Zevallos v. Allstate Fire & Casualty Company et al
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE by Magistrate Judge Craig B. Shaffer on 7/28/17 re 32 MOTION for Judgment on the Pleadings filed by Allstate Property and Casualty Company. The court RECOMMENDS granting Allstates motion for judgment on the pleadings and dismissing Plaintiffs claims. (nmarb, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
ALLSTATE PROPERTY AND CASUALTY COMPANY,
RECOMMENDATION REGARDING DEFENDANT’S MOTION FOR
JUDGMENT ON THE PLEADINGS
Magistrate Judge Craig B. Shaffer
This matter comes before the court on Defendant Allstate Property and Casualty
Company’s (hereinafter “Allstate”)1 Motion for Judgment on the Pleadings (doc. #32), filed on
March 2, 2017. Judge Moore referred the motion to this Magistrate Judge pursuant to a
Memorandum. Doc. #33. Allstate argues that Plaintiff Miriam Zevallos’s claims for Uninsured
and Underinsured Motorists (“UM/UIM”) benefits are barred by a release that she executed with
Allstate in 2014 and that the Colorado Supreme Court’s decision in Calderon v. American
Family Mutual Insurance Co., 383 P.3d 676 (Colo. 2016) can be applied only prospectively.
Ms. Zevallos filed her Response (doc. #37) to the motion on March 23, 2017, which was
followed by Defendant’s Reply (doc. #38) on April 6, 2017. On May 3, 2017, I heard oral
argument. Doc. #43 (transcript). The court has also received from Allstate three notices of
Plaintiff originally sued three Allstate entities but later dismissed the other two. Doc. #34.
supplemental authority. Docs. #44-46. For the following reasons, I recommend granting the
motion and dismissing this action.
Since a 2007 amendment, section 10-4-609 of the Colorado insurance code has provided:
The amount of the [Uninsured Motorist/Underinsured
Motorist] coverage available pursuant to this section shall not
be reduced by a setoff from any other coverage, including,
but not limited to, legal liability insurance, medical payments
coverage, health insurance, or other uninsured or underinsured
motor vehicle insurance.
C.R.S. § 10-4-609(1)(c). Plaintiff alleges that despite this statute, “Defendants uniformly
reduce amounts paid to their insureds under their Uninsured Motorist/Underinsured Motorist
(‘UM/UIM’) coverages by setoffs from their medical payments (‘MedPay’) coverages under
their respective automobile policies.” Doc. #5, Complaint ¶ 16.
Plaintiff Zevallos was insured by Allstate with a policy of
insurance that included $5,000.00 of MedPay coverage and
$50,000/$100,000 of UM/UIM coverage [the “Policy.”] This
policy constitutes a contract. Zevallos was injured by an
underinsured motorist on August 20, 2012. As a result of her
injuries, … Zevallos submitted claims under her MedPay and
UM/UIM coverages. Allstate paid MedPay benefits on …
Zevallos's behalf. Allstate paid … Zevallos UM/UIM benefits of
Doc. #5, Complaint ¶¶ 20-25 (paragraph breaks omitted).
Allstate alleges that the $2700 it paid to Plaintiff was in settlement of Plaintiff’s claim for
UM/UIM benefits under the Policy. Doc. #31, Answer ¶ 25. In consideration of the settlement
payment, on September 26, 2014, Plaintiff released Allstate from
any and all liability and from any and all contractual obligations
whatsoever under the coverage designated above [underinsured
motorist insurance – Coverage SU] of [the Policy] . . . and arising
out of bodily injury sustained by Miriam Zevallos due to an
accident on or about the 20th day of August, 2012.
Doc. #31-2, Answer Ex. B (Release) at 2. 2
Plaintiff alleges that “[i]n reaching the $2,700.00 UM/UIM benefit number, Allstate
explicitly subtracted the $5,000.00 in MedPay coverage from its evaluation.” Doc. #5,
Complaint ¶ 26. With respect to this assertion, Allstate “admits only that, in evaluating
Zevallos’s underinsured motorist claim, Allstate Property considered, pursuant to the express
terms and conditions of the Policy, among other things, the amount paid in Medical Payment
benefits as an offset in establishing a range of settlement value.” Doc. #31, Answer ¶ 26.
Plaintiff further alleges that “Allstate confirmed this subtraction on June 11, 2014, in a
letter regarding … Zevallos' claim.” Doc. #5, Complaint ¶ 27. Plaintiff did not attach the
referenced letter to the Complaint, but Allstate attaches it to its Answer. Doc. #31-3. The letter
states among other things:
Based on the information provided, your office has submitted
approximately $69,663.63 in medical bills to date. Of the amount
submitted, I considered $68,737 in the evaluation based on usual
and customary charges. Because of the non-duplication of benefits
clause, the specials were reduced by $5000 that was paid under
Medical Payments coverage.
Additionally, I evaluated Ms. Zevallos' non-economic damages in
the amount of $28,000, making the total evaluation $91,737. Even
if I allowed the entire amount of specials, $69,663.63, her
evaluation is still within the amount settled by the underlying
Doc. #31-3 (letter dated June 11, 2014 from Allstate to Plaintiff’s counsel).
The court can consider the attachments to the answer without converting to summary judgment.
Park Univ. Enter’s, Inc. v. Am. Cas. Co. of Reading, 442 F.3d 1239, 1244 (10th Cir. 2006),
abrogated on other grounds by Magnus, Inc. v. Diamond State Ins. Co., 545 F. App’x 750, 753
(10th Cir. 2013); Gee v. Pacheco,627 F.3d 1178, 1186 (10th Cir. 2010) (documents referenced in
and central to the Complaint, no dispute of authenticity).
On November 7, 2016 – more than two years after Plaintiff agreed to settle her claim
with Allstate – the Colorado Supreme Court issued Calderon. In that case, the insured obtained
a judgment against his insurer for UM/UIM benefits, and the trial court reduced that amount by
$5,000 to offset what the insurer had paid in MedPay benefits. Calderon, 383 P.3d at 676. The
Colorado Supreme Court held that although Section 10-4-609(1)(c) could be read “in isolation”
as prohibiting offsets for MedPay from either the amount of UM/UIM coverage “available under
the policy in the abstract, or [the amount actually paid] in a particular case,” the latter is the best
construction. Id. at 678. Thus “section 10–4–609(1)(c) bars the setoff of MedPay payments
from the amount actually paid pursuant to UM/UIM coverage.” Id. Insurers cannot use nonduplication of benefits clauses to setoff MedPay benefits from UM/UIM benefits. Id. at 679-80.
Four days after Calderon issued, Plaintiff filed her complaint in state court on behalf of
herself and a putative class. Doc. #5, Complaint. Allstate removed the case based on federal
jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(1)(B), (5); Doc. #1 at 9.
Standard for Rule 12(c) Motions for Judgment on the Pleadings
Defendant moves pursuant to Fed. R. Civ. P. 12(c), which provides that “[a]fter the
pleadings are closed but within such time as not to delay the trial, any party may move for
judgment on the pleadings.” “A motion for judgment on the pleadings is designed to dispose of
cases where material facts are not in dispute and judgment on the merits can be rendered based
on the content of the pleadings and any facts of which the court will take judicial notice.”
Hamilton v. Cunningham, 880 F. Supp. 1407, 1410 (D. Colo. 1995) (citations omitted). The
court applies the same standard of review to a motion for judgment on the pleadings under Rule
12(c) as it does to a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6).
Colony Ins. Co. v. Burke, 698 F.3d 1222, 1228 (10th Cir. 2012); Concaten, Inc. v. Ameritrak
Fleet Solutions, LLC, 131 F. Supp. 3d 1166, 1171 (D. Colo. 2015), aff'd, 669 F. App'x 571 (Fed.
Cir. 2016), cert. denied, 137 S. Ct. 1604 (2017). Thus, in deciding a Rule 12(c) motion, the
court accepts as true all well-pleaded material allegations of the opposing party's pleadings and
“grants all reasonable inferences from the pleadings in favor of the same.” Colony Ins., 698 F.3d
Interpretation of Releases
“A release is the relinquishment of a vested right or claim to a person against whom the
claim is enforceable.” Neves v. Potter, 769 P.2d 1047, 1049 (Colo. 1989). It “is an agreement to
which general contractual rules of interpretation and construction apply.” Bunnett v. Smallwood,
793 P.2d 157, 159 (Colo. 1990). “A court is to construe a release to effectuate the manifest
intention of the parties.” CMCB Enters., Inc. v. Ferguson, 114 P.3d 90, 96 (Colo. App. 2005).
“Public policy favors the settlement of disputes, provided they are fairly reached, and if releases
and settlements may be lightly ignored defendants, and their insurance companies representing
them, would be discouraged from ever settling claims for personal injuries because of the
uncertainty as to their finality.” Davis v. Flatiron Mat’ls Co., 511 P.2d 28, 32 (Colo. 1973); see
also Colo. Ins. Guar. Ass'n v. Harris, 827 P.2d 1139, 1142 (Colo. 1992); Gates Corp. v. Bando
Chem. Indus., Ltd., 4 F. App’x 676, 682 (10th Cir. 2001) (“Colorado public and judicial policies
favor voluntary agreements to settle legal disputes.”).
Persons involved in accidents or their representatives carry on and
conclude negotiations precisely because there is uncertainty as to
the extent of injuries or liability or both, and because of the
uncertainty as to the outcome of any ensuing litigation. A general
release duly executed and fairly obtained is a complete bar to
further recovery for injuries sustained.
Davis, 511 P.2d at 32 (internal quotation marks omitted).
The Enforceability of Plaintiff’s Release.
In this case, Plaintiff does not dispute that she released her UIM claim against Allstate in
return for $2700. Plaintiff also does not dispute that the release of her rights under this statute
was voluntary. In doing so, she was represented by the same counsel as in this case. She does
not dispute that she (through her counsel) was aware of the issue of whether Allstate could
lawfully consider the MedPay amounts in settling her claim.
Plaintiff argues that the release is void or unenforceable as contrary to the public policy
embodied in section 10-4-609(1)(c). Plaintiff asserts that because Allstate Property deducted the
MedPay benefits it had paid to third parties from its settlement offer on her UM/UIM claim, the
release is contrary to the anti-setoff provision in section 10-4-609(c)(1). Plaintiff further argues
that “[c]ontracts in violation of statutory prohibitions are void,” citing R.P.T. of Aspen, Inc. v.
Innovative Commc’ns, Inc., 917 P.2d 340, 342 (Colo. App. 1996). R.P.T. did not address
whether a contract was void due to a statutory violation, but only whether a court faced with the
question of arbitrability must first decide whether the contract was void.
In general, “statutory rights may … be waived.” Klein v. State Farm Mut. Auto. Ins. Co.,
948 P.2d 43, 46–47 (Colo. App. 1997), as modified on denial of reh'g (May 29, 1997) (citing
First Interstate Bank of Denver, N.A. v. Central Bank & Trust Co., 937 P.2d 855 (Colo. App.
1996); People v. Bergen, 883 P.2d 532 (Colo. App. 1994)). The question is “whether the
legislative purpose is thwarted if the statute is not applied in particular circumstances. * * *
Legislative intent is, in the first instance, discerned from the terms of a statute.” First Interstate,
937 P.2d at 862. In First Interstate, the court found that a statute of repose could be waived
because “the General Assembly could, but did not, either preclude or restrict the parties' ability
to waive” it. Id. Here, section 10-4-609(1)(c) could have, but did not, prohibit an insured from
waiving the rights which that statute provides. Thus, as in First Interstate, there is no statutory
bar against Plaintiff’s voluntary waiver of her right to UM/UIM benefits without setoff for
MedPay benefits.3 Nor does Calderon suggest such a bar; in that case, there was no issue of a
release. The insured tried his claim for UM/UIM benefits against the insurer, and the setoff
occurred only when the district court reduced the judgment. In short, Section 10-4-609 does not
by its terms require an insured to take nothing less than full compensation for UM/UIM losses,
and implying such a requirement “would undermine Colorado public policy that favor[s]
voluntary agreements to settle legal disputes.” Archuleta v. USAA Cas. Ins. Co., Civ. 17-191RBJ, 2017 WL 3157947, at *2 (D. Colo. July 25, 2017). 4
Plaintiff points to the general rule that “[a] contract provision is void if the interest in
enforcing the provision is clearly outweighed by a contrary public policy,” citing Norton
Frickey, P.C. v. James B. Turner, P.C., 94 P.3d 1266, 1267 (Colo. App. 2004), and Rademacher
v. Becker, 374 P.3d 499 (Colo. App. 2015), reh'g denied (Nov. 19, 2015), cert. denied, No.
15SC1051, 2016 WL 3453473 (Colo. June 20, 2016). However, “[t]his rule does not exist for
the benefit of the party seeking to avoid contractual obligations, but instead serves to protect the
public from contracts that are detrimental to the public good.” Rademacher, 374 P.3d at 499
As the “public good” impacted by Plaintiff’s release, Plaintiff argues that section 10-4609 codifies public policies of “preventing the dilution of UM coverage” and precluding any
The statute makes the insured’s purchase of UM/UIM coverage optional, C.R.S. § 10-4-609(3),
but the court does not deem that language persuasive for either side. See, e.g., Kral v. Am.
Hardware Mut. Ins. Co., 784 P.2d 759, 765 (Colo. 1989).
Allstate also filed the July 12, 2017 transcript from McCracken v. Progressive Direct Insurance
Co., Civ. 17-cv-114-CMA-STV (D. Colo.), in which Judge Christine M. Arguello dismissed
similar claims as barred by a release because the insured did not show grounds for
unenforceability. Doc. #45-1. Judge Arguello’s reasoning is persuasive.
offsets from UM/UIM for benefits paid under other coverages. Response at 4 (quoting State
Farm Mut. Auto. Ins. Co. v. Brekke, 105 P.3d 177, 184-85 (Colo. 2004), and citing Aetna Cas. &
Sur. Co. v. McMichael, 906 P.2d 92, 100 (Colo. 1995), Newton v. Nationwide Mut. Fire Ins.
Co., 594 P.2d 1042, 1043-45 (Colo. 1979)).5
Essentially, Plaintiff argues that the rights which section 10-4-609 gives to insureds
caused her release of those rights to be contrary to public policy when she entered it. See, e.g.,
Response at 8. Plaintiff’s argument ignores the difference between protecting insureds from
unfair insurance contracts vs. protecting insureds from the consequences of voluntarily releasing
claims. Brekke, Aetna, and Newton each address whether insurance contract provisions were
unenforceable as contrary to section 10-4-609 or public policy. As Plaintiff points out, courts
have a “responsibility to scrutinize insurance policies” for unenforceability. Response at 4,
citing Countryman v. Farmers Ins. Exchange, No. 12-1456, 545 F. App’x 762, 764 (10th Cir.
Nov. 18, 2013), and Newton v. Nationwide Mut. Fire Ins. Co., 594 P.2d 1042, 1043-45 (Colo.
1979). Countryman cites Huizar v. Allstate Insurance Co., 952 P.2d 342, 344 (Colo. 1998).
Huizar held that insurance contracts are subject to such scrutiny because
[i]nsurance policies … differ from ordinary, bilateral contracts. …
Because of both the disparity of bargaining power between insurer
and insured and the fact that materially different coverage cannot
be readily obtained elsewhere, automobile insurance policies are
generally not the result of bargaining.
Id. at 344.
Plaintiff also cites Rivera v. American Family Insurance Group, 292 P.3d 1181, 1185 (Colo.
App. 2012) for a policy that “tort victims injured by uninsured or underinsured motorists receive
full compensation for their injuries.” That is what the insured argued, but the court disagreed.
The statute “does not require full indemnification of losses … it provides coverage only to the
extent necessary to compensate an insured for loss, subject to the limits of the insurance
contract.” Id. at 1186 (internal quotation marks omitted, emphasis original).
In contrast, the contract presently at issue is not the insurance policy, but the release.
Although Plaintiff contends that Allstate dictated the terms of the release, Plaintiff concedes that
she was able to successfully counteroffer regarding the settlement amount. In its June 11, 2014
letter, Allstate offered $1500, and it ultimately paid Plaintiff $2700 to settle. Plaintiff also
concedes that entering into the release agreement was optional. Instead of settling and releasing
her UM/UIM claim, Plaintiff could have brought suit against Allstate for breach of the insurance
policy. Although the legislative intent of the UM/UIM statute is to require insurers to offer such
coverage and to not dilute the coverage provided by deducting other benefits paid, this says
nothing of whether an insured can voluntarily waive or release those rights in settling a claim.
Plaintiff has not pointed to any authorities that suggest Plaintiff’s release is
unenforceable. Plaintiff relies on Kral v. American Hardware Mutual Insurance Co., 784 P.2d
759, 764-65 (Colo. 1989), but it is distinguishable. In that case, the insured settled her UM claim
with her insurance carrier for $30,000 (the full policy amount for that coverage) in a release-trust
agreement that gave the carrier a right to 15% of any settlement or judgment that the insured
obtained later from others. It was the insured’s “inability to obtain full compensation for the loss
she sustained” that caused the release to “violate th[e] legislative policy and … be
unenforceable.”6 Kral, 784 P.2d at 765-66 (distinguishing Granite State Ins. Co. v. Dundas, 528
P.2d 961 (Colo. App. 1974)).
[R]equiring the insured to reimburse her insurance company when
she obtained money from a tortfeasor, [would] potentially keep...
her from fully recovering for her loss. But the [Kral] court did not
In Kral, the insured sued and settled with third parties (not the uninsured motorist) for
$177,500. Kral, 784 P.2d at 761. Upon notifying the insurer of the settlement, the insurer
demanded 15% of the proceeds, which came to $26,635 – just short of what the insurer had paid
to settle the UM claim. This “would place Kral in the position of having no greater protection
against her loss than if uninsured motorist coverage had not been purchased.” Id. at 764.
say that insured parties were required to accept nothing less than
full compensation for their losses.
Archuleta, 2017 WL 3157947, at *2. See also Arline v. Am. Fam. Mut. Ins. Co., Case No.
16CV34390, slip op. at 5 (Denver Dist. Ct. June 5, 2017), filed at Doc. #44-1 (nonprecedential
opinion distinguishing Kral).
Here, Plaintiff does not allege facts that under Kral would make the release
unenforceable. Plaintiff does not allege that the release resulted in her “having no greater
protection against her loss” than if she had not purchased UM/UIM coverage, or her being
unable “to obtain full compensation for the loss she sustained.” The court infers in Plaintiff’s
favor (as the non-movant) that Allstate not only “considered” the $5,000 it had paid in MedPay
benefits but also subtracted that amount from its June 2014 settlement offer and its September
2014 settlement amount. Plaintiff still only alleges that she and the putative class members “are
or were legally entitled to receive” additional UM/UIM benefits. Doc. #5, Complaint ¶ 43. But
Plaintiff alleges that entitlement based only on section 10-4-609(1)(c) prohibiting Allstate from
deducting the $5,000 MedPay from its settlement offer on UM/UIM. Plaintiff does not allege
that she was entitled to additional UIM benefits because the MedPay deduction left her with
uncompensated losses from the underinsured motorist. Because Plaintiff does not allege that the
release caused her UM/UIM coverage to be meaningless or caused her to be unable to receive
full compensation for her loss, Kral is distinguishable.
Nor do Plaintiff’s other cited cases support her position. Norton Frickey regarded a
“contract to apportion attorney fees upon [an] attorney’s departure from the firm;” the court
found the contract was enforceable. 94 P.3d at 1266, 1269. Rademacher found a “private
agreement in which influence over a criminal prosecution is exchanged for … the promise to pay
money” was void as contrary to the public policy that is embodied in the criminal laws. 374 P.3d
at 499. Martin Marietta Corp. v. Lorenz, 823 P.2d 100, 109 (Colo. 1992), held the terminability
of at-will employment is unenforceable when it is conditioned on requiring the employee to
perpetrate a fraud on the government. Loffland Bros. Co. v. Indus. Claim Appeals Panel, 770
P.2d 1221, 1226 (Colo. 1989) recognized that private settlement agreements cannot abrogate the
authority of the director of worker’s compensation or otherwise abrogate statutory conditions
affecting public policy, but does “not hold that Colorado public policy generally invalidates
agreements releasing legal claims to compensation.” Archuleta, 2017 WL 3157947, at *2
(distinguishing Loffland). In General Steel Domestic Sales, LLC v. Steel Wise, LLC, No. 07-cv01145-DME-KMT, 2009 WL 185614, (D. Colo. Jan. 23, 2009), the unenforceable provisions of
a settlement agreement prevented testimony that was relevant to other litigants’ consumer
protection claims. In Mata v. Anderson, 685 F. Supp. 2d 1223, 1262 (D.N.M. 2010), aff'd, 635
F.3d 1250 (10th Cir. 2011), the unenforceable provision “releases the police department from
liability for any future harm it may cause to a member of the public.” Each of these cases
involved a contract provision that impacted the public beyond just the parties to the contract.
The same is true of Plaintiff’s cases (Response at 5-6) from other jurisdictions.
Again, Plaintiff’s release has no impact on nonparties or the public in general. The only
public impact that Plaintiff alleges is in regard to Allstate’s general practice of deducting
MedPay benefits in settling UM/UIM claims. But the generality of Allstate’s conduct does not
cause Plaintiff’s release itself to have a public impact. In short, Plaintiff has not shown that the
release is void as illegal or contrary to public policy.
The court concludes that Plaintiff’s release bars her claims, regardless of whether
Calderon should or should not be given retroactive effect. Even assuming that Calderon applies
retroactively (as Plaintiff argues), nothing barred Plaintiff from voluntarily waiving the statute’s
anti-setoff provision when she settled and released her claim. See also Arline, slip op. at 4-5 (not
addressing whether Calderon applied retroactively); Doc. #45-1, McCracken, Civ. 17-114CMA-STV, July 12, 2017 transcript at 5, 8 (same).
For each of the reasons stated above, the court RECOMMENDS granting Allstate’s
motion for judgment on the pleadings and dismissing Plaintiff’s claims.
DATED: July 28, 2017.
BY THE COURT:
s/Craig B. Shaffer
United States Magistrate Judge
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