Peden v. State Farm Mutual Automobile Insurance Company

Filing 27

ORDER granting 13 Motion for Leave to Amend Complaint by Magistrate Judge Kristen L. Mix on 9/22/14.(dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 14-cv-00982-LTB-KLM
WENDY L. PEDEN,
Plaintiff,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
Defendant.
_____________________________________________________________________
ORDER
_____________________________________________________________________
ENTERED BY MAGISTRATE JUDGE KRISTEN L. MIX
This matter is before the Court on Plaintiff’s Motion for Leave to Amend
Complaint [#13] (the “Motion”), filed on June 11, 2014. Defendant filed a Response [#21]
in opposition to the Motion, and Plaintiff filed a Reply [#23]. The Scheduling Order [#20]
governing this case provides that the deadline for joinder of parties and amendment of
pleadings was August 9, 2014. Accordingly, Plaintiff’s Motion was timely filed.
Plaintiff seeks leave to amend the Complaint to correct various typographical errors,
which Defendant does not oppose, as well as to add one new state law claim for delay or
denial of benefits under Colo. Rev. Stat. § 10-3-1115, which Defendant opposes.
The Court has discretion to grant a party leave to amend her pleadings. Foman v.
Davis, 371 U.S. 178, 182 (1962); see Fed. R. Civ. P. 15(a)(2) (“The court should freely give
leave when justice so requires.”). “In the absence of any apparent or declared reason –
such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure

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to cure deficiencies by amendments previously allowed, undue prejudice to the opposing
party by virtue of allowance of the amendment, futility of the amendment, etc. – the leave
sought should, as the rules require, be ‘freely given.’” Id. (quoting Fed. R. Civ. P. 15(a)(2)).
Here, Defendant argues that the proposed amendment is futile and that the Motion should
be denied on that basis.
The Court first notes that the parties discuss this case in terms of what Plaintiff has
already proven. See, e.g., Response [#21] at 6 (“In the instant case, plaintiff has not
proven whether she would have been entitled to amounts in excess of the benefits she
received, and therefore State Farm has no duty to pay UIM benefits at this time.”). The
parties also submit documents to support their theories of whether Plaintiff’s proposed
claim is futile. See, e.g., Exs. C & D to Response [#21-3, #21-4]; Exs. 1-6 to Reply [#23-1,
#23-1, #23-3, #23-4, #23-5, #23-6]. However, the parties’ attempt to mold Defendant’s
futility argument into a summary judgment issue is premature. Response [#21] at 6; Reply
[#23] at 3-4. To permit amendment under Rule 15(a)(2), Plaintiff need do no more than
provide enough allegations in the proposed Amended Complaint such that the claim would
survive a motion to dismiss. See Innovatier, Inc. v. CardXX, Inc., No. 08-cv-00273-PABKLM, 2010 WL 148285, at *2 (D. Colo. Jan. 8, 2010) (citing Bradley v. Val–Mejias, 379
F.3d 892, 901 (10th Cir. 2004) (stating that an amendment is futile if it would not survive
a motion to dismiss)). There are no circumstances present here to allow the Court to view
the submitted evidentiary documents as on a motion to dismiss. See Driskell v. Thompson,
971 F. Supp. 2d 1050, 1057 n.8 (D. Colo. 2013) (discussing circumstances when a court
may consider documents outside of the complaint on a motion to dismiss without converting
the motion into one for summary judgment). The Court therefore declines to review the
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parties’ submissions in this respect.
Colo. Rev. Stat. §§ 10-3-1115(1)(a) states 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.” Defendant relies heavily on Vaccaro v. American
Family Insurance Group, 275 P.3d 750 (Colo. App. 2012), to support its argument that
Plaintiff’s claim under Colo. Rev. Stat. §§ 10-3-1115(a) is futile. Response [#21] at 5-6.
As Vaccaro makes clear, statutes such as Colo. Rev. Stat. §§ 10-3-1115(1)(a) “create a
right of action separate from the common law tort of bad faith breach of an insurance
contract.” 275 P.3d at 756. Further, “[w]hile first-party bad faith principles require a plaintiff
to establish that the insurer knew or recklessly disregarded the fact that its conduct was
unreasonable, the statutory claim requires only that a first-party claim be denied without a
reasonable basis.” Id. (internal citations omitted). Thus, “[t]he standard contained in §
1115 arguably is less onerous on the insured, and the remedies contained in § 1116 are
more financially threatening to the insurer than a traditional common law bad faith claim.”
Id. (citation omitted).
Under the statute, an insurer’s actions are unreasonable “if the insurer delayed or
denied authorizing payment of a covered benefit without a reasonable basis for that action.”
Colo. Rev. Stat. § 10-3-1115(2). Citing to Vaccaro, 275 P.3d at 759, Defendant argues that
“[a] dispute about the value of plaintiff’s damages or whether she is entitled to UIM benefits
is not sufficient to sustain a claim for unreasonable delay or denial of benefits owed,
because under the express terms of the policy, no benefits are owed until either the parties
reach an agreement with respect to the amount of plaintiff’s damages or plaintiff has met
her burden of proof in the appropriate judicial setting as to the amount of her damages.”
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Response [#21] at 6. Multiple decisions in this district have already rejected this argument,
however. As Judge Arguello summarized:
Under Defendant's logic, any insurer would be insulated from liability under
§ 10-3-1115(1)(a) as long as they dispute the amount of “benefits owed”, no
matter how unreasonable the insurer's position. Put another way, a
defendant insurer . . . could unreasonably delay and/or deny a valid claim for
benefits and unreasonably refuse to settle the claim. Despite this bad faith,
however, the insurer could not be found liable under the statute unless and
until its insured prosecuted a successful breach-of-contract suit against the
insurer and won a judgment for damages. This would cause the insured to
first need to successfully prosecute the breach-of-contract suit against the
insurer, and then subsequently bring an entirely separate lawsuit seeking to
prove a violation of C.R.S. [§ ] 10-3-1115 . . . . [This] surely cannot be what
the [Colorado] General Assembly intended. Thus, the fact that the benefits
owed to Plaintiff is currently in dispute does not mean that Plaintiff's statutory
bad faith claim fails as a matter of law.
(internal citations omitted) (citing to Tadehara v. State Farm Mut. Auto. Ins. Co., No. 09-cv02893, 2011 WL 4048782, at *4-5 (D. Colo. Sept. 12, 2011) (Krieger, J.); (Doc. #99-1,
Fiechtner v. Am. Family Mut. Ins. Co., No. 09-cv-02681, Martinez, J., Oral Ruling re
Defendant's Rule 50(a) motion). The undersigned agrees and sees no reason to reject the
sound reasoning of these opinions in the context of the present case. Plaintiff’s citation to
Vaccaro that “[a]n insurer is under no obligation to negotiate a settlement when there is a
genuine disagreement as to the amount of compensable damages payable under the terms
of an insurance policy” is not determinative here where Plaintiff has essentially alleged that
there should be no genuine disagreement as to the amount of compensable damages
owed her. 275 P.3d at 759. Accordingly, the Court finds that Plaintiff’s claim at this early
stage of the case is not futile.
For the foregoing reasons, and considering that leave to amend should be freely
given,
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IT IS HEREBY ORDERED that the Motion [#13] is GRANTED.
IT IS FURTHER ORDERED that Plaintiff shall file a non-red-lined version of the
proposed Amended Complaint on or before September 29, 2014.
IT IS FURTHER ORDERED that Defendant shall answer or otherwise respond to
the Amended Complaint in accordance with the Federal Rules of Civil Procedure.

DATED: September 22, 2014 at Denver, Colorado.

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