Showpiece Homes Corp. v. Assurance

• Decision Date: 17 December 2001
• Docket Number: No. 00SA212.,00SA212.
• Citation: 38 P.3d 47
• Parties: SHOWPIECE HOMES CORPORATION, Joy L. McMillan, and Edward J. McMillan, Plaintiffs, v. ASSURANCE COMPANY OF AMERICA, Defendant.
• Court: Colorado Supreme Court

38 P.3d 47

SHOWPIECE HOMES CORPORATION, Joy L. McMillan, and Edward J. McMillan, Plaintiffs, v. ASSURANCE COMPANY OF AMERICA, Defendant.

No. 00SA212.

Supreme Court of Colorado, En Banc.

December 17, 2001.

As Modified on Denial of Rehearing January 11, 2002.

Bieging Shapiro & Burrus LLP, Steven B. Shapiro, M. Gabriel McFarland, Denver, CO, Attorneys for Petitioners.

Spies, Powers & Robinson P.C., Brendan O. Powers, Jack D. Robinson, Denver, CO, Attorneys for Respondents.

Ken Salazar, Attorney General, Garth C. Lucero, Senior Counsel, Denver, CO, Amicus Curiae for Colorado Attorney General.

Roberts Levin Zboyan & Patterson P.C., Thomas L. Roberts, Bradley A. Levin, Michael J. Carrigan, Denver, CO, Amicus Curiae for the Colorado Trial Lawyers Association.

Campbell, Latiolais & Ruebel, P.C., Jeffrey Clay Ruebel, Denver, CO, Amicus Curiae for Colorado Defense Lawyers Association.

Justice MARTINEZ delivered the Opinion of the Court.

Pursuant to C.A.R. 21.1, we agreed to answer several questions certified to us by the United States District Court for the District of Colorado. The questions arise out of a civil action currently pending in the United States District Court in which an insurance company, Assurance Company of America (Assurance), moved to dismiss the Colorado Consumer Protection Act (CCPA) claims of plaintiff, Showpiece Homes Corporation, Joy McMillan, and Edward McMillan (collectively, Showpiece).

The underlying facts are as follows. Showpiece was subjected to a settlement demand in an action by a party not involved in the present action. Showpiece alleged that Assurance failed to authorize sufficient funds to meet the settlement demand, as well as failed to properly investigate and promptly settle the claims against Showpiece. The improper investigation and settlement practices asserted by Showpiece allegedly violate the CCPA. Central to the contested issues before the United States District Court is whether the insurance industry is excluded from the provisions of the CCPA, or whether insureds may bring claims against insurers through a private cause of action.

The first certified question asks whether a private cause of action by an insured against an insurer is preempted by the Colorado Unfair Claims — Deceptive Practices Act (UCDPA), codified at sections 10-3-1101 to -1114, 3 C.R.S. (2001). If no such preemption exists, the second question asks whether section 6-1-106, 2 C.R.S. (2001), excludes the insurance industry from provisions of the CCPA. The third question asks whether insurance encompasses the sale of goods, services, or property under the CCPA. Finally, the fourth question asks whether the CCPA applies to an insurer's post-sale unfair or bad faith conduct.

We conclude that a private cause of action by an insured under the CCPA is not preempted by the UCDPA. The CCPA is meant to work in tandem with other regulatory provisions in the Colorado statutes, and as such, works in conjunction with, not to the exclusion of, the UCDPA. We also conclude that the insurance industry is not excluded from the provisions of the CCPA and that insurance falls under the category of sale of goods, services, or property under the CCPA. Finally, we conclude that the CCPA applies to an insurer's post-sale or bad faith conduct and unfair claims handling practices. Therefore, we answer the first two questions in the negative, and the third and fourth questions in the affirmative.

I.

Showpiece purchased a one-year term commercial general liability insurance policy (CGL) from Assurance for a term beginning February 17, 1993, and ending February 17, 1994.¹ Showpiece renewed the insurance policy twice for additional terms of one year each. Joy McMillan and Edward McMillan are shareholders and officers of Showpiece who are insured under the Assurance CGL policies, and who are intended third-party beneficiaries of the CGL policies. Showpiece paid in full the premiums of each CGL policy. The CGL policies require Assurance to defend and indemnify Showpiece for covered claims, loss, or damage up to a limit of $500,000 per occurrence.

In May 1998, Barry Tillis and Marlene Cohn (collectively, the Tillises)² commenced litigation against Showpiece, claiming damages caused by the settlement of the soils at the Tillises' residence. Showpiece alleges that the settlement of the soils at the Tillises' residence constitutes an "occurrence" as defined in the Assurance CGL policies. Showpiece further alleges that the settlement of the soils constitutes a progressive and continuous process that has occurred during the term of at least one of the Assurance CGL policies. Prior to the commencement of the Tillises' action, the Tillises made a demand upon Showpiece for payment of $190,000 as compensation for the damages caused by the settlement of soils. Showpiece notified Assurance of the demand and requested benefits under the CGL policies to pay and settle. Assurance declined authorization to pay and settle the demand.

Despite Showpiece's advisement that the Tillises would seek legal action if the settlement was not paid, Assurance continued to decline funds to pay the Tillises. After commencing litigation, the Tillises later made a further demand on Showpiece for a total of $500,000. Though this demand was still within the coverage limit of the CGL policies, Assurance continued to refuse authorization to pay. After the insurance company for a co-defendant paid $280,000 to the Tillises for their demand on that other party, Assurance authorized a payment of $191,000 in satisfaction of the Tillises $500,000 demand. The Tillises later increased their demand to $800,000. Assurance still refused to pay more than $191,000 despite advisement from defense counsel, retained by Assurance to represent Showpiece, to authorize a single policy limit of $500,000. Further, in an effort to entice Assurance to authorize payment, the insurance company for the co-defendant authorized $360,000 for the settlement of funds and the insured parties committed to payment of $80,000.

Assurance declined to contribute the remaining $360,000 without imposing allegedly unconscionable conditions upon Showpiece. In the alternative, Assurance communicated that it would pay $191,000 only if Assurance were released from all future liability for the Tillises' claims. Finding such an offer unreasonable, Showpiece rejected Assurance's contribution and paid approximately $440,000 toward the Tillises' claim. Showpiece then brought an action in the United States District Court for settlement of its claims under the CCPA. Assurance moved to dismiss based on the grounds that the UCDPA preempted claims against insurance carriers under the CCPA, and that the insurance industry is exempted from the CCPA. The United States District Court, upon Showpiece's motion to seek certification of those questions, ordered the questions for certification of law pursuant to C.A.R. 21.1. By our order dated June 22, 2000, we accepted the following questions as framed by the United States District Court:

(1) Whether a private cause of action by an insured against an insurer under the Colorado Consumer Protection Act, § 6-1-101 et seq., C.R.S., ("CCPA") is preempted by the Colorado Unfair Claims — Deceptive Practices Act ("UCDPA"), codified at § 10-3-1101 et seq., C.R.S.

(2) Whether the insurance industry is excluded from the provisions of the CCPA by § 6-1-106, C.R.S.

(3) Whether insurance encompasses the sale of goods, services, or property under the CCPA.

(4) Whether the CCPA applies to an insurer's post-sale unfair or bad faith conduct.

We now address each of those questions.

II.

A.

The CCPA is a remedial statute intended to deter and punish deceptive trade practices committed by businesses in dealing with the public. See People ex rel. Dunbar v. Gym of Am., Inc., 177 Colo. 97, 112-13, 493 P.2d 660, 667-68 (1972)

; People ex rel. MacFarlane v. Alpert Corp., 660 P.2d 1295, 1297 (Colo.App.1983). The CCPA's broad legislative purpose is "to provide prompt, economical, and readily available remedies against consumer fraud." Western Food Plan, Inc. v. Dist. Court, 198 Colo. 251, 256, 598 P.2d 1038, 1041 (1979). This purpose is achieved through injunctions and civil penalties such as treble damages and attorney's fees. See §§ 6-1-107 to -112 & -113(2), 2 C.R.S. (2001). The availability of treble damages and attorney's fees is also intended to promote private enforcement of the CCPA. See Lexton-Ancira Real Estate Fund, 1972 v. Heller, 826 P.2d 819, 822 (Colo. 1992). The statute thus provides both for enforcement by the attorney general and a private right of action to any person injured by the deceptive acts or practices committed by a business.

The UCDPA regulates unfair or deceptive trade practices in the insurance industry. The legislative purpose of the UCDPA is

to regulate trade practices in the business of insurance by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices, and by prohibiting the trade practices so defined or determined.

§ 10-3-1101, 3 C.R.S. (2001). The UCDPA vests the Insurance Commissioner with power to investigate specifically defined acts and practices of insurers and to enforce regulatory penalties, such as limited monetary penalties and the suspension or revocation of licenses. See § 10-3-1108, 3 C.R.S. (2001). However, unlike the CCPA, no private right of action may be maintained under the UCDPA. See § 10-3-1104, 3 C.R.S. (2001); Farmers Group, Inc. v. Trimble, 658 P.2d 1370, 1377-78 (Colo.App.1982), aff'd, 691 P.2d 1138 (Colo.1984).

B.

In considering the relationship between the CCPA and the UCDPA, we are guided by several well-established principles of statutory construction. The first goal of a court construing a statute is to ascertain and give effect to the intent of the General Assembly. People v. Guenther, 740 P.2d 971, 975 (C...