Rabin v. Fid. Nat'l Prop. & Cas. Ins. Co.

• Decision Date: 23 May 2012
• Docket Number: Civil Case No. 10–cv–01645–LTB–KLM.
• Citation: 863 F.Supp.2d 1107
• Parties: Keith RABIN, Plaintiff, v. FIDELITY NATIONAL PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Colorado

863 F.Supp.2d 1107

Keith RABIN, Plaintiff,

v.FIDELITY NATIONAL PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant.

Civil Case No. 10–cv–01645–LTB–KLM.

United States District Court, D. Colorado.

May 23, 2012.

Gregory A. Gold, Gold Law Firm, L.L.C., The, Greenwood Village, CO, Samuel G. Livingston, Samuel G. Livingston, P.C., Law Office of, Denver, CO, for Plaintiff.

Lawrence D. Stone, Esq., Christian D. Hammond, Dufford & Brown, P.C., Denver, CO, for Defendant.

MEMORANDUM OPINION AND ORDER

BABCOCK, District Judge.

This matter is before me on four motions by Defendant Fidelity National Property and Casualty Insurance Company (“Fidelity”): first, its Motion for Determination of Question of Law Regarding Double Damages Under Colo.Rev.Stat. § 10–3–1116 [Doc # 94]; second, its Motion for Determination of Question of Law Regarding Suspension of Fidelity's Duty of Good Faith and Fair Dealing [Doc # 95]; third, its Motion for Partial Summary Judgement Regarding Bad Faith Claims Based on Litigation Conduct [Doc # 96]; and fourth, its Motion for Redesignation of Setoff Defense as Recoupment [Doc # 97]. After considering the parties' arguments, and for the reasons herein, I DENY the first motion, GRANT the second motion in part and DENY it in part, and I GRANT the third and fourth motions.

I. Background

Only a recitation of the pertinent facts is necessary. Plaintiff Keith Rabin had a homeowner's insurance policy issued by Fidelity. On February 19, 2009, a fire occurred at Rabin's home, damaging his real and personal property. Rabin submitted a claim for his loss to Fidelity, and Fidelity began its claim review and adjustment process.

Between February 25, 2009, and January 19, 2010, Fidelity made various payments to Rabin totaling $34,403.89 for portions of his personal property losses. It denied other parts of his claim. Rabin expressed dissatisfaction with Fidelity's handling of his claim and the valuation process. For that reason and others, in September 2009, Fidelity requested an appraisal of Rabin's entire loss.

Disenchanted with how Fidelity handled his claim, Rabin filed suit in state court on June 11, 2010. Among other things, he alleges that Fidelity grossly mistreated him, failed to properly communicate with him, and improperly denied aspects of his claim. His suit levies three causes of action: (1) breach of contract; (2) bad faith breach of an insurance contract; and (3) a violation of Colo.Rev.Stat. § 10–3–1116. Fidelity removed the case to this Court on diversity grounds pursuant to 28 U.S.C. §§ 1332 and 1441.

On July 13, 2010, two appraisers issued their appraisal of Rabin's personal property loss pursuant to Fidelity's request. They concluded that the actual cash value of that loss was $52,376.74 (the “Award”). (Under the terms of the insurance policy, the “actual cash value” was the pertinent value.) Per Rabin's policy, the Award represented the entire amount of his personal property loss. As a result, before paying the Award, Fidelity deducted the $34,403.89 it had previously paid Rabin. Without waiving its right or ability to challenge the Award, Fidelity paid Rabin the remainder via two payments on July 21 and 22, 2010, respectively.

After receiving Rabin's disclosure documents, Fidelity began seeking discovery as to how the Award was calculated. After deposing the appraisers who issued it, Fidelity's counsel believed that there was sufficient information to assert counterclaims against Rabin. On, July 12, 2011, Fidelity filed a motion to amend the scheduling order and for leave to assert counterclaims for a declaratory judgment, breach of good faith and fair dealing, and unjust enrichment. See Docket # 29. Magistrate Judge Mix recommended that Fidelity's motion be denied as untimely. Docket # 39. I adopted that recommendation and so ordered. Docket # 60.

II. Standard of Review

Fidelity's first three motions present questions of law. See, e.g., Fogg v. Macaluso, 892 P.2d 271, 273 (Colo.1995) (“Constructionof a statute is a question of law....”). Rule 56(a) provides that “[a] party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought.” Summary judgment is proper when there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). I must view the evidence in a light most favorable to the non-moving party. See Tomlinson v. El Paso Corp., 653 F.3d 1281, 1286 (10th Cir.2011). In a diversity action such as this, I apply Colorado's substantive law. Hjelle v. Mid–State Consultants, Inc., 394 F.3d 873, 877 (10th Cir.2005).

III. Discussion

A. The First Motion

Section 1116(1) provides that an insured “whose claim for payment of benefits has been unreasonably delayed or denied may bring an action in a district court to recover reasonable attorney fees and court costs and two times the covered benefit.” Colo.Rev.Stat. § 10–3–1116(1). Rabin's section 1116 claim seeks damages equal to two times the sum of those benefits which Fidelity allegedly (1) unreasonably delayed in paying him, but that it has paid; and (2) that it continues to unreasonably deny. Fidelity asserts that Rabin cannot receive those benefits by way of other payments or claims and separately be awarded two times the amount of those benefits under his section 1116 claim. Fidelity's first motion thus poses the following issue: Under his section 1116 claim, may Rabin recover two times the amount of covered benefits which he alleges were unreasonably delayed or denied when he has received the majority of them via prior payments from Fidelity, and he seeks the remainder in another claim? I conclude that he can.

A simplified hypothetical example is helpful. Imagine that Rabin files suit claiming a total of $10,000 in covered benefits. Further imagine that Fidelity paid him $8,000 of those benefits, but that payment for the $8,000 was unreasonably delayed, and that Fidelity unreasonably denied the remaining $2,000. Rabin asserts a breach of contract claim seeking the $2,000 in benefits that Fidelity denied. He also asserts a claim under section 1116 in which he argues that he may seek $20,000—“two times the covered benefit” of $10,000—leaving him with $30,000 total if he wins both claims ($8,000 from the delayed payment; plus $2,000 from his contract claim; plus $20,000 from his section 1116 claim). Fidelity contends that Rabin may seek only $10,000 in his section 1116 claim because that would leave him $20,000 total if he wins both claims, “two times the covered benefit” ($8,000 from the delayed payment; plus $2,000 from his contract claim; plus $10,000 from his section 1116 claim). Hence, the meaning of section 1116 is what I must decide.

To resolve this issue, I look first to the plain text of section 1116(1), reject interpretations that render words or phrases superfluous, and, if possible, harmonize potentially conflicting provisions. Hygiene Fire Prot. Dist. v. Bd. of Cnty. Comm'rs, 205 P.3d 487, 490 (Colo.App.2008), aff'd,221 P.3d 1063 (Colo.2009). I will give effect to the plain meaning of the statute's words and phrases, unless the result is unconstitutional. Rodriguez v. Schutt, 914 P.2d 921, 925 (Colo.1996). “In interpreting a statute, [my] primary goal is to effectuate the intent of the General Assembly.” Kisselman v. American Family Mut. Ins. Co., ––– P.3d ––––, ––––, 2011 WL 6091708, *4 (Colo.App.2011). No authoritative court has addressed this issue. (It is, however, currently awaiting review by the Colorado Court of Appeals in Hansen, infra.) There are district court decisions supporting both parties' interpretations. Compare Vaccaro v. American Family Ins. Group, 2010 WL 6473245 (D. Court of Jefferson Cnty., Colo., Dec. 17, 2010) (not explicitly deciding the issue but applying Rabin's interpretation), and Hansen v. American Family, 10–cv–6246, 3–4 (D. Court of City and Cnty. of Denver, Colo. July 6, 2011) (explicitly agreeing with Rabin), with Stresson Corp. v. Rocky Mountain Structures, Inc., Case No. 09–cv–3252 (D. Court of City and Cnty. of Denver, Colo. Apr. 28, 2011) (explicitly agreeing with Fidelity); C & M Towing & Recovery, Inc. v. Redland Ins. Co., 2010 WL 326335, at *1 n. 1 (D.Colo. Jan. 21, 2010) (not explicitly deciding the issue but applying Fidelity's interpretation in a footnote).

Fidelity asserts that the plain language of section 1116(1) supports its position because Rabin's interpretation requires reading in the italicized verbiage: an insured “may bring an action in district court to recover the covered benefit in addition to ... two times the covered benefit.” Fidelity also argues that, unlike other Colorado treble-damages statutes, section 1116(1) does not include the phrase “treble-damages” or “three-times” the covered benefits.

To begin, Fidelity distorts Rabin's section 1116 claim. The claim is not seeking “three times” the covered benefits that Fidelity allegedly unreasonably delayed or denied; it seeks two times the covered benefit-exactly what the statute provides. Nor is the claim seeking to recover the covered benefits themselves and two-times that amount; rather, it seeks only two times the amount of those benefits as a penalty for Fidelity's allegedly unreasonable delay and denial. See Kisselman, ––– P.3d at ––––, 2011 WL 6091708, at *9 (“What [section 1116] does is increase the penalties on companies that unreasonably delay or deny payment ....”) (quoting Speaker Romanoff, Hearings on H.B. 1407 before the H. Comm. on Business Affairs & Labor, 66th Gen. Assem., 2d Sess. (Apr. 24, 2008)).

It is true that under Rabin's interpretation, were he successful on his claims, his total receipt could be approximately three times the benefits at issue in his section 1116 claim, but that receipt would derive from multiple sources: one-third of it from the sum of the prior payments from Fidelity and breach of contract damages, and two-thirds from the ...