Coors v. Security Life of Denver Ins. Co.

• Decision Date: 28 August 2003
• Docket Number: No. 02CA0851.,02CA0851.
• Citation: 91 P.3d 393
• Parties: William K. COORS, individually, Plaintiff-Appellee and Cross-Appellant, v. SECURITY LIFE OF DENVER INSURANCE COMPANY, a registered domestic insurance corporation, Defendant-Appellant and Cross-Appellee.
• Court: Colorado Court of Appeals

91 P.3d 393

William K. COORS, individually, Plaintiff-Appellee and Cross-Appellant, v. SECURITY LIFE OF DENVER INSURANCE COMPANY, a registered domestic insurance corporation, Defendant-Appellant and Cross-Appellee.

No. 02CA0851.

Colorado Court of Appeals, Div. IV.

August 28, 2003.

Certiorari Granted May 24, 2004.¹

Podoll & Podoll, P.C., Richard B. Podoll, Greenwood Village, Colorado, for Plaintiff-Appellee and Cross-Appellant.

Wheeler, Trigg & Kennedy, P.C., John M. Vaught, Heather J. Shull, Denver, Colorado, for Defendant-Appellant and Cross-Appellee.

Johnson & Ayd, P.C., James D. Johnson, Denver, Colorado, Amicus Curiae for Colorado Defense Lawyers Association.

Roberts, Levin & Patterson, P.C., Bradley A. Levin, Christine K. Wilkinson, Denver, Colorado, Amicus Curiae for Colorado Trial Lawyers Association.

Opinion by Judge GRAHAM.

Defendant, Security Life of Denver Insurance Company, appeals from the judgment entered against it and in favor of plaintiff, William K. Coors. Coors also cross-appeals a portion of the judgment. We affirm in part, reverse in part, and remand. On December 8, 1994, Coors, accompanied by his attorney, met with an insurance agent to purchase life insurance. Coors and his attorney reviewed sales illustrations for a Security Life Ultra UL policy with a death benefit of $5.2 million and a projected annual premium of $331,871. The illustrations applied to a seventy-eight-year-old male, nonsmoker. The expense charge term is based upon actuarial computation, which varies depending on age, gender, and smoking status. The expense term was never discussed in the negotiations and is used in calculating the cash surrender value of the policy. Coors signed an application for an Ultra UL policy with the illustrated death benefit and projected annual premium and tendered a check for the first premium of the policy.

The policy became effective on December 15, 1994. It provided that the monthly expense charges were $7.00 per policy per month in all years and $.131 per $1,000 of basic death benefit per month during the first five years of the policy. The policy also contained a face page dated December 15, 1994, which provided Coors a twenty-day right to review and return the policy once he had initially accepted it. When Coors received the policy, he never reviewed it because he "assumed that it was what [he] had bargained for."

Security Life then sent Coors a disclosure statement that stated that the monthly expense charges were $7.00 per policy per month in all years and $.90 per $1,000 of basic death benefit per month during the first five policy years. Coors did not review the disclosure statement.

Each month for approximately three and one-half years, Security Life charged $.90 per $1,000 of basic death benefit, or $2340 per month, to Coors's policy. Thus, the cash surrender value was diminished. Although Coors received annual statements in 1995, 1996, and 1997 that reflected the total expense charges deducted each year based on a $.90 expense charge, he did not review them. Coors paid the $331,871 premium every year from 1994 to 1997.

Security Life did not notice that Coors's policy erroneously provided for a $.131 expense charge until February 1997. In October 1997, Security Life learned that a "computer truncation error" had mistakenly printed the $.131 expense charge on 227 UL Ultra policies, including Coors's policy. Security Life's general counsel concluded that the misprint was a scrivener's error, which could be reformed.

In spring 1998, Coors's estate planning attorney asked Coors's insurance agent whether the $.90 expense charge term was guaranteed. After verifying the information with a claims representative of Security Life, a representative of the insurance agency wrote a letter to Coors's attorney stating that the expense charge term was $.131 per thousand of basic coverage and that it was guaranteed and not subject to change. The insurance agency representative testified that she did not know what documents Security Life relied upon when it verified the policy information; she did not know that there was a discrepancy between the policy and the disclosure statement; and she did not alert Security Life to the discrepancy.

In June 1998, Security Life drafted a letter to Coors notifying him of the error (the June letter). Security Life enclosed a new schedule page reflecting the $.90 expense charge and also enclosed a new policy face page that contained the same twenty-day review provision and date as the original face page.

Coors received the letter in July 1998, and on the same day he requested a rescission of his policy and demanded a refund of all premiums paid, with interest, from the inception of the policy. Security Life informed Coors that the June letter neither required action on his part nor triggered a new twenty-day review period. Security Life explained to Coors that the new face page containing the twenty-day review provision was identical to the face page issued with the policy in 1994, although the signatures on the two face pages differed.

Coors then requested a surrender of his policy and demanded payment. Security Life issued Coors a check for $667,025.03, which represented the surrender value of his policy—the account value less a termination penalty of $112,762.19. Coors filed an action against Security Life for breach of contract, bad faith breach of contract, fraud, violation of the Colorado Consumer Protection Act (CCPA), § 6-1-101, et seq., C.R.S.2002, and punitive damages. After a bench trial, the court ruled in favor of him on all counts and awarded Coors $1,085,506.73 in total damages, which included treble damages and attorney fees. This appeal followed.

I. CCPA

Security Life contends that the trial court erred in finding that its conduct constituted a violation of the CCPA. We agree.

Findings of fact are reviewed for clear error or abuse of discretion, whereas conclusions of law generally are reviewed de novo. E-470 Pub. Highway Auth. v. 455 Co., 3 P.3d 18 (Colo.2000). We must accept the trial court's findings on review unless they are so clearly erroneous as not to find support in the record. Bainbridge, Inc. v. Bd. of County Comm'rs, 53 P.3d 646 (Colo.App. 2001).

We are mindful of the instruction provided in Stevens v. Humana of Delaware, Inc., 832 P.2d 1076 (Colo.App.1992), and Municipal Subdistrict v. OXY USA, Inc., 990 P.2d 701 (Colo.1999), that the near wholesale adoption of one party's proposed findings of fact and conclusions of law requires this court to give close scrutiny to those findings and conclusions. Because the trial court adopted nearly all of Coors's proposed order, we therefore closely scrutinize its findings and conclusions here.

The CCPA is a remedial statute intended to deter and punish deceptive trade practices committed by businesses in dealing with the public. Showpiece Homes Corp. v. Assurance Co., 38 P.3d 47 (Colo.2001). The CCPA's broad legislative purpose is "to provide prompt, economical, and readily available remedies against consumer fraud." W. Food Plan, Inc. v. Dist. Court, 198 Colo. 251, 256, 598 P.2d 1038, 1041 (1979). The statute provides both for enforcement by the attorney general and for a private right of action by any person injured by the deceptive acts or practices committed by a business. Showpiece Homes Corp. v. Assurance Co., supra.

To prove a private cause of action under the CCPA, a plaintiff must show that: (1) the defendant engaged in an unfair or deceptive trade practice; (2) the challenged practice occurred in the course of the defendant's business, vocation, or occupation; (3) the challenged practice significantly impacts the public as actual or potential consumers of the defendant's goods, services, or property; (4) the plaintiff suffered injury in fact to a legally protected interest; and (5) the challenged practice caused the plaintiff's injury. Hall v. Walter, 969 P.2d 224, 235 (Colo.1998).

The terms of the CCPA must be given a liberal construction to effectuate its broad purpose and scope. Hall v. Walter, supra.

Thus, in determining whether conduct falls within the purview of the CCPA, courts presume that the CCPA applies to the conduct. Showpiece Homes Corp. v. Assurance Co., supra.

The trial court found that Security Life engaged in unfair or deceptive trade practices by: (1) stating in its June letter to Coors that "the values of your policy have always been accurately calculated and reported on your annual statements"; (2) deducting $2340 per month from Coors's cash surrender account instead of $340.60; (3) billing Coors in December 1997 for a premium that it knew in October 1997 was falsely calculated based on an inaccurate expense charge factor; (4) publishing Coors's annual statements containing false and misleading information concerning the value of the policy based upon the inaccurate expense charge; (5) providing Coors a twenty-day right to review the policy provision while never intending to honor it; (6) failing to clarify false and misleading statements with respect to the expense charge factor when it knew in November 1997 that such statements were false; (7) stating in its June letter that all the illustrations and cost disclosures presented during the sales process were correct; (8) implementing a false and misleading scheme to unilaterally change 227 policies and to avoid its obligation to refund $21.7 million to affected policyholders; (9) making false representations to policyholders regarding the effect of the computer truncation error; (10) expressly guaranteeing to Coors that his expense charge term was $.131 and not subject to change, and then expressly disavowing its guarantee; and (11) warranting that the premiums were accurately calculated in bills, statements, annual reports, and illustrations.

The trial court concluded that these actions violated § 6-1-105(1)(e), (l), and (r) of the CCPA and found that Coors paid excessive expense...