Borrego et al v. American Family Mutual Insurance Company

Filing 40

ORDER Denying 29 Defendants Motion for Partial Summary Judgment, by Judge Wiley Y. Daniel on 1/6/2016.(evana, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior Judge Wiley Y. Daniel
Civil Action No. 14-cv-01732-WYD-MJW
JESUS BORREGO and
JOANNE BORREGO,
Plaintiffs,
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY,
Defendant.

ORDER ON MOTION FOR PARTIAL SUMMARY JUDGMENT

I.

INTRODUCTION
THIS MATTER is before the Court on Defendant’s Motion for Partial Summary

Judgment filed July 24, 2015. A response was filed on August 14, 2015, and a reply
was filed on August 28, 2015. For the reasons stated below, Defendant’s Motion for
Partial Summary Judgment is denied.
By way of background, this action arises out of Plaintiffs’ claim to American
Family Mutual Insurance Company [“American Family”], under their insurance policy
after their home allegedly sustained damage on June 26, 2012 due to the Waldo
Canyon Fire. Plaintiffs Jesus and Joanne Borrego [“the Borregos”] assert three claims
for relief: (1) breach of the implied covenant of good faith and fair dealing; (2) breach of
contract; and (3) violation of Colo. Rev. Stat. § 10-3-1115 and 1116. American Family

seeks summary judgment on the second and third claims for relief on the basis that the
Borregos did not file suit within the one-year contractual limitation period.
II.

FACTS
The Borregos had a Homeowners Policy with American Family that provided

coverage for certain losses to property located at 5511 Vantage Vista Drive, Colorado
Springs, CO 80919 [the “Property”]. The Policy was in force on the date of the loss and
was in existence from April 3, 2012 through March 6, 2013.1
The Borregos allege that the property was damaged by the Waldo Canyon Fire
which began on June 23, 2012 and damaged their home on June 26, 2012. They
opened a claim with American Family under the Homeowner’s Policy in June of 2012
and there was a dispute with respect to the extent of the damage. This claim was first
reported to American Family by Mrs. Borrego on June 27, 2012. American Family
reported the date of loss to be June 23, 2012.2 The Borregos filed suit on June 20,
2014, six days before the two year anniversary of the purported loss or damage.
American Family asserts that pursuant to the policy, suit must be brought within
one-year of the date of loss. The Borregos deny this as a legal conclusion, stating this
is the very issue in dispute in regard to American Family’s motion.
Specifically, the policy provides as follows:

1

I have cited to the record only where the facts are in dispute, and have recited only those facts I
deem necessary to deciding the motion.
2

Although Plaintiffs contend that date is actually June 26, 2012, they have assumed a June 23,
2012 date of loss for purposes of this motion.

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CONDITIONS – SECTION I
...
18. Suit Against Us. We may not be sued unless there is full compliance
with all the terms of this policy. Suit must be brought within one year after
the loss or damage occurs.
While the Borregos admit that this provision is contained within the policy, they do not
admit that this limitation controls, nor do they admit that “suit must be brought within one
year of the date of loss”. They contend that this language is superseded by statute
pursuant to Colo. Rev. Stat. 10-4-110.8(12)(a)(I)-(II), as discussed in the next section.
Assuming the June 23, 2012 loss date, the one year period ended on June 23,
2013. The policy expired on March 3, 2013.
It is undisputed that American Family’s adjustment of the claim continued well
past the one-year deadline for suit under the policy, and well past the expiration of the
policy. Further, American Family issued three payments to the Borregos, months after
this one year deadline, and months after the expiration date. Finally, American Family
admits that, upon the Borregos’ request and after the one year date of loss, it brought a
Senior Adjuster to conduct an inspection on October 18, 2013, and that it had two
engineers inspect the Borrego residence in August and November 2013.
II.

ANALYSIS
A.

Standard of Review

Summary judgment is proper where “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits,. . . show that there is
no genuine issue as to any material fact and the ... moving party is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(c). “A fact is ‘material’ if. . . it could have an
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effect on the outcome of the lawsuit.” E.E.O.C. v. Horizon/ CMS Healthcare Corp., 220
F.3d 1184, 1190 (10th Cir. 2000). “A dispute over a material fact is ‘genuine’ if a
rational jury could find in favor of the nonmoving party on the evidence presented.” Id.
The burden of showing that no genuine issue of material fact exists is borne by
the moving party. Horizon, 220 F.3d at 1190. “‘Only disputes over facts that might
affect the outcome of the suit under the governing law will properly preclude the entry of
summary judgment.’” Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138,
1148 (10th Cir. 2000) (quotation omitted). When applying the summary judgment
standard, the court must “‘view the evidence and draw all reasonable inferences
therefrom in the light most favorable to the party opposing summary judgment.’” Id.
(quotation omitted). All doubts must be resolved in favor of the existence of triable
issues of fact. Boren v. Sw. Bell Tel. Co., 933 F.2d 891, 892 (10th Cir. 1991).
B.

The Merits of American Family’s Argument

As noted previously, American Family claims that the second and third claims are
barred based on the fact that the Borregos failed to bring suit within one year as
required by the policy. The Borregos do not dispute that the provision exists in the
contract, but contend that the policy’s one-year limitations period is superseded by
statute pursuant to Colo. Rev. Stat. 10-4-110.8(12)(a)(I)-(II). This statute was amended
in May 2013 to expand the time within which a policy-holder may bring suit, to the extent
the contract of insurance limited that time period to less than the applicable statute of
limitations.

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Turning to my analysis, under Colorado law the interpretation of an insurance
policy’s language is a question of law. B & B Livery, Inc. v. Riehl, 960 P.2d 134, 136
(Colo. 1998). A contract must be enforced as written, “unless there is an ambiguity in
the . . . language.” Cotter Corp. v. American Empire Surplus Lines Ins. Co., 64 P.3d
886, 889 (Colo. App. 2002). Here, the requirement that suit be brought within one-year
is not ambiguous, and it is undisputed that the Borregos did not comply with the
requirement. Moreover, contractual limitations periods are generally deemed
enforceable so long as they are not unreasonable even if, as here, they are shorter than
the applicable statute of limitations. See Capitol Fixture & Supply Co. v. Nat’l Fire Ins.
Co. of Hartford, 279 P.2d 435, 437 (Colo. 1955) (finding one year limitations period “is
not unreasonable”); Union Health & Accid. Co. v. Welch, 206 P. 709 (Colo. 1922) (six
month time limit to commence suit under accident policy valid and enforceable);
Atchison, T. & S.F. Ry. Co. v. Baldwin, 128 P. 449, 422-23 (Colo. 1911) (contractual
limitations periods are enforced provided the period of time within which the action must
be brought is reasonable and the provision has not been waived). Indeed, in
McGlothlen v. Am. Family Mut. Ins. Co., 11-CV-02892-DME-KLM, 2013 WL 1767790, at
*5 (D. Colo. Apr. 24, 2013), Judge Ebel enforced the same exact policy provision
limiting suits to within one year of the date the loss or damage occurred, holding that the
plain language of the contract required a lawsuit against American Family to be
commenced within one year of the date of the loss or damage occurred.
Based on the foregoing, American Family contends that the Borregos’ second
claim for relief is time-barred. Additionally, American Family contends that the third
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claim predicated on Colo. Rev. Stat. § 10-3-1115 must be dismissed. Pursuant to that
statute, an insurer may not “unreasonably delay or deny payment of a claim for benefits
owed to or on behalf of a first-party claimant.” Colo. Rev. Stat. § 10-3-1115(1)(a)
(emphasis added). In this case, American Family contends that no covered benefit is
owed due to the failure to commence the suit within one year.
The issue then becomes whether the contractual one-year limitations period was
superseded by the passage of Colo. Rev. Stat. 10-4-110.8(12). This statute provides in
pertinent part:
(12)(a) Notwithstanding any provision of a homeowner’s insurance policy
that requires the policyholder to file suit against the insurer, in the case of
any dispute, within a period of time that is shorter than required by the
applicable statute of limitations provided by law, a homeowner may file
such a suit within the period of time allowed by the applicable statute of
limitations; except that this paragraph (a):
(I) Does not revive a cause of action that, as of May 10, 2013, has already
been barred by contract; and
(II) Applies only to a cause of action that, as of May 10, 2013, has not been
barred by contract.
(b) On or after January 1, 2014, an insurer shall not issue or renew a
homeowner’s insurance policy that requires the policyholder to file suit against
the insurer, in the case of any dispute, within a period of time that is shorter than
required by the applicable statute of limitations provided by law.
The statute became effective on January 1, 2014, after the policy at issue had expired.
The Borregos argue that § 10-4-110.8(12)(a)(I)-(II) reaches back to apply to
policies and causes of action prior to its effective date, and that if the legislature had
intended that the statute not apply retroactively, it would have included only the
language in § 10-4-110.8(12)(b), not (a). The Borregos further assert that because their
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action was not barred by May 10, 2013 (it did not become contractually barred until
June 23, 2013), they can proceed on the breach of contract claim under § 10-4110.8(12)(a)(I)-(II). I find these arguments persuasive, and find from the plain language
of the statute that it was intended to apply retroactively to causes of action that were not
barred contractually as of May 10, 2013.
American Family notes, however, that at the time of the effective date of the
statute, January 1, 2014, and the identified May 10, 2013 date, it is undisputable that
the Borregos’ policy was no longer in effect (having expired on March 6, 2013). It
argues that § 10-4-110.8(12) should not be applied to an expired policy such as the one
at issue, as it would unconstitutionally take away or impair American Family’s vested
contractual rights. American Family relies on Greystone Constr., Inc. v. Nat’l Fire &
Marine Ins. Co., 661 F.3d 1272 (10th Cir. 2011), in support of its argument. It argues
that the Greystone case is controlling as it addressed the applicability of a retroactive
statute to expired policies, and found that the General Assembly’s failure to specify that
the statute at issue in that case applied to expired insurance policies meant that it did
not intend the statute to apply to expired policies. Thus, the Greystone court found that
the statute did not apply to insurance policies whose policy periods had expired, and
that the statute did not apply retroactively. American Family argues that the same result
applies in this case, as the Borregos have offered no authority which contradicts
Greystone’s holding.
While I agree that the Greystone case sets out the test the court must determine
in determining whether retroactive application of a statute is unconstitutional, I do not
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find its result controlling in this case. In that case, the application provision of the
statute at issue, Colo. Rev. Stat. § 13-20-808, stated, “‘This Act applies to all insurance
policies currently in existence or issued on or after the effective date of this Act.’”
Greystone, 661 F.3d at 1280. The court’s task in Greystone was “to decide whether
‘currently in existence’ refers to polices that have been issued and under which
coverage can still be obtained—as is the case here—or only to those whose policy
periods have not yet expired.” Id. It found as to that issue that “[a] plain reading of the
statute supports the latter interpretation.” Id. The Greystone analysis is not relevant to
the statute at issue in this case, § 10-4-110.8(12), as the statute does not address
whether the provision applies to policies that are currently in effect or to those that are
expired. Relevant to the retroactivity issue, the statute addresses the issue of
applicability only as to whether the cause of action has expired. I find that the statute
thus applies regardless of the policy’s expiration because the cause of action is not
dependent upon whether the policy is or is not in effect. Consistent with that rationale,
American Family continued to adjust and pay the claim long after the policy expired.
Moreover, in Greystone, the Court of Appeals based its decision primarily on the
fact that § 13-20-808 contained no legislative intent as to the retroactive application of
the definition of “accident”. 662 F.3d at 1280. That is not the case here, where the
plain language of § 10-4-110.8 applies retroactively to causes of action that existed prior
to the effective date of the statute. Also, the statute at issue in Greystone altered the
definition of a key policy term affecting coverage; namely, the definition of an “accident”.
Under the new definition, coverage would be provided under the policy retroactively.
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The change made in Greystone affected the substance of the agreement between the
parties, not the procedure of seeking a remedy under the agreement. Here, unlike
Greystone, there is no policy term affecting coverage that may or may not retroactively
apply—coverage is not at issue. Finally, in Greystone, the statutory definition applied to
the very policy itself. Here, the statute, § 10-4-110.8(12)(a)(I) - (II), does not alter a
definition within the policy—it relates to the cause of action extending from the policy.
As the Borregos note, it is clear that the General Assembly’s intent behind § 104-110.8 is to give a policyholder more time to file suit. That intent applies regardless of
whether or not the policy has expired or not, for the simple fact that the time the General
Assembly intended to lengthen is not dependent upon the policy, but upon the cause of
action. In fact, American Family’s argument would limit the statute’s reach to only apply
to those policies that were still in effect as of May 10, 2013. Had that been the General
Assembly’s intent, it could have so stated. The failure to do so supports an inference
that it was the General Assembly’s intent not to include such a limitation. Specialty
Restaurants Corp. v. Nelson, 231 P.3d 393, 399 (Colo. 2010) (stating as rule of
statutory construction that “the General Assembly’s failure to include particular language
is the statement of legislative intent, not a mere omission”).
I further find that applying the statute retroactively to the loss at issue would not
be unconstitutional. As noted in the Greystone Construction case:
“[T]he retroactive application of a statute is not necessarily unconstitutional”.
. . .The Colorado state constitution prohibits only “retrospective” legislation.
Colo. Const. art. 2, § 11 (emphasis added). 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
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to transactions or considerations already past.” . . .This proscription
“prevent[s] the unfairness that would otherwise result from changing the
consequences of an act after that act has occurred.”
661 F.3d at 1279-80 (internal quotations omitted). ”Application of a statute to an
existing claim for relief does not violate the prohibition against retrospective legislation
when the statute effects a change that is not substantive, but only procedural or
remedial in nature.” Abromeit v. Denver Career Serv. Bd., 140 P.3d 44, 51 (Colo. App.
2005). “Substantive statutes create, eliminate, or modify vested rights or liabilities,
while procedural statutes relate only to remedies or modes of procedure to enforce such
rights or liabilities.” Id.
Here, the timing of filing a suit is procedural in nature rather than substantive.
Indeed, statutes of limitation are remedial in nature, and the Colorado Court of Appeals
has expressly held that “the application of a remedial statute of limitation to an existing
claim for relief does not violate the prohibition against retrospective legislation.” Vetten
v. Indus. Claim Office of State, 986 P.2d 983, 986 (Colo. App. 1999) (citing Woodmoor
Improvement Ass’n v. Property Tax Administrator, 895 P.2d 1087 (Colo. App. 1994)).
The statute’s effect is not to create a new right or liability where none existed before; its
only effect is to broaden the procedure whereby one seeking redress may file a lawsuit,
which is constitutionally permissible. Smith v. Putnam, 250 F. Supp. 1017, 1018
(D. Colo. 1965). Moreover, “[h]aving the benefit of particular procedures or the ability to
invoke particular remedies generally does not constitute a vested right.” Abromeit, 140
P.3d at 51. Finally, as the Borregos note, American Family’s right to exercise its
contractual limitations argument had not vested at the time the statute was passed,
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because there was another month remaining in the contractual period, regardless of
whether or not the policy itself had expired. American Family has not, and cannot,
demonstrate that this statute which merely alters time and procedure, constitutes a
substantive change in the law which triggers unconstitutionality, especially given that it
had no vested rights being affected at the time of its passage.
Accordingly, I find that the statute at issue, Colo. Rev. Stat. § 10-4-110.8(12), as
amended, is not unconstitutionally retrospective. The contractual provision relied on by
American Family is unenforceable due to the statute, and the Borregos’ suit is not timebarred.
IV.

CONCLUSION
Based upon the foregoing, it is
ORDERED that Defendant’s Motion for Partial Summary Judgment (ECF No. 29)

is DENIED.
Dated: January 6, 2016
BY THE COURT:

s/ Wiley Y. Daniel
Wiley Y. Daniel
Senior United States District Judge

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