Kisselman v. Am. Family Mut. Ins. Co.

• Decision Date: 08 December 2011
• Docket Number: No. 10CA1453.,10CA1453.
• Citation: 292 P.3d 964
• Parties: David KISSELMAN, Plaintiff–Appellant, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin corporation, Defendant–Appellee.
• Court: Colorado Court of Appeals

292 P.3d 964

David KISSELMAN, Plaintiff–Appellant,

v.AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin corporation, Defendant–Appellee.

No. 10CA1453.

Colorado Court of Appeals,

Div. VI.

Dec. 8, 2011.

The Gold Law Firm, L.L.C., Gregory A. Gold, Nelson Boyle, Greenwood Village, Colorado; Bahr & Kreidle, P.C., Michael P. Bahr, Littleton, Colorado; Law Offices of Michael P. Fossenier, Michael P. Fossenier, Denver, Colorado, for Plaintiff–Appellant.

Lambdin & Chaney, LLP, Suzanne J. Lambdin, Michael G. Paul, Denver, Colorado, for Defendant–Appellee.

Roberts Levin Rosenberg, P.C., Michael J. Rosenberg, Denver, Colorado, for Amicus Curiae Colorado Trial Lawyers Association.

Opinion by Judge LOEB.

Plaintiff, David Kisselman, appeals the district court's order, pursuant to C.R.C.P. 56(h), that sections 10–3–1115 and –1116, C.R.S.2011, were “inapplicable” in this action against defendant, American Family Mutual Insurance Company. We reverse and remand with directions.

I. Background and Procedural History

On April 4, 2005, Kisselman was injured in a car accident caused by an underinsured driver. At the time of the accident, Kisselman was covered by an American Family insurance policy that included uninsured/underinsured motorist and umbrella coverage up to $1.1 million.

After the accident, Kisselman made a claim against the other driver and, with American Family's permission, settled for the other driver's policy limits of $25,000. On June 30, 2006, Kisselman also made a claim under his insurance policy with American Family for underinsured motorist benefits to help pay medical costs, as well as for other damages and injuries.

In January 2008, because Kisselman and American Family were unable to amicably resolve Kisselman's claim, Kisselman demanded arbitration pursuant to his insurance policy. On April 1, 2008, to avoid having his legal claims barred by the statute of limitations, Kisselman filed a complaint in Denver District Court, naming American Family as defendant and asserting six claims for relief, as follows: (1) “Negligence by [the other driver]”; (2) “Negligence Per Se by [the other driver]”; (3) “Breach of Contract by Defendant American Family”; (4) “Bad Faith Claim—Breach of Contract by Defendant American Family”; (5) “Unjust Enrichment of Defendant American Family”; (6) and “Punitive Damages.”

While the procedural details of the upcoming arbitration hearing were still being negotiated, the General Assembly enacted two new Colorado statutes, sections 10–3–1115 and –1116 (collectively, the Statutes), effective August 5, 2008. Section 10–3–1115(1)(a) provides that an insurer “shall not unreasonably delay or deny payment of a claim for benefits owed.” Section 10–3–1116(1) provides that a first-party claimant (such as Kisselman) may also bring an action for a breach of the statutory duty set forth in section 10–3–1115 to recover reasonable attorney fees, court costs, and “two times the covered benefit.”

The arbitration hearing was held on November 10 and 11, 2008. The sole issue decided at the arbitration hearing was the amount of Kisselman's past and future damages stemming from the car accident. In a written arbitration award dated December 22, 2008, the arbitrator awarded Kisselman damages of $1,312,187.98, plus costs and interest. This amount was later reduced to $1,075,000 (Kisselman's policy limit of $1.1 million minus the $25,000 he had already recovered from the other driver), which American Family paid on January 15, 2009.

On April 29, 2009, Kisselman filed an amended complaint in this action, restating the six claims from his original complaint and adding a seventh claim for relief under section 10–3–1116. On August 13, 2009, Kisselman filed a second amended complaint, in which he dropped the negligence claims against the other driver and the punitive damages claim, and restated and renumbered the remaining claims, as follows: (1) “Breach of Contract by Defendant American Family”; (2) “Bad Faith Claim—Breach of Contract by Defendant American Family”; (3) “Unjust Enrichment of Defendant American Family”; and (4) “C.R.S. 10–311–16 [sic] (Improper Denial of Claims and Remedies for the Unreasonable Delay or Denial of Benefits).” On August 24, 2009, American Family filed its answer to the second amended complaint and demanded a jury trial. Thereafter, the case was set for a jury trial, and discovery began in earnest.

In February 2010, Kisselman filed a motion for a determination of a question of law pursuant to C.R.C.P. 56(h), requesting the district court to determine whether sections 10–3–1115 and –1116 applied to his case. Kisselman asserted that sections 10–3–1115 and –1116 were applicable in two ways: (1) the Statutes applied retroactively, meaning that the Statutes applied to all of American Family's alleged acts of unreasonable delay or denial of benefits owed under his policy, including pre-effective date acts, or, in the alternative (2) the Statutes applied prospectively, meaning that the Statutes applied only to American Family's alleged acts of unreasonable delay or denial occurring after the Statutes' effective date of August 5, 2008. American Family filed a combined response and motion for summary judgment, in which it argued that the Statutes did not apply retroactively, that the Statutes did not apply prospectively because “Colorado does not recognize a continuing violation or ongoing bad faith claim,” and that the court should grant summary judgment in its favor on all four of Kisselman's claims.

In reply, Kisselman first withdrew his argument that the Statutes applied retroactively, stating that he “withdraws the first argument related to retrospective application of § 10–3–1116 as being wholly unnecessary in this case given the conduct and misconduct of American Family ... after August 5, 2008.” Next, Kisselman reiterated his argument that the Statutes applied prospectively to American Family's alleged acts of unreasonable delay occurring after August 5, 2008. American Family then filed a surreply and unopposed motion requesting oral argument on the issues raised in Kisselman's C.R.C.P. 56(h) motion.

The district court held a hearing on Kisselman's C.R.C.P. 56(h) motion on April 9, 2010, in which the parties advanced substantially the same arguments expressed in their briefs regarding the applicability of sections 10–3–1115 and –1116. During the hearing, Kisselman's counsel made clear that he was asking the court to rule only on the prospective application of sections 10–3–1115 and –1116:

[The issue] is whether 10–3–[11]16 and 15 applies after August [5], 2008. That really is the issue before the Court. I think both parties believe that it's ripe for review at this point and that there I—whether there's a remedy available to Colorado citizens that if an insurance company acts unreasonably and unreasonably delays or denies covered benefits whether the remedy's available ... to someone after August [5], 2008. [sic]

American Family's counsel also understood that the only issue before the court was how the Statutes should be applied prospectively, as demonstrated by this exchange:

[American Family's Counsel]: ... [I]t sounds like we only now have the question of whether 1116 will apply to this case from the date it was enacted in August [5], 2008 and it sounds like we no longer need to address the argument of whether it can be applied retrospectively. Am I right about that?

[Kisselman's Counsel]: That—as simple as that.

On April 21, 2010, the district court issued its written ruling on Kisselman's C.R.C.P. 56(h) motion regarding the applicability of sections 10–3–1115 and –1116 to the present case. First, regarding retroactive application of the Statutes, the court noted that Kisselman had withdrawn his argument and that, therefore, the issue was “moot.”

Second, regarding prospective application of the Statutes, the court rejected Kisselman's argument that the Statutes applied to new, post-effective date acts of unreasonable delay by American Family. In so ruling, the court relied on an unreported decision from the United States District Court for the District of Colorado that rejected an argument similar to Kisselman's because, under the Colorado law of common law bad faith claims, “an insurer's continued refusal to cooperate with an insured cannot serve as the basis for a separate bad faith claim if one has already been plead.” James River Ins. Co. v. Rapid Funding, LLC, (D.Colo. No. 07–CV–01146–CMA–BNB, 2009 WL 524994, Mar. 2, 2009). As in James River, the district court reasoned that the claim at issue here accrued before the Statutes' effective date, and, therefore, the “alleged continuation of any unreasonable delay or denial of payment does not render the claim cognizable.” Accordingly, the court concluded that sections 10–3–1115 and –1116 “are inapplicable in this case.”

Kisselman then filed a motion for reconsideration on April 29, 2010. In his motion, Kisselman attributed the court's order to “confusion, error, or incompleteness,” and, to help remedy the perceived problem, he pointed to four specific instances of American Family's alleged unreasonable delay occurring after August 5, 2008, and argued that any of these four acts was sufficient to state a claim under the Statutes. The court denied Kisselman's motion in a written order dated May 25, 2010, reasoning that although Kisselman

points to ‘new conduct’ (i.e., new acts of allegedly unreasonable delay), the fundamental legal defect remains: [Kisselman's] argument is premised on a continuing breach originating before the effective date of the legislation.

On June 7, 2010, the parties filed a stipulated motion for certification under C.R.C.P. 54(b) and to stay the remaining issues pending immediate appeal of the district court's order ruling that sections 10–3–1115 and –1116 were inapplicable. The district court granted the motion, staying all issues related to Kisselman's common law claims for breach of...