Davis v. Guideone Mut. Ins. Co.

• Decision Date: 19 July 2012
• Docket Number: Nos. 10CA1625,10CA2514.,s. 10CA1625
• Parties: Patricia DAVIS, Plaintiff–Appellee, v. GUIDEONE MUTUAL INSURANCE COMPANY, Defendant–Appellant.
• Court: Colorado Court of Appeals

297 P.3d 950

Patricia DAVIS, Plaintiff–Appellee,

v.GUIDEONE MUTUAL INSURANCE COMPANY, Defendant–Appellant.

Nos. 10CA1625, 10CA2514.

Colorado Court of Appeals, Div. I.

April 26, 2012.

As Modified on Denial of Rehearing July 19, 2012.

Lloyd C. Kordick & Associates, Lloyd C. Kordick, Colorado Springs, Colorado; J. Stephen Price, Colorado Springs, Colorado, for Plaintiff–Appellee.

John R. Rodman & Associates, John R. Rodman, Caleb Meyer, Brendan P. Rodman, Denver, Colorado, for Defendant–Appellant.

Opinion by Judge DAILEY.

¶ 1 In these consolidated appeals, GuideOne Mutual Insurance Company (GuideOne), appeals the trial court's judgment and award of attorney fees in favor of plaintiff, Patricia Davis. We affirm in part, vacate in part, and remand with directions.

¶ 2 On appeal, the primary issue is whether, under the former Colorado Auto Accident Reparations Act (CAARA),¹ GuideOne had to disclose various personal injury protection (PIP) benefit options to Davis when she became the named insured on an automobile policy which had originally been issued to her ex-husband. We conclude that GuideOne had such an obligation.

I. Background

¶ 3 In 1995, GuideOne (doing business as Preferred Risk) issued an automobile insurance policy covering Davis's husband as the “named insured” and Davis as a “resident spouse.”

¶ 4 At the time, CAARA required all drivers to carry insurance which, in the event of an accident, would pay “basic” PIP benefits to insureds, resident relatives, vehicle passengers, and pedestrians injured by the covered vehicle, regardless of blame. See §§ 10–4–706(1)(b), (c), 10–4–707(1).² Insurers were also required to offer insureds the opportunity to purchase, at increased premiums, enhanced PIP benefits. See § 10–4–710(2)(a).³

¶ 5 Because high insurance premiums were associated with “no-fault” coverage, insurance companies were allowed, in connection with basic PIP benefits, to offer insureds various “managed care” options, including a preferred provider organization (PPO) option, which, in exchange for a reduced premium, required insureds, in the event of an accident, to use certain preapproved medical providers. See § 10–4–706(2).

¶ 6 When Davis's husband applied for the policy, he opted for PPO-restricted “basic” PIP coverage, and, as required by law, executed a disclosure form with that option. In January 1999, the husband requested that GuideOne make Davis the named insured on the policy because he and Davis had divorced and no longer lived together. GuideOne did so, sending Davis documents informing her of the terms of coverage under the policy but not alerting her to any PIP option beyond the PPO-restricted one contained in the policy.

¶ 7 In August 2000, Davis was injured in a car accident. Initially, she was treated for her injuries under GuideOne's PPO program. In early 2002, however, GuideOne received a request for authorization of treatment from a non-PPO chiropractor. GuideOne refused the request until an independent medical exam (IME) could be conducted by a PPO doctor to assess whether the treatment sought was reasonable and necessary care related to the car accident. Before the IME was completed, GuideOne received several additional bills from other non-PPO doctors related to Davis's treatment.

¶ 8 GuideOne withheld payment on the non-PPO bills pending completion of the IME. Upon receiving the IME results, GuideOne paid the bills it had previously receivedbut stopped paying for any further non-PPO chiropractic care for Davis.

¶ 9 In late 2003, Davis filed the present action against GuideOne. In her amended complaint, she alleged that GuideOne violated CAARA, breached its contract with her, engaged in bad faith insurance practices, and owed her additional PIP benefits.

¶ 10 The trial court granted two of Davis's motions for partial summary judgment, determining that (1) GuideOne was statutorily required to advise her of various PIP options when she became the named insured on the policy, and it had not done so; and, consequently, (2) PIP benefits would not be restricted to the “basic” PPO coverage in the policy but would be unlimited in amount, effective as of the day she became the named insured on the policy.

¶ 11 In contrast, the trial court denied two of GuideOne's motions for partial summary judgment on Davis's claims of bad faith and for treble damages. The court ruled that, even if GuideOne's actions were based entirely on its statutory interpretation, the reasonableness, or conversely, the willful and wanton nature, of its conduct had to be determined as a question of fact at trial, rather than as a question of law.

¶ 12 Without any further objection from GuideOne, at trial the parties presented conflicting expert testimony about whether GuideOne acted, at best, reasonably, and, at worst, willfully and wantonly, in treating Davis's policy as providing benefits only under the PPO program; answering falsely a request for admission; destroying the original policy; certifying two different copies of the policy; sending a check late to her for the amounts due; including, on the check, language that her endorsement would release GuideOne from future liability; and refusing to pay statutorily required interest on past due payments.

¶ 13 At the close of evidence, the trial court granted, over GuideOne's objection, an amendment to Davis's complaint to allow the jury to consider a claim for punitive damages. Ultimately, the jury found:

• GuideOne had violated CAARA in bad faith by willfully and wantonly (1) failing to pay Davis's medical bills covered under her policy; (2) delaying payment of over $36,000 in medical bills; (3) belatedly paying over $15,000 in lost wages; and (4) failing to timely pay interest on the late medical bills; and

• GuideOne had breached its insurance contract in bad faith by (1) unreasonably delaying or denying payment (or approval) of Davis's medical treatment; and (2) knowingly—or recklessly—disregarding that its conduct was unreasonable.

¶ 14 The jury awarded Davis $500,000 in noneconomic damages; $905,000 for economic damages; $500,000 for physical impairment; and $1 million in punitive damages. However, because the jury also found that Davis was ten percent responsible for her injuries, the trial court reduced the jury awards for noneconomic, economic, and physical impairment damages by ten percent. After trebling the delayed medical and wage loss payments, calculating interest, and adding in the punitive damages award, the trial court entered judgment for Davis for $5,001,001.14 and subsequently awarded her $344,680.25 in attorney fees.

¶ 15 On appeal, GuideOne contends the court erred in (1) granting Davis's motions for partial summary judgment; (2) denying its motions for partial summary judgment, or, in the alternative, allowing the jury to decide, as a question of fact, the issue of whether it had engaged in bad faith practices; (3) allowing the jury to consider Davis's belated claim for punitive damages, and (4) awarding attorney fees to Davis under CAARA.

¶ 16 We address, in turn, each of GuideOne's contentions.

II. Partial Summary Judgment for Davis

¶ 17 GuideOne contends that the trial court erred in granting summary judgment for Davis on her claims that (1) GuideOne violated CAARA by not disclosing to her the managed care PIP options when she became the named insured under the policy and (2) she was entitled to have her policy reformed, as of the date she became the named insured, to provide for unlimited PIP benefits. We disagree with GuideOne's first assertion and with part of its second.

¶ 18 We review de novo the trial court's summary judgment ruling. Montoya v. Connolly's Towing, Inc., 216 P.3d 98, 103 (Colo.App.2008). Summary judgment is appropriate only if the pleadings, affidavits, depositions, or admissions in the record establish that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. C.R.C.P. 56(c); see also Nelson v. Gas Research Inst., 121 P.3d 340, 343 (Colo.App.2005).

A. GuideOne's Obligation to Disclose Managed Care PIP Options

¶ 19 Here, the parties agree that there is no genuine issue of material fact which could affect the determination of the issue. They assert, and we agree, that this determination depends solely on the interpretation of statutory provisions, a matter which presents a question of law subject to de novo review by this court. See Vigil v. Franklin, 103 P.3d 322, 327 (Colo.2004).

¶ 20 Under former section 10–4–706(2)(a)(I), insurers were allowed to offer, “at the option of the named insured, the [basic PIP] benefits ... through managed care arrangements such as a health maintenance organization (HMO) or a preferred provider organization.”

¶ 21 If an insurer offered a managed care arrangement, it was required, “upon an initial application for insurance coverage,” to disclose certain information, such as “[w]hat managed care is and how it affects the consumer,” § 10–4–706(2)(a)(II)(B); the “potential cost savings” associated with managed care, § 10–4–706(2)(a)(II)(C); and that “a policy containing a managed care option may be accepted or rejected by the named insured at any time upon notice to the insurer or its agent,” § 10–4–706(2)(f)(I). It was also required to certify to the commissioner of insurance these disclosure forms to record an insured's election of such coverage. § 10–4–706(2)(f).⁴

¶ 22 According to GuideOne: (1) the disclosures had to be made only once, and a disclosure form executed by an insured, that is, when the original named insured on the policy (i.e., the ex-husband) applied for insurance; (2) the required disclosures were made, and the ex-husband executed the disclosure form; (3) Davis, as a resident spouse under the original policy, was on notice of the PPO selection as well as the policy provision that the PPO selection would apply to any policies that replaced or superseded the original, unless the insured...