Zarevo v. State Farm Mut. Auto. Ins. Co.
| Decision Date | 08 April 2022 |
| Docket Number | Civil Action 22-cv-00117-RMR-NYW |
| Parties | ALLA ZAREVO, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INS. CO., Defendant. |
| Court | U.S. District Court — District of Colorado |
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
This matter is before the court on Defendant's Motion to Dismiss in Part Pursuant to Fed.R.Civ.P. 12(b)(6) (the “Motion” or “Motion to Dismiss”). [Doc. 9]. This court considers the Motion to Dismiss pursuant to 28 U.S.C. § 636(b), the Order Referring Case dated January 24, 2022, [Doc. 8], and the Memorandum dated January 27, 2022. [Doc. 12]. The court concludes that oral argument will not materially assist in the resolution of this matter. Accordingly, upon review of the Motion, the related briefing and the applicable case law, I respectfully RECOMMEND that the Motion to Dismiss be GRANTED.
The court takes the following facts from the Complaint and Jury Demand (the “Complaint”) [Doc. 4] and presumes they are true for purposes of the Motion to Dismiss. On September 25, 2019, Plaintiff Alla Zarevo (“Plaintiff” or “Ms. Zarevo”) was driving her vehicle in Commerce City, Colorado. [Doc. 4 at ¶¶ 5-6]. After Ms. Zarevo approached an intersection and slowed to a stop at a red traffic light, her vehicle was hit from behind when the driver of another vehicle failed to slow to a stop. [Id. at ¶¶ 7-9]. Plaintiff alleges that the other driver caused the collision in the course of negligently and carelessly operating his vehicle. [Id. at ¶ 11].
Ms Zarevo suffered a number of injuries as a result of the collision, including a cervical disc herniation, cervical pain, and cervical radiculopathy. [Id. at ¶ 13]. Ms. Zarevo has been recommended a C5-C7 anterior cervical disc fusion to treat her injuries, which “has been estimated to cost over $170, 000.00.” [Id.]. Thus far, Plaintiff has incurred medical expenses of $34, 193.65 and will continue to incur medical expenses “related to her continued care and treatment.” [Id. at ¶ 14]. In addition to her physical injuries, Ms. Zarevo has suffered, inter alia, emotional distress, disruption, impairment, and the loss of quality and enjoyment of life. [Id. at ¶ 15].
At the time of the collision, Plaintiff was insured by Defendant State Farm Mutual Automobile Insurance Company (“Defendant” or “State Farm”) through a policy owned by her husband (the “Policy”). [Id. at ¶ 21]. The State Farm Policy provided underinsured motorist (“UIM”) coverage “in the amount of $100, 000/$300, 000.” [Id.]. Meanwhile, the other driver held a liability insurance policy through non-party Progressive Insurance with a $25, 000 per person, $50, 000 per accident liability limit. [Id. at ¶ 18]. With State Farm's consent, Ms. Zarevo settled her bodily injury claim against the other driver for that driver's policy limit-$25, 000. [Id. at ¶ 19]. In addition, Plaintiff's son, a resident relative of Plaintiff's, was also insured through Progressive Insurance at the time of the subject accident. [Id. at ¶ 20]. Plaintiff's son “settled the primary underinsured claim for [his] policy's maximum underinsured policy limits of $50, 000 per person in September 2020.” [Id.].
Following the collision, Ms. Zarevo sought UIM coverage from State Farm under the Policy. [Id. at ¶¶ 22-23]. Plaintiff provided Defendant with “comprehensive liability documents, medical records and bills related to this claim” and tendered a comprehensive settlement demand to Defendant in April 2020. [Id. at ¶¶ 24-25]. In July and October of 2020, State Farm tendered to Plaintiff payments totaling $9, 193.36, [id. at ¶ 26], [1] and on November 18, 2020, State Farm offered to settle Ms. Zarevo's UIM claim for $13, 172.36. [Id. at ¶ 27]. In its settlement offer, State Farm informed Plaintiff that it believed “Plaintiff's property damage [to her vehicle] to be minor and her need for surgery to be unrelated” to the collision. [Id. at ¶ 30]. “[I]n light of the magnitude of her injuries, damages, pending surgery costs, and losses, ” Plaintiff declined State Farm's settlement offer. [Id. at ¶ 28].
Ms. Zarevo initiated this civil action on December 21, 2021 in the District Court for the City and County of Denver, Colorado, asserting the following claims against State Farm: (1) breach of contract (“Claim One”); (2) bad faith breach of insurance contract (“Claim Two”); and (3) unreasonable delay or denial of insurance benefits under Colo. Rev. Stat. §§ 10-3-1115 and 10-2-1116 (“Claim Three”). [Id. at 5-7]. State Farm removed the action to federal court on January 18, 2022, see [Doc. 1], and filed the instant Motion to Dismiss on January 25, 2022. [Doc. 9]. In the Motion, Defendant maintains that Plaintiff fails to state a claim for bad faith breach of insurance contract or unreasonable delay or denial, and for this reason, it argues that Claims Two and Three must be dismissed. [Id. at 2]. Ms. Zarevo responded in opposition to the Motion on February 15, 2022, [Doc. 16], and State Farm has since replied. [Doc. 17]. Because the Motion to Dismiss is ripe for Recommendation, I consider the Parties' arguments below.
Under Rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). In deciding a motion under Rule 12(b)(6), the court must “accept as true all well-pleaded factual allegations . . . and view these allegations in the light most favorable to the plaintiff.” Casanova v. Ulibarri, 595 F.3d 1120, 1124 (10th Cir. 2010) (quoting Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)). A plaintiff may not rely on mere labels or conclusions, “and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (). The court must ultimately “determine whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed.” Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007).
Defendant maintains that Claims Two and Three should be dismissed for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. See [Doc. 9]. More specifically, State Farm asserts that Plaintiff's bad faith breach of contract claim should be dismissed because Plaintiff's allegations-taken as true-demonstrate only that the Parties “have a disagreement over the relatedness of Plaintiff's claimed future accident-related medical treatment based on the evidence submitted relating to the accident, ” which is insufficient to allege that State Farm acted in bad faith in not meeting her settlement demand. [Id. at 5]. For this same reason, State Farm contends that Ms. Zarevo has failed to state a claim for unreasonable delay or denial; according to State Farm, Plaintiff's allegations are insufficient to allege that Defendant acted without a reasonable basis in denying Plaintiff's settlement demand. [Id. at 6-7]. The court addresses these arguments in turn.
Colorado law provides for two types of bad-faith claims arising out of an alleged breach of an insurance contract: (1) common law bad faith breach of an insurance contract; and (2) unreasonable delay or denial of insurance benefits under Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116, also referred to as “statutory bad faith.” Dowgiallo v. Allstate Ins. Co., No. 19-cv-03035-KMT, 2020 WL 1890668, at *2 (D. Colo. Apr. 16, 2020). The two claims are similar, but nevertheless distinct.
“[B]oth common law and statutory bad faith claims require a showing of unreasonable conduct.” McKinney v. State Farm Mut. Auto. Ins. Co., No. 20-cv-01651-CMA-KLM, 2021 WL 4472921, at *4 (D. Colo. Sept. 30, 2021). A statutory bad faith claim primarily concerns whether an insurer denied or delayed the payment of insurance benefits without a reasonable basis. State Farm Mut. Auto. Ins. Co. v. Fisher, 418 P.3d 501, 506 (Colo. 2018); see also Colo. Rev. Stat. § 10-3-1115(1)(b)(II)(B)(2) (“[A]n insurer's delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.”). Under § 10-3-1115, an insurer who delays or denies payment to its insured without a reasonable basis breaches its statutory duty of good faith and fair dealing. See Canady v. Nationwide Affinity Ins. Co. of Am., No. 19-cv-00344-RBJ, 2020 WL 376494, at *3 (D. Colo. Jan. 23, 2020). To state a claim of unreasonable delay or denial under § 10-3-1115, an insured must allege that: (1) the insurer delayed or denied payment of benefits to the insured, and (2) the delay or denial was without a reasonable basis. Am. Family Mut. Ins. Co. v. Barriga, 418 P.3d 1181, 1185-86 (Colo. 2018).
In addition to an insurer's statutory duties, an insurer has a simultaneous common law duty to deal in good faith with its insured. Am. Family Mut. Ins. Co. v. Allen, 102 P.3d 333, 342 (Colo. 2004). “Due to the ‘special nature of the insurance contract and the relationship which exists between the insurer and the insured,' an insurer's breach of the duty of good faith and fair dealing gives rise to a separate cause of action arising in tort.” Goodson v. Am. Standard Ins. Co., 89 P.3d 409, 414 (Colo. 2004) (quoting ...
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