Hill v. Allstate Ins. Co.

• Decision Date: 06 March 2007
• Docket Number: No. 06-1134.,06-1134.
• Citation: 479 F.3d 735
• Parties: Scott HILL, as Conservator of the Estate of Katelyn Hill, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

479 F.3d 735

Scott HILL, as Conservator of the Estate of Katelyn Hill, Plaintiff-Appellant, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee.

No. 06-1134.

United States Court of Appeals, Tenth Circuit.

March 6, 2007.

Appeal from the United States District Court for the District of Colorado, Robert E. Blackburn, J Robert B. Carey, Hagens Berman Sobol Shapiro, LLP, Phoenix, AZ, for Appellant.

Terence M. Ridley (John M. Vaught and LaMar F. Jost with him on the brief), Wheeler Trigg Kennedy, LLP, Denver, CO, for Appellee.

Before HENRY, ANDERSON, and HOLMES, Circuit Judges.

ANDERSON, Circuit Judge.

Plaintiff and appellant Scott Hill, as conservator for the estate of his daughter, Katelyn Hill, who was injured in an automobile accident, appeals the following orders of the district court: one granting defendant Allstate Insurance Company's motion for partial summary judgment dated September 14, 2005, another granting Allstate's motion for summary judgment dated January 24, 2006, and the final judgment dismissing the case. The orders denied Hill's request to reform an automobile insurance contract to provide additional personal injury protection benefits for Katelyn, denied Hill's request for wage-loss benefits, and dismissed the case with prejudice. We affirm.¹

BACKGROUND

The Colorado legislature enacted the Colorado Auto Accident Reparations Act ("CAARA" or "No-Fault Act") in 1973. Among other things, the No-Fault Act "require[d] that a complying [automobile insurance] policy include mandatory [personal injury protection or "PIP"] benefits." Brennan v. Farmers Alliance Mut. Ins. Co., 961 P.2d 550, 552 (Colo.Ct.App.1998). More specifically, Colo.Rev.Stat. § 10-4-706(1)² required an insurance company to provide:

(b)(I) Compensation without regard to fault, up to a limit of fifty thousand dollars per person for any one accident, for payment of all reasonable and necessary expenses for medical . . . and nonmedical remedial care and treatment .. . performed within five years after the accident for bodily injury arising out of the use or operation of a motor vehicle. . . .

(c)(I) Compensation without regard to fault up to a limit of fifty thousand dollars per person for any one accident within ten years after such accident for payment of the cost of rehabilitation procedures or treatment and rehabilitative occupational training necessary because of bodily injury arising out of the use or operation of a motor vehicle.

Furthermore, pursuant to § 10-4-706(4)(a), "[a]n insurer issuing policies providing coverages as set forth in this section shall provide written explanations of all available coverages prior to issuing any policy to an insured."

Section 10-4-707 delineates the categories of people who must receive coverage under § 706 as including "1) the named insured, 2) resident relatives of the named insured, 3) passengers occupying the insured's vehicle with the consent of the insured, and 4) pedestrians who are injured by the covered vehicle." Brennan, 961 P.2d at 553.

The No-Fault Act also required every insurance company to offer optional extended PIP benefits to its insureds, in exchange for higher premiums. Thus, § 10-4-710(2)(a) provided that:

Every insurer shall offer the following enhanced benefits for inclusion in a complying policy, in addition to the basic coverages described in section 10-4-706, at the option of the named insured:

(I) Compensation of all expenses of the type described in section 10-4-706(1)(b) without dollar or time limitation;

(II) Compensation of all expenses of the type described in section 10-4-706(1)(b) without dollar or time limitations and payment of benefits equivalent to eighty-five percent of loss of gross income per week from work the injured person would have performed had such injured person not been injured during the period commencing on the day after the date of the accident without dollar or time limitations.

Colo.Rev.Stat. § 10-4-710(2)(a). Although § 710 does not specify to whom the extended coverages it provides applies, Brennan held that they apply to the same four categories of individuals to whom § 706 coverage applies.

The Colorado Court of Appeals held in Brennan that "when . . . an insurer fails to offer the insured optional coverage that satisfies [CAARA], additional coverage in conformity with the offer mandated by statute will be incorporated into the policy." Brennan, 961 P.2d at 554; see also Thompson v. Budget Rent-A-Car Sys., Inc., 940 P.2d 987, 990 (Colo.Ct.App.1996) ("[W]hen a policy is violative of a statute, reformation is also required to assure that coverage will meet the statutory minimums."). Thus, in Brennan, because the insurance policy at issue failed to offer extended PIP benefits for injured pedestrians and the court determined that the No-Fault Act mandated coverage for such pedestrians, the court ordered the policy reformed to include such coverage. See Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d 703, 710 (10th Cir.2005) (Clark III) ("Brennan and Thompson reformed those insurance policies to include extended pedestrian coverage that insurers should have offered under section 710.").³

The insurance policy at issue in this case was purchased by John Paul, who was then still married to, although legally separated from, Katelyn's mother, April Paul. He purchased the policy in August 2000 from the Marchand Agency, which was operated by Elizabeth Marchand. Christine Pitcher (formerly known as Christine Clifford) was a licensed agent at Marchand. Both Elizabeth Marchand and Pitcher testified as to their standard procedure for processing an insurance application from an individual. The procedure consisted of three phases—a quotation phase, an application phase and a signature phase. The agent would discuss the available coverages, including extended PIP coverages, in all three phases. The agent would also use Allstate's "Colorado PIP Disclosure," which described all extended PIP coverages, as a visual display of PIP coverages.

With respect to Paul's application, Pitcher testified she "recall[ed] money being an object. . . . [H]e wanted to go with the basic personal injury protection coverage." Appellant's App. Vol. II at 401. Pitcher further testified that she told him the aggregate limit of coverage for the extended PIP coverage was $200,000. Id. at 404. She testified that, after showing him the available extended PIP coverages, both on her computer screen and on the PIP Disclosure Form, she asked him if he wanted her to explain those in more detail and he declined. Paul purchased a policy with the mandatory minimum PIP coverage.

Allstate subsequently mailed to Paul his policy. It included a summary of the coverages he selected, including the basic PIP coverage. The policy specifically stated "Optional Personal Injury Protection coverages also are available." Id. at 425. Along with the policy Allstate mailed an "Important Notice" (Form X5188) which summarized the major coverages in the Pauls' policy and informed them that the PIP coverage "provides coverage for you, your passengers and pedestrians, who are injured in an automobile accident." Id. The policy also contained an eight-page description of the extended PIP coverages, including two options with unlimited medical coverage. The policy further provided that Allstate would pay basic and extended PIP benefits "in accordance with [CAARA] and subject to the limits as specified in the Limits of Liability provision." Id. at 439-40.

The Pauls renewed the policy every six months from August 2000 through September 2002.⁴ On September 4, 2001, Allstate mailed them a renewal packet which included a form called "Important Notice—A Reminder for You" (Form X67009), which stated in part:

Allstate offers options to purchase Additional Personal Injury Protection (PIP) benefits on your Allstate auto policy. These additional benefits might be very important to you or occupants of your insured auto if you are involved in a serious injury causing accident. Allstate's Additional (PIP) options provide increased coverages for Medical Expenses, Work Loss and Essential Services. . . .

The average[ ] price associated with purchasing Additional PIP options is around $77. Your Price for Additional PIP coverage will vary based on your characteristics (e.g. driving record, geographic location, age), characteristics of the insured auto (e.g., passive restraint system, seat belts), and whether you are eligible for certain discounts or subject to certain surcharges. . . .

There are eight separate coverage options that are available to choose from. Please see your Colorado Automobile Policy for a full explanation of these options. (A description of the eight options can be found under Additional Personal Injury, in the section titled "Limits of Liability".) If you wish to purchase Additional Personal Injury Protection (Coverage V8) options or have any questions about your PIP benefits, or about any aspect of you insurance coverage, please feel free to contact your Allstate agent—or call the Allstate Customer Information Center at 1-800-ALLSTATE.

Id. at 486. Allstate mailed the Pauls another renewal packet in March 2002, which again included the above Notice (Form X67009). The Pauls continued to renew the policy with the minimum PIP coverage.

On July 25, 2002, April and Katelyn Hill were involved in a serious automobile accident, in which April died and ten-month-old Katelyn was seriously injured. Allstate paid approximately $100,000 in basic PIP benefits to Scott Hill for Katelyn's care. When Allstate refused to make further payments, Hill sued Allstate and Ms. Marchand in state court. He made various claims under CAARA and sought, inter alia, reformation of the insurance policy to require Allstate to pay extended PIP benefits to Katelyn, and damages for breach of contract and bad faith refusal to pay. Allstate removed the case to federal court on the basis of diversity of the parties. In ...