Toy v. Am. Family Mut. Ins. Co.

Decision Date29 January 2014
Docket NumberCivil Action No. 12-cv-01683-PAB-MJW
CourtU.S. District Court — District of Colorado

Judge Philip A. Brimmer


This matter is before the Court on Plaintiff's Motion for Partial Summary Judgment [Docket No. 86] filed by plaintiff Gregory Toy and Defendant's Motion for Summary Judgment [Docket No. 109] filed by defendant American Family Mutual Insurance Company. The Court has subject matter jurisdiction pursuant to 18 U.S.C. § 1332.


This action arises out of an insurance coverage dispute between defendant and plaintiff Gregory Toy. At all times relevant, Mr. Toy was insured by defendant under policy number 05XF9988-01. Docket No. 86 at 3, ¶ 1. The policy's Underinsured Motorist ("UIM") endorsement limited coverage to $1,000,000 for any single accident. Id.; see Docket No. 109-1 at 3. The UIM endorsement was subject to multiple exclusions, including "[t]he direct or indirect benefit of any insurer or self-insurer underany workers' compensation, disability benefits or similar law." Id. at 2. The endorsement also stated:

No one will be entitled to receive duplicate payments for the same elements of "loss" under this Coverage Form and any Liability Coverage Form or Medical Payments Coverage Endorsement attached to this Coverage Part.
We will not pay for any element of "loss" if a person is entitled to receive payment for the same element of "loss" under any workers' compensation, disability benefits or similar law.

Id. at 3. The UIM endorsement's arbitration clause stated, in relevant part:

If we and an "insured" disagree whether the "insured" is legally entitled to recover damages from the owner or driver of an "uninsured motor vehicle" or do not agree as to the amount of damages that are recoverable by that "insured," then the matter may be arbitrated. However, disputes concerning coverage under this endorsement may not be arbitrated. Both parties must agree to arbitration.

Id. at 4.

On August 26, 2008, Mr. Toy was injured in a motor vehicle collision caused by Ceaser Barriga-Nino. Docket No. 143 at 6, ¶ 1. Mr. Barriga-Nino's insurance policy limit was $25,000. Docket No. 86 at 3, ¶ 3. Mr. Barriga-Nino offered to settle with Mr. Toy for $25,000 and, on November 2, 2009, defendant provided Mr. Toy written consent to accept the $25,000 settlement. Docket No. Docket No. 143 at 6, ¶¶ 2-3. On December 29, 2009, Mr. Toy settled his workers' compensation claims with his workers' compensation carrier for $80,000. Docket No. 109-6.

On December 16, 2010, Mr. Toy submitted his claim to defendant for evaluation under the UIM endorsement. Docket No. 143 at 6, ¶ 4. On May 26, 2011, defendant offered to settle Mr. Toy's claim for $75,000. Docket No. 109-2 at 2. In a letter to Mr. Toy, Vicki Mrowiec, defendant's Commercial F/R Claim Desk Senior Adjuster,explained that defendant's settlement offer took into account, among other things, the $43,443.87 for medical expenses and additional compensation for lost wages paid by Mr. Toy's workers compensation carrier. Docket No. 109-2 at 1-2. Defendant's Fed. R. Civ. P. 30(b)(6) deponent stated that its adjusters offset the amount of workers' compensation benefits received by an insured pursuant to an UIM endorsement's exclusions. Docket No. 113-1 at 3-4, pp. 17:20-18:6 (Defendant's Rule 30(b)(6) Dep.). In response to defendant's settlement offer of $75,000, Mr. Toy asked defendant for a written evaluation of his claim. Docket No. 109-3 at 2. On June 2, 2011, defendant made Mr. Toy a final settlement offer of $100,000. Docket No. 109-4 at 1.

On July 1, 2011, plaintiff's counsel sent defendant's counsel a letter asking if defendant would "agree to arbitrate the value of Mr. Toy's underlying underinsured motorist claim?" Docket No. 101-1. Mr. Toy claims that defendant did not immediately respond to his July 1, 2011 letter. Docket No. 113 at 5, ¶ 1. On August 4, 2011, Mr. Toy filed an action against defendant in the District Court for the City and County of Denver, Colorado bringing claims for breach of contract, bad faith breach of contract, and a statutory claim under Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116. Docket No. 113-5 at 3-5. On August 10, 2011, defendant advised Mr. Toy that it would not formally respond to a request for arbitration until such time as Mr. Toy provided a formal demand for arbitration. Docket No. 86-4 at 1. On August 15, 2011, Mr. Toy served a Demand for Arbitration on defendant. Docket No. 86-3. Mr. Toy dismissed his state court action against defendant without prejudice, which defendant acknowledged. Docket No. 113 at 5, ¶ 1; Docket No. 113-6 at 2.

On August 29, 2011, the parties entered into an Arbitration Agreement, whichprovided that "[t]he sole issue to be determined through this arbitration is the nature and extent of Claimant's damages arising from the aforementioned August 26, 2008 collision." Docket No. 98-1 at 2. The agreement also provided that "the arbitrator does not have authority to resolve any disputes concerning coverage under the underinsured motorist policy provisions." Id. at 3. On April 9 and 10, 2012, an arbitration hearing was held before arbiter William G. Meyer. Docket No. 86 at 4, ¶ 9. On April 12, 2012, the arbiter determined the damages to be $2,067,005.30, which consisted of $275,000 in noneconomic damages, $964,557 in economic damages, and $300,000 in physical impairment damages, plus interest and costs. Docket No. 86 at 4, ¶ 10; Docket No. 865. The parties agreed to reduce the award to $1,000,000, the UIM policy limit, and, on April 19, 2012, defendant paid Mr. Toy $1,000,000 plus costs and interest. Docket No. 113-8 at 2. Defendant did not appeal or request any setoff from the arbitration award. Docket No. 86 at 4, ¶ 12.

On June 1, 2012, Mr. Toy filed the instant case in the District Court for the City and County of Denver, Colorado, claiming that defendant unreasonably delayed or denied payment of insurance benefits pursuant to Colo. Rev. Stat. § 10-3-1115 and § 10-3-1116. Docket No. 1-3 at 4. On June 27, 2012, defendant removed the case to this Court. Docket No. 1. Mr. Toy later amended his complaint to add a claim against defendant for bad faith breach of insurance contract. Docket No. 42 at 7; see Docket No. 15.

Mr. Toy moves for partial summary judgment asking the Court to find as a matter of law that the arbiter's calculation of his actual damages has preclusive effect in this proceeding and that the "covered benefit" for purposes of § 10-3-1116 is equal to the$1,000,000 UIM policy limit. Docket No. 86 at 2. Defendant moves for summary judgment arguing that Mr. Toy's bad faith and statutory claims are barred by the doctrine of claim preclusion, that defendant acted reasonably by offsetting its settlement offers by the amount Mr. Toy's received from his workers' compensation carrier, and that § 10-3-1116(1) does not permit Mr. Toy to recover attorneys' fees accrued in pursuing this action. Docket No. 109 at 2.


Summary judgment is warranted under Federal Rule of Civil Procedure 56 when the "movant shows that 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); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A disputed fact is "material" if under the relevant substantive law it is essential to proper disposition of the claim. Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). Only disputes over material facts can create a genuine issue for trial and preclude summary judgment. Faustin v. City & Cnty. of Denver, 423 F.3d 1192, 1198 (10th Cir. 2005). An issue is "genuine" if the evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party. Allen v. Muskogee, 119 F.3d 837, 839 (10th Cir. 1997).

A. Issue Preclusion

Mr. Toy argues that the arbiter's calculation of his actual damages from the August 26, 2008 collision in the amount of $2,067,005.30 should be given preclusiveeffect in this action. Docket No. 86 at 4. Issue preclusion, or collateral estoppel is an "equitable doctrine that operates to bar relitigation of an issue that has been finally decided by a court in a prior action." Sunny Acres Villa, Inc. v. Cooper, 25 P.3d 44, 47 (Colo. 2001); see Bebo Constr. Co. v. Mattox & O'Brien, P.C., 990 P.2d 78, 84 (Colo. 1999).2 "Its purpose is to promote judicial economy, to conserve private resources, and to protect parties from unnecessary or vexatious litigation." Byrd v. People, 58 P.3d 50, 53 (Colo. 2002). Under Colorado law, issue preclusion applies when the moving party can show that: (1) the issue presented in the current case is identical to an issue actually litigated and necessarily adjudicated in the prior proceedings; (2) the prior action reached a final adjudication on the merits; (3) the party against whom the doctrine is raised was a party, or in privity with a party, to the prior adjudication, and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action. Bebo Constr. Co., 990 P.2d at 84-85; see Dodge v. Cotter Corp., 203 F.3d 1190, 1198 (10th Cir. 2000) (identifying the elements for federal common law collateral estoppel).3 The offensive use of issue preclusion occurs where, as here, "'a plaintiff seeks to foreclose a defendant from relitigating an issue the defendant has previously litigated unsuccessfully in another action against the same. . . party.'" Harrell v. U.S. Postal Service, 445 F.3d 913, 921 (7th Cir. 2006) (quoting United States v. Mendoza, 464 U.S. 154, 159 n.4 (1984)). Trial courts have broad discretion to determine when nonmutual offensive issue preclusion applies. Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 331 (1979).

As a threshold matter, Mr. Toy does not clearly indicate...

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