Breaux v. American Family Mut. Ins. Co.

• Decision Date: 06 January 2009
• Docket Number: No. 07-1136.,No. 07-1446.,07-1136.,07-1446.
• Citation: 554 F.3d 854
• Parties: Kimberley BREAUX; Lori Chambers; Crystal Hamrick, Plaintiffs, and Martin Persichitte; Robert W. Reffel; Michael Whitehead, Plaintiffs-Appellants, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

554 F.3d 854

Kimberley BREAUX; Lori Chambers; Crystal Hamrick, Plaintiffs, and Martin Persichitte; Robert W. Reffel; Michael Whitehead, Plaintiffs-Appellants, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin corporation, Defendant-Appellee.

No. 07-1136.

No. 07-1446.

United States Court of Appeals, Tenth Circuit.

January 6, 2009.

Megan E. Waples (Robert B. Carey and Julie B. Cliff, on the briefs), of The Carey Law Firm, Colorado Springs, CO, for Plaintiffs-Appellants.

A. Peter Gregory (Robert W. Harris, with him on the brief), of Harris, Karstaedt, Jamison & Powers, P.C., Englewood, CO, for Defendant-Appellee.

Before BRISCOE, EBEL, and MURPHY, Circuit Judges.

BRISCOE, Circuit Judge.

Robert Reffel, Martin Persichitte, and Michael Whitehead ("plaintiffs") brought this diversity action against American Family Mutual Insurance Co. ("American Family"), alleging that by failing to disclose, offer, and provide certain personal injury protection ("PIP") coverage, American Family: (1) violated the Colorado Auto Accident Reparations Act ("CAARA" [Colo.Rev.Stat. § 10-4-701 et seq. (repealed July 1, 2003)]); (2) breached their insurance contracts; (3) breached their insurance contracts in bad faith; and (4) breached the implied covenant of good faith and fair dealing. On cross motions for summary judgment, the district court granted summary judgment to American Family on the claims of Mr. Persichitte and Mr. Reffel, and on American Family's argument that all reformed policies were subject to a $200,000 limit; found that Mr. Whitehead failed to state a claim regarding one of his policies; and found disputed issues of material fact regarding the nature of the offer to Mr. Whitehead. The issue of the nature of the offer to Mr. Whitehead proceeded to trial. The jury found American Family failed to adequately offer PIP coverage, breached the contract, and acted in bad faith. The jury awarded damages for bad faith and exemplary damages. The district court entered a judgment for damages on the breach of contract and bad faith claims, but held the contract was not reformed until the date of the court's post-trial order. Consequently, the court refused to award statutory penalties for interest or treble damages.

Plaintiffs appeal the district court's rulings interpreting portions of the CAARA. Among the issues presented are: (1) whether the reformed policies contained aggregate limits; (2) whether the reformed policies permitted "stacking"— combining the aggregate limits from separate policies; (3) what level of specificity is required in pleading as to which insurance policy required reformation; (4) whether the offer requirement applied when insurers renewed policies; and (5) what is the appropriate date of reformation. Additionally, plaintiff Whitehead appeals the district court's post-trial orders denying attorney fees. We have jurisdiction pursuant to 28 U.S.C. § 1291 and affirm in part, and reverse in part and remand.

I

The relevant, underlying facts are undisputed. American Family issued insurance policies that covered plaintiffs. American Family issued the policy covering Mr. Reffel in 1984, and renewed the relevant policy on August 21, 1996. American Family issued the policy covering Mr. Persichitte in 1987, and renewed the relevant policy on May 5, 1997. Despite the CAARA offer requirements, American Family did not offer the enhanced PIP coverage from 1992 to January 29, 2001.

American Family issued the policy covering Mr. Whitehead, and the relevant automobile, on April 5, 1995, and renewed the policy on May 23, 2001. Mr. Whitehead also purchased another policy on May 30, 2001 ("the May 2001 policy"). The American Family agent who sold policies to Mr. Whitehead failed to offer enhanced PIP in a manner that complied with the CAARA.

Each plaintiff suffered injuries as a result of unrelated automobile accidents. Mr. Reffel's accident occurred on December 3, 1996; Mr. Persichitte's accident occurred on October 6, 1997; and Mr. Whitehead's accident occurred on September 26, 2002. American Family did not reform the relevant policies to include enhanced PIP coverage. On March 22, 2004, plaintiffs filed a joint complaint alleging jurisdiction pursuant to 28 U.S.C. § 1332 and seeking reformation of their policies under the CAARA, damages, costs, and attorney fees.¹

On September 1, 2006, the district court granted in part American Family's motion for partial summary judgment. In that order, the district court: (1) dismissed Mr. Reffel's claims as barred by the statute of limitations; (2) dismissed Mr. Persichitte's claims because his policies were issued before the enactment of the CAARA, rejecting the argument that the CAARA applied when policies were renewed; (3) dismissed Mr. Whitehead's claims related to the May 2001 policy because there was no reference to the May 2001 policy in the complaint and found amendment of the complaint untimely; (4) granted American Family's request for a judicial declaration that plaintiffs may not stack coverage; and (5) granted American Family's request for a judicial declaration that plaintiffs' policies subject to reformation are also subject to a $200,000 aggregate limit.

A jury trial was held to decide Mr. Whitehead's remaining claims. The jury found that American Family willfully and wantonly breached his insurance contract and acted in bad faith. The jury awarded Mr. Whitehead $250,000 in noneconomic damages and $1,000,000 in exemplary damages. After the verdict, Mr. Whitehead filed a motion to increase the exemplary damages award and to award stipulated breach of contract damages, treble breach damages, statutory interest on breach damages, prejudgment interest, postjudgment interest, trial costs and attorney fees. The parties agreed that because the jury awarded Mr. Whitehead $250,000 in compensatory damages, the jury was limited to awarding $250,000 in exemplary damages.

On February 13, 2007, the district court ruled on Mr. Whitehead's motion to increase his damages award and also award interest, costs, and fees. The court determined the amount of the stipulated breach of contract damages was $69,312.41. While the district court found that reformation was appropriate, it applied the date of the order, February 13, 2007, as the date of the reformation. As a result, the district court did not grant any statutory interest on the breach of contract award. Similarly, because trebling damages is appropriate when there is a failure to pay benefits when due, and the benefits were not due until the date of the order, the district court did not treble damages. The district court also denied attorney fees, citing the appropriate federal and local rules in response to Mr. Whitehead's "one-sentence motion." App. at 1105.

Unsure whether the February 13, 2007 order was the entry of a final judgment, the parties filed a joint motion for extension of time regarding Mr. Whitehead's motions for costs and attorney fees. The district court granted this motion on February 26, 2007, extending the deadline to March 6, 2007. On February 27, 2007, the district court entered final judgment. During the late evening of March 6, 2007 and the early morning of March 7, 2007, counsel for Mr. Whitehead filed a motion for attorney fees. The district court denied this motion under the Federal Rules of Civil Procedure and the local rules.

Mr. Whitehead filed a motion to reconsider and a revised motion for attorney fees. Because the district court did not find inadvertent error, the court denied the motion to reconsider. The court denied the revised motion for attorney fees because it was untimely.

II

A. Issues Related to the September 1, 2006 Summary Judgment Order

Because this is a diversity action, the laws of the forum state, Colorado, govern our analysis of the underlying claims. Federal law, however, governs our analysis of the district court's summary judgment rulings. Reid v. Geico Gen. Ins. Co., 499 F.3d 1163, 1165 (10th Cir.2007). We review summary judgment rulings de novo and apply the same standard as the district court, Rule 56(c) of the Federal Rules of Civil Procedure. Id. (citing Hill v. Allstate Ins. Co., 479 F.3d 735, 739 (10th Cir.2007)). Under Rule 56(c), summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).

Mr. Reffel, Mr. Persichitte, and Mr. Whitehead claim the district court erred in several regards in its September 1, 2006 summary judgment order. First, they assert that the insurance policies at issue did not contain an aggregate limit that complied with § 10-4-710(2)(b) of the CAARA. Second, they disagree with the district court's determination that the policies prohibited stacking. Third, Mr. Whitehead challenges the district court's findings that he did not include in his complaint any claims based on the May 2001 policy and that any subsequent attempt to amend the complaint would be untimely. Fourth, Mr. Persichitte objects to the district court's determination that § 10-4-710 only required American Family to offer enhanced PIP coverage when issuing new policies, and not—as is the present situation—when renewing policies. Fifth, Mr. Reffel objects to the district court's application of the statute of limitations to bar his claims.

1. Aggregate Limits

Section 10-4-710(2)(b) provided:

A complying policy may provide that all benefits set forth in section 10-4-706(1)(b) to (1)(e) and in this section are subject to an aggregate limit of two hundred thousand dollars payable on account of injury to or death of any one person as a result of any one accident arising out of the use or operation of a motor vehicle.

The district court found that the policies, through PIP endorsements, "both expressly contemplate and clearly establish $200,000 aggregate caps." App. at 797. The district court noted that the endorsements contain charts of available PIP...