Reid v. Geico General Ins. Co.

• Decision Date: 24 August 2007
• Docket Number: No. 06-1484.,06-1484.
• Citation: 499 F.3d 1163
• Parties: Denise REID, Plaintiff-Appellant, v. GEICO GENERAL INSURANCE COMPANY, a Maryland corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

499 F.3d 1163

Denise REID, Plaintiff-Appellant, v. GEICO GENERAL INSURANCE COMPANY, a Maryland corporation, Defendant-Appellee.

No. 06-1484.

United States Court of Appeals, Tenth Circuit.

August 24, 2007.

Submitted on the briefs:^*

Robert B. Carey, Frances R. Johnson, The Carey Law Firm, Colorado Springs, CO, for Plaintiff-Appellant.

Meloney Cargil Perry, Baker & McKenzie, Dallas, TX, and Gregory K. Falls, Deisch, Marion & Klaus, P.C., Denver, CO, for Defendant-Appellee.

Before TACHA, Chief Judge, MURPHY and HOLMES, Circuit Judges.

TACHA, Chief Judge.

Plaintiff Denise Reid appeals from a district court order denying her motion for partial summary judgment and awarding summary judgment in favor of defendant GEICO General Insurance Company ("GEICO") in this action seeking reformation of an automobile insurance contract. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

I. Background

The Colorado Auto Accident Reparations Act, Colo.Rev.Stat. §§ 10-4-701 to 726 (repealed July 1, 2003) ("No-Fault Act" or "Act"), was enacted in 1973 with the purpose of avoiding inadequate compensation to all victims of automobile accidents in the State of Colorado. It required complying automobile insurance policies to include certain minimum or basic personal injury protection ("PIP") benefits to compensate injured persons for medical expenses and lost wages resulting from an automobile accident. The No-Fault Act also required an insurer to offer, in exchange for higher premiums, optional enhanced PIP coverage, and it was GEICO's obligation with respect to this enhanced coverage that gave rise to this lawsuit.

As pertinent here, the Act provided:

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

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

(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) (1999).

In September 1999, Ms. Reid called GEICO and purchased an automobile insurance policy over the telephone. The policy she chose included the minimum PIP coverage required under the Act. Within days of the telephone call, GEICO mailed to Ms. Reid a New Business Packet, which included a copy of her policy and various other forms relating to her coverage and other coverage that it offered, including enhanced PIP. The only form that is relevant to this appeal, however, is GEICO's Colorado Information and Option Form ("Option Form"), which set forth its options for both basic and enhanced PIP coverage. GEICO claims that between September 1999 and the date of the accident at issue in this lawsuit, it sent its Option Form to Ms. Reid six times, one was included in the New Business Packet and five more were sent in conjunction with later renewals. In support of its motion for summary judgment, GEICO submitted one such Option Form, bearing Ms. Reid's signature and the date March 21, 2000. GEICO claims that this is the only Option Form that Ms. Reid ever signed and returned.

The first two pages of the signed Option Form comprise descriptions of the basic PIP and enhanced PIP coverage options available under Ms. Reid's insurance policy. The second page contains a sub-section entitled "Part 3 — Additional Personal Injury Protection (APIP) Options." Aplt. App. at 195. This sub-section describes GEICO's options for enhanced PIP coverage and begins with the following introductory paragraph:

Higher limits of PIP coverage are available at your option. The higher limits are described below. For these options the separate $50,000 limit for medical expenses is replaced by a single aggregate limit for all PIP benefits that apply. The premium for APIP is based on a percentage of your Basic PIP premium. If you selected the PPO option for Basic PIP in Part 1, it will also apply to APIP. However, unlimited APIP (options 4, 5 or 6) is not available with the PPO option. APIP is not available with the Limited Basic PIP option.

Id. Below this paragraph is a box listing six options for enhanced PIP coverage. Each option is designated with an option number in the first column, followed by three more columns setting forth for each option (a) the "Total Aggregate Limit of Applicable PIP Benefits;" (b) the applicable "Work Loss Limitations;" and (c) a percentage reflecting the "Approximate Additional Premium Per Vehicle." Id. GEICO offered this enhanced PIP coverage at various rates ranging from 35% to 900% additional premium per vehicle. Ms. Reid, however, declined all options by checking a box next to the statement "I do not want Additional PIP Benefits." Id.

In July 2002, Ms. Reid was injured in an accident while driving her GEICO-insured vehicle. GEICO paid her the full amount of the basic PIP benefits to which she was entitled under the terms of her policy. It did not pay for any enhanced PIP benefits. In July 2005, Ms. Reid sued GEICO in federal court based on diversity of citizenship, claiming that GEICO's offer of enhanced PIP coverage failed to meet the requirements of the No-Fault Act as interpreted in controlling case law. Her complaint alleges that she has unpaid medical expenses and work losses and seeks reformation of her insurance policy to provide unlimited medical and wage loss benefits. She also asserts causes of action for breach of contract and bad faith.

Shortly after Ms. Reid filed her complaint, the parties filed cross-motions for summary judgment. Ms. Reid argued that GEICO's offer of enhanced PIP coverage was deficient under the Act, and GEICO countered that Ms. Reid's claims were baseless because she had explicitly rejected enhanced PIP coverage in the March 21, 2000, Option Form. The district court ruled in favor of GEICO, concluding that its offer of enhanced PIP coverage to Ms. Reid, reflected in the signed Option Form, was sufficient to satisfy its obligations under the No-Fault Act.

Although the court rejected all of Ms. Reid's arguments, only some of them are relevant here. First, it rejected her claim that GEICO violated the Act by failing to offer enhanced coverage in writing prior to issuing her insurance policy. See Colo. Rev.Stat. § 10-4-706(4)(a) (1999) (requiring pre-sale written explanation of minimum PIP coverage). The court declined to interpret the statutory text and instead held that even if the Act imposed such an obligation with respect to enhanced PIP coverage, GEICO's failure to make a pre-sale written offer was harmless given the multiple written offers that it extended before Ms. Reid's accident. Second, the court concluded that GEICO's offer of enhanced PIP coverage was sufficient even though it did not specify that its work-loss benefits were payable at the 85% level, as set forth in § 10-4-710(2)(a)(II). Finally, the court rejected Ms. Reid's arguments based on what her enhanced PIP coverage would have been had she decided to buy it. Ultimately, the district court concluded that granting Ms. Reid the relief she requested "would give her the benefit of a policy [with] a premium cost 900% greater than what she paid." Aplt.App. at 919. Reformation, the court observed, is an equitable remedy, and it concluded that granting Ms. Reid that form of relief "would not only be inequitable, it would be unconscionable." Id. at 919-20. This appeal followed.

II. Analysis

In this diversity case, the laws of Colorado, the forum state, govern our analysis of the underlying claims while federal law determines the propriety of the district court's grant of summary judgment. Hill v. Allstate Ins. Co., 479 F.3d 735, 739 (10th Cir.2007). "We review the grant of summary judgment de novo, applying the same standard as the district court pursuant to Rule 56(c) of the Federal Rules of Civil Procedure." Id. at 739-40 (alteration and quotation omitted). In applying the standard set forth in Rule 56(c), we must examine the record in the light most favorable to Ms. Reid, the non-moving party. Id.

Ms. Reid claims that in entering summary judgment in favor of GEICO, the district court overlooked significant flaws in its offer of enhanced PIP coverage. She makes a number of interrelated arguments on appeal, which, for ease of discussion, we distill to three main points. First, she maintains that GEICO's offer of enhanced PIP coverage could not have satisfied its obligations under the No-Fault Act because GEICO did not even have statutorily-compliant coverage to offer. Specifically, she claims GEICO's enhanced PIP work loss benefit terminated when the injured person reached age 65, in violation of § 10-4-710(2)(a). Second, she argues that GEICO's offer of enhanced PIP coverage was not reasonably calculated to permit her to make an informed decision as required under Allstate Ins. Co. v. Parfrey, 830 P.2d 905, 913 (Colo.1992). And third, she challenges the district court's determination that reformation of her policy would be unconscionable, arguing that this conclusion was based on an improper assumption that she did not wish to purchase enhanced PIP coverage. We address each of these arguments in turn.

A. GEICO's Allegedly Non-Compliant Coverage

According to Ms. Reid, the Option Form that she signed contained an offer of enhanced PIP coverage that, a close examination of GEICO's policies revealed, did not exist. Specifically, she claims that the only endorsement that was available for her to purchase imposed a time limitation on the work loss benefit — until the injured person reached age 65. Since § 10-4-710(2)(a)(II) requires that...