Vaccaro v. American Family Ins. Grp.

Decision Date15 March 2012
Docket NumberNo. 10CA2590.,10CA2590.
PartiesCharles M. VACCARO, Plaintiff–Appellee, v. AMERICAN FAMILY INSURANCE GROUP, Defendant–Appellant.
CourtColorado Court of Appeals

OPINION TEXT STARTS HERE

Irwin & Boesen, P.C., Steven R. Barrett, Andrea L. Blanscet, Denver, Colorado, for PlaintiffAppellee.

Sweetbaum Sands Anderson PC, Jon F. Sands, Kimberle E. O'Brien, William B. Stanton, Denver, Colorado, for DefendantAppellant.

Opinion by Judge CASEBOLT.

¶ 1 In this dispute over underinsured motorist (UIM) insurance benefits, defendant, American Family Insurance Group, appeals the judgment entered on a jury verdict in favor of plaintiff, Charles M. Vaccaro, for breach of contract and for unreasonable denial of insurance benefits under sections 10–3–1115 and 10–3–1116, C.R.S.2011 (the Statutes). Defendant asserts the trial court erred in applying the Statutes to a claim arising before their effective date, by sustaining a jury verdict based on insufficient evidence, and by awarding prejudgment interest in excess of defendant's policy limit. We affirm the judgment, vacate the interest award, and remand with directions.

I. Background

¶ 2 A negligent tortfeasor injured plaintiff in a two-car accident in 2005. The tortfeasor had liability insurance with policy limits of $25,000. Defendant's policy insuring plaintiff provided UIM coverage up to $100,000. Plaintiff settled his claim against the at-fault driver for the policy limit of $25,000.

¶ 3 In 2007, plaintiff submitted a claim to defendant seeking $75,000 in UIM benefits, the amount remaining available under his UIM policy. Defendant reviewed plaintiff's medical records and initially valued plaintiff's claim between $21,000 and $25,000, offset entirely by the amount he had recovered from the tortfeasor. On January 2, 2008, defendant offered to settle plaintiff's UIM claim for $2,500. Following a request to reconsider from plaintiff's counsel, defendant increased its valuation to between $26,000 and $30,000 and extended a “full and final” settlement offer of $5,000 on January 30, 2008. Plaintiff rejected the settlement offer.

¶ 4 In June 2008, plaintiff's counsel requested defendant to consider permanent impairment and disfigurement in its valuation of plaintiff's claim. Defendant responded that it had no proof of permanency and would need the evaluation of a medical provider documenting plaintiff's injuries and level of impairment. Plaintiff's counsel then arranged an independent medical evaluation (IME) by Steven Nadler, M.D., an orthopedic surgeon.

¶ 5 Dr. Nadler examined plaintiff on August 12, 2008, and submitted a report, which defendant received on September 22, 2008. Among other things, the report concluded that plaintiff suffered from facet joint injuries to his cervical spine, impingement syndrome in his right shoulder, and residual tendonitis in his right forearm following carpal tunnel release surgery. Dr. Nadler opined that all these injuries were causally related to the accident, and that approximately $27,000 in medical treatment that plaintiff had received to date had been medically necessary. Dr. Nadler also recommended additional treatment, including pain management at $200 per month for the rest of plaintiff's life; spinal injections costing $7,000 to $10,000; radiofrequency rhizotomy procedures at $16,548 each every 422 days for the rest of plaintiff's life; and arthroscopic shoulder surgery estimated to cost $26,784. Defendant reviewed and considered the IME report but declined to reassess its settlement offer.

¶ 6 Plaintiff commenced this action on May 26, 2009, alleging that defendant had breached the insurance contract and had unreasonably denied payment of insurance benefits in violation of the Statutes. As pertinent here, section 10–3–1115(1)(a), C.R.S.2011, provides that a “person engaged in the business of insurance shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.” Section 10–3–1116(1), C.R.S.2011, provides that a “first-party claimant ... whose claim for payment of benefits has been unreasonably delayed or denied may bring an action ... to recover reasonable attorney fees and court costs and two times the covered benefit.” The Statutes became effective August 5, 2008.

¶ 7 During trial, the court denied plaintiff's motion to amend his complaint to assert a “common law” claim for bad faith breach of insurance contract, observing that common law bad faith and the statutory penalty under the Statutes involve “different standards” and are not interchangeable. The court also denied defendant's motion for a directed verdict, rejecting its contention that the Statutes could not be applied retroactively to a claim arising before their effective date. The court concluded:

[T]here is evidence of information being provided to the insurance company subsequent to the passage of the statute that would permit a jury to find that the defendant had violated that statute. Although the Court acknowledges the difficulty in sort of submitting this, in that the statute is certainly not intended to be applied retroactively, nor is it constitutionally permissible to apply it retroactively, the Court does not find in this case that new information was provided for the purposes of re-triggering the statute or triggering the statute for that matter. Were that the case, the Court may agree with [defense counsel] in his argument that it's unfair to apply it retroactively. Certainly, in some cases it would be unfair to apply the statute if someone essentially makes a phone call to the insurance company and says, “Hey, do you want to reconsider your decision?” Here, this was additional information provided in some—there is some indication it may have been at the request of the insurance company. And, again, all this is subject to disputed issues of fact. The Court will allow that claim to go to the jury.

¶ 8 The court instructed the jury to limit its consideration of the statutory claim to conduct occurring after August 5, 2008, and the verdict form for that claim repeated this limiting instruction.

¶ 9 Following trial, the jury returned a verdict for plaintiff, awarding him $75,000 on the contract claim, and $75,000, which the trial court doubled to $150,000, for unreasonable denial of insurance benefits after August 5, 2008. The propriety of the court's doubling is not at issue in this appeal.

¶ 10 Defendant moved for a new trial and for judgment notwithstanding the verdict (JNOV), asserting that it was error to submit plaintiff's statutory claim to the jury, and challenging the sufficiency of the evidence related to the reasonableness of its actions. The court denied both motions, stating that [t]he statutory claim was properly submitted to the jury and [it was] instructed to apply it prospectively; jurors are expected to follow the Court's instructions.” The court also found the evidence sufficient to support the jury's verdict on the statutory claim.

¶ 11 Plaintiff initially requested $69,325 in prejudgment interest, based on both the contract and statutory claims. Defendant disputed that plaintiff was entitled to prejudgment interest on the statutory claim but stated that [i]t appears that plaintiff has applied the correct calculation of the right to prejudgment interest on the UIM benefit award of $75,000.” Three days later, however, defendant filed a “Corrected Response,” arguing that plaintiff was not entitled to any prejudgment interest because the jury had already awarded him the policy limit of $75,000 in damages, and defendant was not responsible for prejudgment interest in excess of that limit.

¶ 12 The court awarded prejudgment interest to plaintiff on the contract claim only, observing that the statutory claim was “inherently punitive and not remedial,” and thus any amount awarded was not subject to assessment of interest. The court rejected defendant's assertion that USAA v. Parker, 200 P.3d 350 (Colo.2009), controlled this issue, stating that the award was properly calculated pursuant to the “personal injury statute,” section 13–21–101(1), C.R.S.2011.

¶ 13 After adding $14,907 in costs, $52,830 in attorney fees, and $40,539 in prejudgment interest to the damages awarded by the jury, the court entered judgment against defendant for $333,276. This appeal followed.

II. Statutory Claim

¶ 14 Defendant asserts that the trial court's submission of plaintiff's statutory claim to the jury was an unconstitutional retroactive application of the Statutes. It argues that because plaintiff's injuries and demand for UIM benefits occurred before August 5, 2008, the jury was required to apply the statutes to a continuing course of conduct that began before the effective date of the Statutes. On the facts of this case, we are not persuaded that the Statutes were applied retroactively. We also conclude that the trial court did not err by instructing the jury to consider plaintiff's statutory claim with respect to conduct arising after August 5, 2008.

A. Standard of Review

¶ 15 Construction of a statute presents a question of law, Fogg v. Macaluso, 892 P.2d 271, 273 (Colo.1995), which we review de novo.

¶ 16 We also review de novo whether a statute has been applied in violation of retroactivity principles, see Specialty Restaurants Corp. v. Nelson, 231 P.3d 393, 399 (Colo.2010), as well as whether a court has erroneously granted or denied a motion for JNOV. Cardenas v. Fin. Indem. Co., 254 P.3d 1164, 1167 (Colo.App.2011).

B. Law

¶ 17 The Colorado Constitution prohibits the enactment of any law that is “retrospective in its operation.” Colo. Const. art. II, § 11. A statute is retrospective if it “takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past.” In re Estate of DeWitt, 54 P.3d 849, 854 (Colo...

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