Schimek v. Auto-Owners Insurance Company, a Michigan corporation

Filing 54

ORDER granting 37 Plaintiffs Motion for Leave to Amend to Add Claim for Exemplary Damages. Plaintiff shall file its amended complaint adding a claim for exemplary damages on or before September 4, 2017, by Magistrate Judge Scott T. Varholak on 8/23/2017. (jgonz, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 16-cv-02197-PAB-STV
THERESA SCHIMEK,
Plaintiff,
v.
OWNERS INSURANCE COMPANY,
Defendant.
______________________________________________________________________
ORDER
______________________________________________________________________
Magistrate Judge Scott T. Varholak
This matter is before the Court on Plaintiff’s Motion for Leave to Amend to Add
Claim for Exemplary Damages (the “Motion”) [#37]. The Motion has been referred to
this Court. [#38] This Court has carefully considered the Motion, related briefing, the
case file, and the applicable case law, and has determined that oral argument would not
materially assist in the disposition of the Motion. For the following reasons, the Motion
is GRANTED.
I.

Background
On January 6, 2016, Plaintiff Theresa Schimek was involved in a motor vehicle

accident caused by non-party Elizabeth Wynkoop. [#1 at ¶¶ 6-7] Ms. Wynkoop was
driving on the wrong side of the highway, resulting in a head-on collision between
Plaintiff’s car and Ms. Wynkoop’s car. [Id. at ¶¶ 8-9] Ms. Wynkoop died at the scene,
and Plaintiff was transported to a local hospital. [Id. at ¶ 9] Plaintiff contends that she

suffered “significant damages from the collision including past and future medical
expenses, emotional distress, and pain and suffering.” [Id. at ¶ 18]
At the time of the accident, Ms. Wynkoop had a liability insurance policy with a
$50,000 limit through non-party Bristol West Insurance, and Plaintiff had a $500,000
underinsured motorist policy underwritten by Defendant Owners Insurance Company.
[Id. at ¶¶ 5, 10; #26] Defendant was notified of the accident on January 7, 2016, and
the claim was assigned to Korrie Cole, a Field Claim Representative for Defendant.
[#42-1 at ¶¶ 1, 6; #43-2 at 34]
In a letter dated April 26, 2016, Plaintiff’s counsel notified Defendant of a possible
underinsured motorist claim. [#42-1 at ¶ 10] On June 28, 2016, Plaintiff’s counsel
provided Defendant with a copy of Plaintiff’s demand letter to Wynkoop’s insurer, which
made a demand for $335,000, and the final settlement offer from Wynkoop’s insurer.
[#42-1 at ¶ 14; #42-3 at 5] On July 21, 2016, Defendant provided its consent for Plaintiff
to settle with Ms. Wynkoop’s insurer for less than the policy limits and requested
additional documentation in support of Plaintiff’s demand. [#42-1 at ¶ 15; 43-2 at 5] On
August 10, 2016, Plaintiff’s counsel provided Defendant with additional documentation
in support of her claim and requested “a good faith offer to settle” the uninsured motorist
claim by August 19, 2016. [#42-1 at ¶ 16; #43-2 at 3] Ms. Cole requested 30 days to
review the additional documentation and Plaintiff’s counsel agreed. [#43-2 at 3]
Defendant valued Plaintiff’s total damages at $52,500 and thus, on August 24,
2016, extended a settlement offer of $2,500 (having subtracted the $50,000 limit of Ms.
Wynkoop’s policy) to settle the uninsured motorist claim. [#42-1 at ¶ 22; #43-2 at 2-3]
Plaintiff filed the instant lawsuit on August 30, 2016, asserting the following three claims

2

for relief: (1) breach of insurance contract, (2) common law bad faith breach of contract;
and (3) violations of Colorado’s insurance regulations, Colorado Revised Statute §§ 103-1115 and 10-3-1116. [#1] On November 2, 2016, the Court entered a Scheduling
Order, which set December 1, 2016 as the deadline for the joinder of parties and
amendment of pleadings. [#25 at 7]
On May 30, 2017, after the parties had conducted substantial discovery, Plaintiff
filed the instant motion seeking leave to amend her complaint to add a claim for
exemplary damages as additional relief for her common law bad faith breach of contract
claim. [#37 at 1-2; #43 at 11] On June 14, 2017, Defendant filed its opposition brief
responding to the Motion. [#42] Plaintiff filed a Reply in support of the Motion on June
21, 2017. [#43]
II.

Legal Standard
After the deadline for the amendment of pleadings established by a scheduling

order has expired, a party seeking leave to amend “must demonstrate (1) good cause
for seeking modification under Fed. R. Civ. P. 16(b)(4) and (2) satisfaction of the Rule
15(a) standard” for amending pleadings. Birch v. Polaris Indus., Inc., 812 F.3d 1238,
1247 (10th Cir. 2015) (quoting Gorsuch, Ltd., B.C. v. Wells Fargo Nat’l Bank Ass’n, 771
F.3d 1230, 1240 (10th Cir. 2014)).
Federal Rule of Civil Procedure 16(b)(4) allows modification of a scheduling
order “only for good cause and with the judge’s consent.” “Demonstrating good cause
under the rule ‘requires the moving party to show that it has been diligent in attempting
to meet the deadlines, which means it must provide an adequate explanation for any
delay.’” Strope v. Collins, 315 F. App’x 57, 61 (10th Cir. 2009) (quoting Minter v. Prime

3

Equip. Co., 451 F.3d 1196, 1205 n.4 (10th Cir. 2006)); see Lehman Bros. Holdings Inc.
v. Universal Am. Mortg. Co., 300 F.R.D. 678, 681 (D. Colo. 2014). “In practice, this
standard requires the movant to show the scheduling deadlines cannot be met despite
[the movant’s] diligent efforts.” Gorsuch, Ltd., 771 F.3d at 1240 (quotations omitted).
“Rule 16’s good cause requirement may be satisfied, for example, if a plaintiff learns
new information through discovery or if the underlying law has changed.” Id. On the
other hand, “[i]f the plaintiff knew of the underlying conduct but simply failed to raise tort
claims, [ ] the claims are barred.” Id.
Pursuant to Federal Rule of Civil Procedure 15(a)(2), the Court is to freely allow
amendment of the pleadings “when justice so requires.” The grant or denial of an
opportunity to amend is within the discretion of the Court, but “outright refusal to grant
the leave without any justifying reason appearing for the denial is not an exercise of
discretion; it is merely abuse of that discretion and inconsistent with the spirit of the
Federal Rules.” Foman v. Davis, 371 U.S. 178, 182 (1962). “Refusing leave to amend
is generally only justified upon a showing of undue delay, undue prejudice to the
opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments
previously allowed, or futility of amendment.” Frank v. U.S. West, Inc., 3 F.3d 1357,
1365 (10th Cir. 1993).
Pursuant to Colorado law, a request for “exemplary damages . . . may not be
included in any initial claim for relief” but rather may be asserted “by amendment to the
pleadings only after the exchange of initial disclosures . . . and the plaintiff establishes
prima facie proof of a triable issue.” COLO. REV. STAT. 13-21-102(1.5)(a). In order to
obtain exemplary damages, a plaintiff must prove that “the injury complained of is

4

attended by circumstances of fraud, malice, or willful and wanton conduct.” COLO. REV.
STAT. 13-21-102(1)(a).

Pursuant to the statute, willful and wanton conduct “means

conduct purposefully committed which the actor must have realized as dangerous, done
heedlessly and recklessly, without regard to consequences, or of the rights and safety
of others, particularly the plaintiff.” COLO. REV. STAT. 13-21-102(1)(b).
III.

Analysis
Defendant does not argue that Plaintiff lacks good cause for seeking to amend

the Complaint to add a claim for exemplary damages after the deadline for the
amendment of pleadings set in the Scheduling Order. As noted above, Colorado law
does not allow a plaintiff to assert a claim for exemplary damages in the initial pleading,
but rather requires the plaintiff to make a prima facie offer of proof—which often
requires the plaintiff to obtain evidence through discovery—to obtain leave to add a
claim for exemplary damages.

The Court thus finds good cause pursuant to Rule

16(b)(4) for Plaintiff seeking leave to add the exemplary damages claim after the
deadline.
Defendant argues instead that Plaintiff’s request to add a claim for exemplary
damages should be denied as futile because (1) Plaintiff has failed to offer evidence
sufficient to make the prima facie showing required by the statute and (2) Plaintiff may
not recover both enhanced damages under the penalty statute, Colorado Revised
Statute § 10-3-1116, and exemplary damages under Section 13-21-102. 1 [#42]

1

Section 10-3-1116 provides that a claimant “whose claim for payment of benefits has
been unreasonably delayed or denied may bring an action in a district court to recover
reasonable attorney fees and court costs and two times the covered benefit.”
5

A. Prima Facie Showing of Willful and Wanton Conduct
“Prima facie proof of a triable issue of exemplary damages is established by a
showing of a reasonable likelihood that the issue will ultimately be submitted to the jury
for resolution.” Stamp v. Vail Corp., 172 P.3d 437, 449 (Colo. 2007) (quotation omitted).
“Such proof may be established through discovery, by evidentiary means, or by an offer
of proof.” Id. “Prima facie evidence is evidence that, unless rebutted, is sufficient to
establish a fact.”

Id. The Supreme Court of Colorado has instructed that this is “a

lenient standard.” Id. at 450.
Plaintiff argues that she has asserted a prima facie case by submitting evidence
that Ms. Cole, Defendant’s representative handling the claim, was inexperienced, did
not understand Plaintiff’s injuries, did not investigate Plaintiff’s injuries, and did not
obtain approval for the amount offered from her supervisor or a more experienced
claims representative prior to extending the offer to Plaintiff. Plaintiff offers the following
evidence to support these contentions:
•

Prior to June 2015, Ms. Cole had no experience with the valuation of
insurance claims. [#43-1 at 17-18]

•

Between June 2015, when she began her position as a claims representative,
and January 7, 2016, when she was assigned Plaintiff’s claim, Ms. Cole
predominately handled non-automotive, property insurance claims and was
assigned Plaintiff’s claim to “cross-train” her on automotive claims. [Id. at 2021]

•

Prior to handling Plaintiff’s claim, Ms. Cole had only handled two automotive
claims—neither of which involved a personal injury or an uninsured motorist
claim. [Id. at 22, 35]

•

Prior to handling Plaintiff’s claim, Ms. Cole had never handled any claim
involving a fatality. [Id. at 21]

•

At her deposition, Ms. Cole was unable to define many of the medical terms
used to identify Plaintiff’s injuries. [Id. at 2-3]
6

•

At her deposition, Ms. Cole could not identify the purpose of several of the
medications taken by Plaintiff. [Id. at 5-7]

•

Ms. Cole had no training in psychology, anatomy or physiology. [Id. at 10-11]

•

Ms. Cole did not utilize certain investigative tools available to her—she did
not conduct an examination under oath, did not use an independent medical
examination, did not consult an outside medical expert, and did not use a
private investigator. [Id. at 24; #42-2 at 8]

•

The claims file does not indicate that Ms. Cole completed any research
regarding Plaintiff’s injuries and, when asked at her deposition whether she
had done so, Plaintiff responded that she “also can use [her] own
experience.” [#43-2; #43-1 at 29]

•

During her valuation of Plaintiff’s claim, Ms. Cole spoke to only one of the
other, more experienced claims representatives about the file—only once and
“in passing.” [#43-1 at 23, 25-26]

•

Although Ms. Cole spoke with her supervisor “on several occasions”
regarding Plaintiff’s claim, Ms. Cole did not indicate that any of those
discussions related to the valuation of Plaintiff’s claim and none is
documented in the claim file. [#42-2 at 8-9]

•

Ms. Cole testified that her supervisor did not “approve” the valuation of
Plaintiff’s claim, because Ms. Cole “ha[d] authority to handle the file, evaluate
it, and make settlement offers.” [#43-1 at 36-37]

•

Ms. Cole testified that the valuation of noneconomic injuries is “very
subjective” and her evaluation process involved “taking into consideration
everything about the file” and also her “experience with other bodily injury
claims that [she’s] handled” outside of the automotive context. [#42-2 at 9]

In addition to this factual evidence, Plaintiff proffers the opinions of her expert
witness, Jeremy Sitcoff, who has been involved in insurance-related matters since
1998. [#43-3] Mr. Sitcoff states that industry standards require an insurer to investigate
“the extent of the insured’s injuries and other damages.” [#43-3 at 6] According to Mr.
Sitcoff, industry standards do not permit an insurer to make “a lowball settlement offer
and compel the insured to institute litigation to recover amounts reasonably owed;”
rather, the insurer’s settlement offers “should reasonably reflect the value of the

7

insured’s losses.” [Id. at 7] Mr. Sitcoff stated that Defendant’s $2,500 settlement offer
was “far below any reasonable amount” and “represents unreasonable conduct in
violation of insurance industry standards.” [Id. at 9] Mr. Sitcoff further opines that
Defendant’s conduct in offering this unreasonable amount “was purposeful and
intentional or, alternatively, a reckless disregard [sic] its obligation to pay benefits due to
[Plaintiff].” [Id. at 8]
The Court finds that the proffered evidence “unless rebutted, is sufficient to
establish” that Defendant’s conduct in making the $2,500 settlement offer—described
by Plaintiff’s expert as “far below any reasonable” offer—was willful and wanton. In
addition to Plaintiff’s expert’s opinion on this point, the evidence supports a finding that
Ms. Cole may not have conducted a fulsome investigation of Plaintiff’s injuries. At her
deposition, Ms. Cole seems to acknowledge that she did not have an understanding of
all of Plaintiff’s prescriptions and that she did not research the specific medical terms
used to describe Plaintiff’s injuries. Although Ms. Cole testified that she used her own
experience to evaluate the worth of Plaintiff’s claims, a trier of fact may determine that
Ms. Cole did not have sufficient experience with the type of injuries Plaintiff experienced
to allow her to make a reasonable valuation of Plaintiff’s claim without further
investigation.

Such a conclusion would be bolstered by Ms. Cole’s lack of prior

experience with an automotive personal injury claim or any claim involving a fatality.
Although Ms. Cole states that her valuation was based upon her prior “experience with
other bodily injury claims,” it is unclear what relation, if any, the injuries in those claims
bore to Plaintiff’s injuries.

The proffered evidence—although it may ultimately be

rebutted—is sufficient to allow a trier of fact to conclude that Ms. Cole “heedlessly and

8

recklessly, without regard to” Plaintiff’s rights reached an unreasonable valuation of
Plaintiff’s claim.

Put differently, the trier of fact may conclude that Ms. Cole was

“conscious of [her] conduct and the existing conditions and knew or should have known
that injury [in the form of an underpayment of benefits] would result.” Coors v. Sec. Life
of Denver Ins. Co., 112 P.3d 59, 66 (Colo. 2005).
Defendants contend that the proffered facts, 2 “even if they were true, would not
rise to the level to establish prima facie evidence of malice and/or willful and wanton
conduct.” [#42 at 13] Defendant, however, fails to provide any analysis or authority to
support this statement.

Instead, Defendant attempts to refute Plaintiff’s proffered

evidence by providing additional context from Ms. Cole’s deposition testimony and
offering an affidavit from Ms. Cole prepared in connection with Defendant’s opposition
to the instant Motion. [Id. at 13-15] Defendant fails to establish that there is a lack of
evidentiary support for any of the factual contentions it challenges.
First, Defendant contends that there is no evidence to support Plaintiff’s
contention that the offered settlement was “facially unreasonable” [Id. at 13], but Plaintiff
has offered Mr. Sitcoff’s opinion on this point as well as evidence that Defendant valued
Plaintiff’s claim at $52,500 compared to Plaintiff’s demand of $335,000.
Second, Defendant contends that “there was simply no time for [Ms. Cole] to
employ” investigatory techniques, because Plaintiff initiated this lawsuit without making
a counteroffer six days after Defendant submitted its initial settlement offer. [Id. at 14]

2

Plaintiff submitted its proffer of Mr. Sitcoff’s expert testimony with its reply and thus this
additional evidence is not addressed in Defendant’s opposition brief. Defendant,
however, submitted its own expert’s report with its opposition brief and has not sought
to strike or otherwise respond to Plaintiff’s inclusion of Mr. Sitcoff’s testimony with her
Reply.
9

Similarly, Defendant contends there was no time for Ms. Cole to consult a medical
expert.

[Id. at 15]

To the extent such investigatory techniques were necessary,

however, Defendant offers no explanation for why Ms. Cole did not initiate them prior to
making the initial offer and the record is devoid of any evidence that Plaintiff ever
refused any request by Ms. Cole for additional time to evaluate Plaintiff’s claims. To the
contrary, the claim file indicates that Plaintiff’s counsel agreed to Ms. Cole’s request for
30 days to review the additional documentation provided by Plaintiff on August 10,
2016. [#43-2 at 3] Despite that agreement, Ms. Cole provided Plaintiff the settlement
offer only fourteen days later.
Third, without citation to any specific testimony, Defendant contends that “[b]oth
in her deposition (the parts Plaintiff failed to cite) and in her affidavit, Ms. Cole was very
clear that she understood the nature and extent of Plaintiff’s injuries and took these
facts into account in evaluating Plaintiff’s claim.” [#42 at 14-15] But, Defendant fails to
adequately address the testimony Plaintiff did cite.

The trier of fact may find that

testimony—in which Ms. Cole was unable to explain specific terminology and
medications identified in Plaintiff’s medical records—relevant to its determination of the
sufficiency of Ms. Cole’s knowledge of Plaintiff’s condition.
Finally, Defendant contends that Ms. Cole’s lack of experience does not support
a finding of willful and wanton conduct, because she had experience evaluating bodily
injury claims and she reviewed her valuation of the claim with her supervisor before
submitting it to Plaintiff. [Id. at 15] As discussed above, however, the relevance, if any,
of Ms. Cole’s prior experience with bodily injury claims is unclear. In her Affidavit, Ms.
Cole states only that she “had handled claims that involved bodily injuries” prior to

10

handling Plaintiff’s file. [#42-1 at ¶ 5] She does not establish that any of those claims
involved similar injuries. Moreover, Ms. Cole admitted at her deposition that she had
not previously handled a claim involving a fatality or an automobile injury, which
indicates she may not have handled a claim involving the type of PTSD and anxiety
suffered by Plaintiff after the accident. Although Ms. Cole contends in her affidavit that
she reviewed the settlement offer with her supervisor, it does not state that the
supervisor provided any input with regard to the valuation of Plaintiff’s claims or that Ms.
Cole accepted any feedback provided by her supervisor.

Ms. Cole’s deposition

testimony indicates that she may not have discussed valuation of the claim with her
supervisor and that she did not submit the offer to him for approval.
Defendant thus, at best, has highlighted factual disputes between the parties with
regard to Plaintiff’s proposed claim for exemplary damages.

The Court declines

Defendant’s invitation to resolve these disputed issues of fact. “[A]t this stage of the
litigation, the Court is only concerned with whether the evidence, when viewed in the
light most favorable to Plaintiff, is sufficient to make out a prima facie case of willful and
wanton behavior for the purpose of allowing Plaintiff to amend [her] Complaint to include
exemplary damages, not whether such evidence is sufficient to defeat a motion for
summary judgment or to prevail on the issue at trial.” Bituminous Cas. Corp. v. Hartford
Cas. Ins. Co., No. 12-CV-00043-WYD-KLM, 2013 WL 6676157, at *3 (D. Colo. Dec. 18,
2013).
B. Duplicative Recovery
Defendant next argues that Plaintiff is “barred from making recovery for treble
damages and punitive damages based on the same set of facts.” [#42 at 16] That

11

Plaintiff ultimately may be barred from recovering both enhanced damages pursuant to
Section 10-3-1116 and exemplary damages pursuant to Section 13-21-102, however, is
irrelevant to whether Plaintiff may allege a claim for both types of damages in her
complaint.
The Supreme Court of Colorado expressly acknowledged this distinction in
Lexton-Ancira Real Estate Fund, 1972 v. Heller, 826 P.2d 819, 823 (Colo. 1992)—the
authority Defendant relies upon. In Lexton-Ancira, the court upheld the trial court’s
determination that the jury’s award of punitive damages under one statute was
duplicative of the treble damages awarded under a separate statute because both were
based upon the same conduct of the defendant and served the same punishment and
deterrence goals. Id. at 822. Under these circumstances the plaintiff was not entitled to
recover both the treble damages and the punitive damages. The court made express,
however, that its holding did “not preclude a claimant from filing claims based on other
theories of recovery” but rather only precluded a claimant from “receiv[ing] a double
recovery from the same act.” Id. at 823 (citing Farmers Grp., Inc. v. Williams, 805 P.2d
419, 427 (Colo. 1991)). Lexton-Ancira did not disrupt the court’s holding in Farmers
Group that a plaintiff may assert both a statutory claim for bad faith denial of insurance
benefits and a common law claim for tortious bad faith breach of contract. Farmers
Grp., Inc., 805 P.2d at 426.
The law thus is clear that a plaintiff may assert claims both for enhanced
damages under Section 10-3-1116 and for exemplary damages under Section 13-21102 based upon a common law bad faith breach of contract claim, even though Plaintiff

12

ultimately may only be permitted to actually recover damages under one of these
theories. 3
III.

Conclusion
For the reasons stated above, the Court GRANTS Plaintiff’s Motion for Leave to

Amend to Add Claim for Exemplary Damages [#37]. Plaintiff shall file its amended
complaint adding a claim for exemplary damages on or before September 4, 2017.

DATED: August 23, 2017

BY THE COURT:
s/Scott T. Varholak
United States Magistrate Judge

3

To the extent Defendant seeks an order of this Court requiring Plaintiff to make an
election of remedies, such a request is procedurally defective.
Pursuant to
D.C.COLO.LCivR 7.1, “[a] motion shall not be included in a response or reply to the
original motion” but rather must “be filed as a separate document.”
13