Rooftop Restorations, Inc. v. American Family Mutual Insurance Company

Filing 36

ORDER Certifying Question of Law to the Colorado Supreme Court and denying 22 Motion for Summary Judgment as Premature. This case is ADMINISTRATIVELY CLOSED subject to re-opening for good cause shown upon motion by any party. ORDERED by Judge William J. Martinez on 02/08/2017. (cthom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 15-cv-2560-WJM-MJW
ROOFTOP RESTORATIONS, INC., a Colorado Corporation,
Plaintiff,
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin Corporation,
Defendant.

ORDER CERTIFYING QUESTION OF LAW TO THE COLORADO SUPREME COURT
AND DENYING SUMMARY JUDGMENT AS PREMATURE

This matter is before the Court on Defendant American Family Mutual Insurance
Company’s Motion for Partial Summary Judgment. (ECF No. 22.) The motion has
been fully briefed (see ECF Nos. 26, 27), and presents a single, discrete legal issue:
Whether Plaintiff’s claim for unreasonable delay or denial of insurance benefits arising
under Colorado Revised Statutes §§ 10-3-1115 & -1116 is subject to the one-y ear
statute of limitations applicable to actions arising under “penal statutes,” Colo. Rev.
Stat. § 13-80-103(d).
Because the Court concludes that this issue may be case-determinative and it
appears no controlling precedent from the Colorado Supreme Court resolves it, the
Court, on its own motion, certifies this question of law to the Colorado Supreme Court,
as set out below. See C.A.R. 21.1(a) & (b).
I. BACKGROUND
Pursuant to Colorado Appellate Rule 21.1(c)(2), the Court concludes that the

following facts and background are relevant to the question of law to be certified and
fully show the nature of the controversy in which this question arises.
In this insurance dispute, the insureds held a hom eowners policy issued by
Defendant (“American Family”). (See generally ECF No. 22 at 1.) On August 30, 2013,
the insureds asserted a claim for hail damage. (Id. at 1–2.) On September 3, 2013,
American Family estimated that the cost to repair the damage was less than the policy’s
$1,000 deductible. (Id. at 2; ECF No. 22-1.) At some point thereafter, the insureds
assigned their claim against American Family to their contractor, Plaintiff Rooftop
Restoration, Inc. (“Rooftop”).1 On May 13, 2014, Rooftop sent American Family an
estimate that the relevant cost of repairs was nearly $70,000. (Id. at 2; ECF No. 22-2.)
Following a reinspection, on May 28, 2014, American Family increased its estimate of
the covered damage to approximately $4,000, and sent the insureds a payment for that
amount, less the deductible, or approximately $3,000. (Id. at 2–3; ECF No. 22-3.)
This lawsuit followed. Rooftop filed its Complaint against American Family in
Denver District Court on September 11, 2015. (ECF No. 1-5.) On November 23, 2015,
American Family removed the case to this Court pursuant to federal diversity
jurisdiction, 28 U.S.C. § 1332. (ECF No. 1.) Rooftop asserts two causes of action:
breach of contract, and unreasonable delay or denial of insurance benefits, Colo. Rev.
Stat. §§ 10-3-1115 & -1116 (i.e., “statutory bad faith”). (See ECF No. 1-3 at 4–5; ECF
No. 34 at 2.)

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Plaintiff alleges the assignment occurred on November 11, 2013. (See ECF No. 34 at
5, ¶ 22.) In other filings, American Family disputes whether the assignment was valid or was
prohibited by the insurance contract, but does not dispute this date. (See id. at 6.)

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II. DISCUSSION
Given the timeline above, it is undisputed that Rooftop’s claims were filed more
than one year after they accrued. American Family argues that Rooftop’s statutory bad
faith claim is therefore time-barred by § 13-80-103(d) because that provision applies to
“penal statutes,” and Colo. Rev. Stat. § 10-3-1116 is such a “penal” statute, when
analyzed under the test articulated in Kruse v. McKenna, 178 P.3d 1198, 1201 (Colo.
2008); see also Palmer v. A.H. Robins Co., 684 P.2d 187, 214 (Colo. 1984). Under that
test, courts address: (1) whether the statute asserted a new and distinct cause of
action; (2) whether the claim would allow recovery without proof of actual damages; and
(3) whether the claim would allow an award in excess of actual damages. Kruse, 178
P.3d at 1201.
Given the large number of cases litigated under §§ 10-3-1115 & -1116, it is
surprising that neither the Colorado Supreme Court nor any division of the Colorado
Court of Appeals has resolved whether the one-year statute of limitations (Colo. Rev.
Stat. § 13-80-103(d)) applies to such claims, or decided whether § 1116 is a “penal
statute” under Kruse. One explanation for this lack of controlling authority may be that
many such cases are removed from the Colorado courts to this Court pursuant to 28
U.S.C. § 1332, by insurance companies headquartered outside Colorado. Indeed, this
frequently-recurring question of law question has been addressed both directly and
indirectly by many of the judges of this Court.2 Some of these decisions have squarely

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See, e.g., Pinewood Townhome Assoc., Inc. v. Auto Owners Ins. Co., 2017 WL
131798, at *4 n.2 (Arguello, J., recognizing “various courts in this district concluding that
§§ 10-3-1115 and 10-3-1116 are subject to a one-year limitations period because they are
penal in nature” (collecting cases)); MacKinney v. Allstate Fire and Cas. Ins. Co., 2016 WL

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held that because § 10-3-1116 is penal in nature, claim s arising under it are subject to a
one-year statute of limitations. Phipps, 2015 WL 5047640, at *3; see also Mascarenas
v. Am. Family Mut. Ins. Co., 2015 WL 8303604, at *8 (D. Colo. Dec. 8, 2015). Others
have concluded the statute is penal under the Kruse test, without directly addressing
the statute of limitations issue. Rooftop I, 2015 WL 9185679, at *4 (holding statute is
penal under Kruse and that claims therefore cannot be assigned); Hernandez, 2013 WL
6633392, at *3–4 (same).
The undersigned finds the analysis in Hernandez and Phipps to be persuasive.
However, this Court’s role is not to reach its own judgment regarding open questions of
Colorado law, but to follow the decisions of the Colorado Supreme Court, and, “[w]here
no controlling state decision exists . . . to predict what the state’s highest court would
do,” using “guidance from decisions rendered by lower courts in the relevant state.”
Wade v. EMCASCO Inc. Co., 483 F.3d 657, 665–66 (10th Cir. 2007).
Here, the Court finds it impossible to predict with confidence what the Colorado
Supreme Court would do. On the one hand, the decisions in this Court hav e
persuasively applied the controlling test articulated by the Colorado Supreme Court in
Kruse to conclude the statute is penal. See supra note 2; MacKinney, 2016 WL

7034977, at *6–8 (D. Colo. Dec. 1, 2016) (Wang, J., collecting decisions on this issue in this
Court and in Colorado trial courts); Rooftop Restoration, Inc. v. Ohio Ins. Co., 2015 WL
9185679, at *4 (D. Colo. Dec. 17, 2015) (“Rooftop I”) (Babcock, J., holding “the statute creates
a penalty” under Kruse (citing Hernandez and Phipps, infra)); Gerald A. Phipps, Inc. v.
Travelers Prop. Cas. Co. of Am., 2015 WL 5047640, at *3 (D. Colo. Aug. 27, 2015) (“Phipps”)
(Brimmer, J., holding “Section 10-3-1116(1) satisfies all three elements of the Kruse test” and is
therefore “subject to a one-year statute of limitations . . . pursuant to . . . § 13-80-103(1)(d)”);
Hernandez v. Am. Standard Ins. Co. of Wisconsin, 2013 WL 6633392, at *3–4 (D. Colo. Dec.
16, 2013) (Jackson, J., holding “the statute [§ 10-3-1116] creates a penalty” under Kruse).

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7034977, at *8 (collecting and summarizing cases); Pinewood Townhome, 2017 WL
131789, at *4 n.2 (same). On the other hand, language and analysis in recent
Colorado Court of Appeals opinions casts doubt upon earlier decisions of this Court, but
these decisions have not resolved the statute of limitations issue, and have not applied
the Kruse test. In particular, the panel in Casper v. Guarantee Trust Life Ins. Co.,
___P.3d ___, 2016 WL 6803070, at *8 (Colo. App. Dec. 15, 2016) “d isagree[d] that the
statute is penal and instead conclude[d] that section 10-3-1116 is rem edial in nature.”
However, Casper reached that conclusion in a distinct context (whether attorneys’ fees
awarded under § 10-3-1116 are considered dam ages), and without analysis under
Kruse.3 See also Stresscon Corp. v. Travelers Prop. Cas. Co., 373 P.3d 615, 639
(Colo. App. 2013) (describing § 10-3-1116 as a “remedial statutory scheme,” but
without citation to Kruse), rev’d on other grounds, 370 P.3d 140 (Colo. 2016).
Given these decisions, the undersigned agrees with the recent observation of
U.S. Magistrate Judge Nina Y. Wang that “the law regarding the applicable statute of
limitations remains uncertain.” MacKinney, 2016 WL 7034977, at *8 (reviewing cases).
Moreover, more than three years have passed since U.S. District Judge R. Brooke
Jackson wrote that “[u]ltimately, this issue will be resolved by Colorado’s appellate
courts,” Hernandez, 2013 WL 6633392, at *3, yet the issue remains both unresolved
and frequently-recurring. And, no matter how many statutory bad faith claims cases are
removed to this Court, it cannot definitively resolve this question of Colorado law. See

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The Court is aware that the deadline for a petition for certiorari to be filed in Casper
has been extended to Feb. 9, 2017. However, Casper does not present the same issue
certified here.

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Wade, 483 F.3d at 666. Accordingly, the Court certifies this issue to the Colorado
Supreme Court, as set out below.4
III. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1.

Pursuant to Colorado Appellate Rule 21.1, the Court CERT IFIES the following
question of law to the Colorado Supreme Court:
Is a claim brought pursuant to Colorado Revised Statutes
§ 10-3-1116 subject to the one-year statute of limitations
found in Colorado Revised Statutes § 13-80-103(d) and
applicable to “All actions for any penalty of forfeiture of any
penal statutes”?

2.

Pursuant to Colorado Appellate Rule 21.1, the Clerk shall f orward this order to
the Colorado Supreme Court under the Clerk’s official seal. Also pursuant to
Colorado Appellate Rule 21.1, the Clerk shall, if and when requested by the
Colorado Supreme Court, forward the original or any copies of any portion of the
record which the Colorado Supreme Court may determine necessary.

3.

Defendant American Family Mutual Insurance Company’s Motion for Partial
Summary Judgment (ECF No. 22) is DENIED WITHOUT PREJUDICE AS
PREMATURE, pending the Colorado Supreme Court’s response to this Order
and certification.

4.

The jury trial currently set for May 8, 2017, the Trial Preparation Conference set

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Although the insureds’ assignment of their claim to Rooftop presents a factual wrinkle,
the Court does not view this as counseling against certification. The exact same legal analysis
is dispositive of both issues, with the same implications for Rooftop’s claim. If the statute is
held penal under Kruse, then the claim under § 10-3-1116 is time-barred, and also was not
assignable to Rooftop. See Hernandez, 2013 WL 6633392, at *5.

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for April 21, 2017, and all related deadlines are hereby VACATED.
5.

This case is ADMINISTRATIVELY CLOSED subject to re-opening for good
cause shown upon motion by any party. If the Colorado Supreme Court chooses
not to answer the certified question, the parties shall file a joint status report
within five business days of that decision. If the question of law certified above is
resolved by any other decision of either the Colorado Supreme Court or the
Colorado Court of Appeals, the parties shall promptly file a notice citing and
docketing any such decision.
Dated this 8th day of February, 2017.
BY THE COURT:

William J. Martínez
United States District Judge

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