagreed about the truck's value.

¶ 6 After the parties' discussions failed to lead to an agreement, Andres Trucking filed an action against United on May 6, 2016. The complaint alleged that United unreasonably refused to pay the value of the truck and related damages, including storage fees, and asserted claims for breach of contract and bad faith denial and delay of an insurance claim under sections 10-3-1115 and - 1116.

¶ 7 Two weeks later, in lieu of answering the complaint, United moved to compel appraisal and stay the proceedings; over Andres Trucking's objection, the court granted the motion.¹ Before commencing the appraisal process, Andres Trucking filed an amended complaint. The amended complaint contained a third claim for relief challenging the enforceability of the contractual appraisal provision, but it was otherwise substantially similar to the initial complaint. The district court struck the amended complaint on the ground that the insurance policy required an appraisal.

¶ 8 The parties proceeded to appraisal. Andres Trucking submitted an appraisal valuing the truck at $42,500, United submitted an appraisal of $33,454, and the umpire obtained an appraisal of $54,289. The umpire ultimately settled on a value of $39,507 plus $3907 in taxes, which United paid.

¶ 9 In January 2017, after United paid Andres Trucking the appraised value of the truck, it moved for entry of judgment under C.R.C.P. 12(b)(5), contending that, as a matter of law, the completion of the appraisal process had resolved Andres Trucking's claims. Andres Trucking objected, contending that "several issues" required determination by a jury, including whether United had unreasonably denied or delayed paying the claim and whether United had breached the insurance contract by failing to pay all of Andres Trucking's damages.

¶ 10 While United's motion for entry of judgment was pending, Andres Trucking again moved to amend its complaint. Its proposed second amended complaint included additional allegations concerning its damages and a fourth claim for unjust enrichment.

¶ 11 Relying on the enforceability of the appraisal provision, the court again denied the motion. It reasoned that, upon completion of the appraisal process, "the issues before the court were concluded," and that "[a]ll that remains is for judgment to enter."

¶ 12 The court then entered judgment in favor of United on Andres Trucking's breach of contract and statutory bad faith claims. In its order entering judgment, the court determined that Andres Trucking's claims "were subject to the appraisal process," the "appraisal process was completed and a value determined," and "[a]ccordingly, as a matter of law [Andres Trucking] can have no claim for breach of contract, much less bad faith breach of contract." Without analyzing Andres Trucking's allegations, the court found "[t]here has been no breach of the insurance contract or any unreasonable delay or denial of the claim that was caused by [United]."

II. The District Court Erred in Dismissing Andres Trucking's Complaint

¶ 13 Andres Trucking argues that the district court erred in dismissing its complaint, as the appraisal process did not resolve whether United had breached the insurance policy or unreasonably denied or delayed payment of benefits. We agree.

A. Standard of Review

¶ 14 The purpose of a motion under C.R.C.P. 12(b)(5) is to test the legal sufficiency of the complaint to determine whether the plaintiff has asserted a claim or claims upon which relief can be granted. Hannon Law Firm, LLC v. Melat, Pressman & Higbie, LLP , 293 P.3d 55, 62 (Colo. App. 2011), aff'd , 2012 CO 61, 287 P.3d 842. In evaluating a motion to dismiss under Rule 12(b)(5), we must determine whether, accepting the complaint's factual allegations as true and viewing them in the light most favorable to the plaintiff, id. , the complaint states a plausible claim for relief, Warne v. Hall , 2016 CO 50, ¶¶ 9, 24, 373 P.3d 588.

¶ 15 Because it presents a question of law, we review de novo an order granting a motion to dismiss under Rule 12(b)(5). Hannon , 293 P.3d at 63.

B. Analysis

¶ 16 The district court did not reach any conclusions about the sufficiency of the complaint's allegations or the plausibility of the claims for relief. Instead, the district court determined that Andres Trucking could not state any claim for relief because completion of the appraisal process, like arbitration, precludes breach of contract and statutory bad faith claims as a matter of law.

¶ 17 An appraisal is "an act of estimating" or "a valuation of property by the estimate of an authorized person," Unetco Indus. Exch. v. Homestead Ins. Co. , 57 Cal.App.4th 1459, 67 Cal.Rptr.2d 784, 789 (1997) (quoting Webster's Third New International Dictionary 105 (1986) ), and determines "only the amount of loss," Hartford Lloyd's Ins. Co. v. Teachworth , 898 F.2d 1058, 1062 (5th Cir. 1990). By its own terms, the appraisal provision in United's policy was triggered only when the parties disagreed "on the amount of ‘loss,’ " and the provision allowed either party to "demand an appraisal of the ‘loss. ’ " (Emphasis added.)

¶ 18 The provision did not purport to be a mechanism for resolving any other disagreements between the parties. Indeed, the provision expressly reserved to United the right to contest liability, notwithstanding the parties' participation in the appraisal process. See Auto-Owners Ins. Co. v. Summit Park Townhome Ass'n , 129 F. Supp. 3d 1150, 1153-54 (D. Colo. 2015) (unlike arbitration, appraisal "establishes only the amount of a loss," and not other issues including liability and coverage (quoting Minot Town & Country v. Fireman's Fund Ins. Co. , 587 N.W.2d 189, 190 (N.D. 1998) ) ); Hartford , 898 F.2d at 1062 (An appraisal does not "resolv[e] issues such as whether the insurer is liable under the policy.").

¶ 19 Thus, "an appraisal award, by itself, does not entitle either the insured or the insurer to judgment in its favor" on the insured's claims of breach of contract or statutory bad faith. Sec. Nat'l Ins. Co. v. Waloon Inv., Inc. , 384 S.W.3d 901, 905 (Tex. App. 2012) ; see also Hometown Cmty. Ass'n v. Phila. Indem. Ins. Co. , Civ. A. No. 17-cv-00777-RBJ, 2017 WL 6335656, at *6 (D. Colo. Dec. 12, 2017) (an appraisal is determinative of the amount of loss, but issues outside of the scope of the appraisal must be resolved by the court or fact finder). Judgment does not follow directly from an appraisal because, unlike arbitration, the "function of an appraisal award is not to determine the merits of any claim." Waloon Inv. , 384 S.W.3d at 905.

¶ 20 In American Family Mutual Insurance Co. v. Barriga , 2018 CO 42, ¶ 2, 418 P.3d 1181, for example, the insurance company demanded an appraisal, an appraiser fixed an award, and American Family paid the award. Thereafter, the insured sued the insurer for breach of insurance contract and statutory bad faith under section 10-3-1116(1). Id. at ¶ 3. The jury found in favor of the insured on both claims and awarded separate damages. Id. On appeal, the supreme court concluded that where "the payments ... were unreasonably delayed but eventually paid ... pursuant to the third-party appraisal process outlined in the insurance agreement," the insured could keep the amount paid pursuant to the appraisal process, recover any damages resulting from a breach of the insurance contract, and receive an additional "two times the covered benefit" under section 10-3-1116. Id. at ¶¶ 8-12 (quoting § 10-3-1116(1) ). Thus, under Barriga , appraisal and litigation of breach of contract and bad faith claims are not mutually exclusive. And, contrary to United's argument, partial payment of benefits is not a complete ...