Warren v. Liberty Mut. Fire Ins. Co.

• Decision Date: 19 February 2010
• Docket Number: Civil Action No. 05-cv-01891-PAB-MEH.
• Citation: 691 F. Supp.2d 1255
• Parties: Kirk WARREN, Plaintiff, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, a Massachusetts insurance company, Defendant.
• Court: U.S. District Court — District of Colorado

691 F. Supp.2d 1255

Kirk WARREN, Plaintiff, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, a Massachusetts insurance company, Defendant.

Civil Action No. 05-cv-01891-PAB-MEH.

United States District Court, D. Colorado.

February 19, 2010.

Frances Renae Johnson, The Carey Law Firm, Colorado Springs, CO, for Plaintiff.

Brian John Spano, Stephen Erik Csajaghy, Rothgerber Johnson & Lyons, LLP, Denver, CO, for Defendant.

ORDER AND MEMORANDUM OF DECISION

PHILIP A. BRIMMER, District Judge.

This state-law insurance case is before the Court following remand from the Tenth Circuit Court of Appeals. The parties remaining in the case are plaintiff Kirk Warren and defendant Liberty Mutual Fire Insurance Company ("Liberty Mutual"). The matter is presently before the Court on two issues reserved for the trial court by the Tenth Circuit's remand order. The parties have filed cross motions for partial summary judgment regarding the first issue: whether the insurance policy in question contains an aggregate cap on the benefits to which Kirk Warren is entitled. The parties also have briefed the second issue: as of what date the insurance policy in question should be deemed to be reformed. Although Kirk Warren did not make a formal motion for summary judgment on the latter issue, Liberty Mutual poses its arguments under Federal Rule of Civil Procedure 56. Furthermore, because plaintiff seeks a ruling as a matter of law and legal claims will remain unresolved following this order, I conclude that it is more appropriate to address the date of reformation within the context of Rule 56 rather than, say, a trial to the Court. The issues are fully briefed. The Court's jurisdiction is predicated upon diversity jurisdiction under 28 U.S.C. § 1332(a).

I. BACKGROUND

The facts of this case are recounted in detail in the February 15, 2007 order on summary judgment, see Warren v. Liberty Mut. Fire Ins. Co., 505 F.Supp.2d 770 (D.Colo.2007) and the Tenth Circuit's order remanding this case, see Warren v. Liberty Mutual Fire Ins. Co., 555 F.3d 1141 (10th Cir.2009). For present purposes, I summarize the following pertinent facts. On September 29, 2002, Kurt Warren was driving a 1983 Chevrolet Suburban in which his twin brother, plaintiff Kirk Warren, was riding as a passenger. Kurt lost control of the vehicle and it rolled over. As a result of the accident, both of the Warren brothers suffered injuries. As a result, Kirk Warren is now confined to a bed or wheelchair indefinitely.

At the time of the accident, Kurt Warren and the Suburban he was driving were insured under an automobile insurance policy (the "Policy") issued by defendant Liberty Mutual. Liberty Mutual first issued the Policy to Kurt Warren in March of 1996 when Deborah Bannister, Kurt's wife, executed the Policy. At the time that Ms. Bannister applied for the Policy, she met with Liberty Mutual's sales representative, Doug Maxey. At this meeting, Ms. Bannister executed an automobile insurance policy application together with the fourth page of a Colorado personal injury protection ("PIP") options disclosure form ("1996 PIP Disclosure Form"). The 1996 PIP Disclosure Form provides a variety of options with respect to "Basic PIP coverage" as well as "Added PIP coverage" or "APIP coverage." The form says the following about the APIP coverage:

ADDED PERSONAL INJURY PROTECTION BENEFITS

You may elect to purchase an Added PIP Medical Expense option, and sic Added PIP Work Loss Option, or a combination of these two options applying to you and any family member for a reasonable increase in premium. If you elect either of the following, the $50,000 per person limit of benefits is increased to $200,000 per person for any one accident.

i) ADDED PIP MEDICAL EXPENSES—provides the same medical expense coverage as Basic PIP except that losses are not limited to those incurred within five (5) years after the date of the accident.

ii) ADDED PIP WORK LOSS—provides the same Work Loss Coverage as Basic PIP except there is no 52 week time limitation and coverage is not subject to a weekly dollar limit.

iii) ADDED PIP MEDICAL EXPENSES AND ADDED PIP WORK LOSS—provides a combination of i) and ii) above.

Resp. in Opp'n to Pl.'s Mot. for Partial Summ. J. Re: Aggregate Limit Docket No. 110 ("Def.'s Resp. Re: Aggregate Limit"), ex. A at 10.¹ Ms. Bannister selected one of the Basic PIP coverage offerings and declined all forms of the offered APIP coverage.

At the time Liberty Mutual first issued the Policy to Ms. Bannister in 1996, neither the application nor the Policy, by their terms, offered or extended APIP coverage to guest occupants of the insured vehicles or to pedestrians. Furthermore, the policy itself did not reference a specific aggregate limit for APIP coverage. However, Mr. Maxey, the insurance agent, testified at his deposition that, while he has no personal recollection of doing so in this case, it was his practice to review orally the APIP provisions with potential customers. See Def.'s Resp. Re: Aggregate Limit, ex. G at 4-6, 9, 18. The reviewed provisions of the application included a standard $200,000 per-person-per-accident aggregate cap on APIP benefits. See Def.'s Resp. Re: Aggregate Limit, ex. G at 18. Liberty Mutual also asserts through an assistant vice president, Hall Crowder, that during this time period "it was Liberty Mutual's practice in Colorado to specify the $200,000 aggregate limit for basic PIP and APIP on the Declarations page of a policy." Def.'s Resp. Re: Aggregate Limit, ex. D ¶ 9. In fact, Mr. Crowder states in an affidavit that Liberty Mutual "did not sell unlimited APIP coverage in Colorado and only sold such coverage subject to an aggregate limit of $200,000 per person per accident...." Def.'s Resp. Re: Aggregate Limit, ex. D ¶ 11.

Although repealed in 2003, at the time Liberty Mutual first issued the Policy to Kurt Warren and at the time of the accident that injured the Warren brothers, the Colorado Auto Accident Reparations Act ("CAARA"), Colo.Rev.Stat. §§ 10-4-701 to -726 (2002), contained mandates related to APIP coverage. For example, at the time of the accident in 2002, CAARA required that:

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

(I) Compensation of all expenses of the type described in section 10-4-706(1)(b) 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) (2002). Despite the reference above to "expenses... without dollar or time limitation," CAARA permits insurers to place a $200,000 per-person-per-accident cap on APIP coverage. Brennan v. Farmers Alliance Mut. Ins. Co., 961 P.2d 550, 555 (Colo.App.1998); see Colo.Rev.Stat. §§ 10-4-710(2)(b) (2002) ("A complying policy may provide that all benefits set forth in section 10-4-706(1)(b) to (1)(e) and in this section are subject to an aggregate limit of two hundred thousand dollars payable on account of injury to or death of any one person as a result of any one accident arising out of the use or operation of a motor vehicle.").

Before 1998 it was unclear exactly to whom APIP coverage must apply and, as a result, what offer of APIP coverage conformed with CAARA's mandate. In 1998, however, the Colorado Court of Appeals held in Brennan v. Farmers Alliance Mutual Insurance Co. that an insurer's offer of APIP coverage must specifically reference four categories of individuals: 1) the named insureds; 2) resident relatives of the named insureds; 3) passengers occupying the insured's vehicle with the consent of the insureds—the so-called guest occupants; and 4) pedestrians who are injured by the covered vehicle. 961 P.2d 550 (Colo.App.1998). Where an insurer fails to offer APIP coverage for any of these four groups, the policy in question must be reformed to include coverage for the omitted group or groups. See, e.g., Warren, 555 F.3d at 1147-48; see generally Thompson v. Budget Rent-A-Car Sys., Inc., 940 P.2d 987, 990 (Colo.App.1996) ("When an insurer fails to offer the insured optional coverage that it is statutorily required to offer, additional coverage in conformity with the required offer is incorporated into the agreement by operation of law.").

It was not until December 21, 2001 that Liberty Mutual modified its PIP endorsement in its policies to comply with the Brennan decision by extending APIP coverage to guest occupants and pedestrians. This Court previously concluded, and the Tenth Circuit affirmed, that there was insufficient evidence that the insureds, Kurt Warren and Deborah Bannister, received this endorsement or any other notification that APIP coverage was available to guest occupants and pedestrians. See Warren, 555 F.3d at 1146.

Following the accident, both Kurt and Kirk Warren submitted claims to Liberty Mutual. Liberty Mutual paid benefits to the brothers under Basic PIP coverage, but not under APIP coverage. Believing they were entitled to have the Policy reformed to include APIP coverage, Kurt and Kirk Warren filed a complaint in this Court on September 29, 2005. The complaint asserted a claim seeking reformation of the insurance contract, a claim for breach of contract of the Policy, and several statutory and common law bad faith claims.

In July 2006, the parties filed crossmotions for summary judgment Docket Nos. 34, 38 that encompassed all of plaintiffs' claims. On February 15, 2007, then—Chief Judge Edward W. Nottingham granted summary judgment in favor of Liberty Mutual on all of the plaintiffs' claims ...