Archuleta v. USAA Casualty Insurance Company et al
ORDER granting 31 Motion for Judgment on the Pleadings by Judge R. Brooke Jackson on 7/25/17. (jdyne, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson
Civil Action No. 17-cv-00191-RBJ
JERRY ARCHULETA, individually and on behalf of all others similarly situated,
USAA CASUALTY INSURANCE COMPANY, and
UNITED SERVICES AUTOMOBILE ASSOCIATION,
ORDER GRANTING DEFENDANTS’ MOTION FOR JUDGMENT ON THE
Jerry Archuleta, a Colorado resident, was injured in a car accident with an underinsured
motorist. He submitted insurance claims to United Services Automobile Association (“USAA”)
under his policy for medical payments (“MedPay”) and uninsured/underinsured motorist
(“UM/UIM”) coverage. USAA paid Mr. Archuleta $5,000 in MedPay benefits and later paid an
additional $17,000 in UM/UIM benefits pursuant to a settlement agreement. According to Mr.
Archuleta, USAA disclosed during the negotiations that it believed he was entitled to $22,000 in
UM/UIM coverage, but it subtracted the $5,000 paid for MedPay benefits under a “nonduplication” provision of the insurance policy. With the advice of counsel, Mr. Archuleta
accepted this setoff and signed a release discharging USAA’s duty to pay under the policy.
More than a year later, however, the Colorado Supreme Court held in Calderon v.
American Family Mutual Insurance Co., 383 P.3d 676 (Colo. 2016), that such setoff policies
violate state law. Mr. Archuleta then filed this class action against USAA and USAA Casualty
Insurance Company, alleging that they have systematically reduced UM/UIM payments by the
amount of MedPay payments in violation of state law since 2008—eight years before Calderon
clarified the law. Defendants have filed a motion for judgment on the pleadings on the ground
that Mr. Archuleta’s signed release is fatal to his claims. The motion is granted.
Mr. Archuleta cannot get out of his settlement agreement. “Parties to a contract . . . may
agree on whatever terms they see fit so long as such terms do not violate statutory prohibitions or
public policy.” Fox v. I-10, Ltd., 957 P.2d 1018, 1022 (Colo. 1998). A public policy will
invalidate a contractual provision only if the policy “clearly outweigh[s]” the interest in
enforcing the contract. FDIC v. Am. Cas. Co., 843 P.2d 1285, 1290 (Colo. 1992).
No public policy outweighs the interest in enforcing the parties’ settlement agreement
here. Mr. Archuleta argues that Calderon manifests Colorado’s policy of forbidding setoffs of
UM/UIM benefits by MedPay payments. But this case stands for a more limited proposition:
that the statutory prohibition on UM/UIM insurance policies taking setoffs refers to “the amount
of UM/UIM coverage available on a particular claim,” not the coverage limit in the abstract.
Calderon, 383 P.3d at 677. The present settlement agreement does not concern the amount of
UM/UIM coverage available on Mr. Archuleta’s claim, but rather the amount of money he was
willing to accept to release whatever claim he had.
This agreement is not tainted by Mr. Archuleta’s allegedly releasing his entitlement to
UM/UIM benefits without a MedPay setoff. Mr. Archuleta lawfully could have accepted less
than the amount of his UM/UIM coverage, or he could have held out and conceivably obtained
more than this coverage—for example, if USAA thought it would lose at trial and wanted to save
on attorneys’ fees. Calderon says nothing about either type of agreement. Instead, “[p]ublic
policy favors the settlement of disputes, provided they are fairly reached.” Davis v. Flatiron
Materials Co., 511 P.2d 28, 32 (Colo. 1973).
This situation is unlike the other Colorado Supreme Court cases Mr. Archuleta cites. The
line of cases leading up to Calderon—State Farm Mutual Automobile Insurance Co. v. Kastner,
77 P.3d 1256 (Colo. 2003), Aetna Casualty & Surety Co. v. McMichael, 906 P.2d 92 (Colo.
1995), and Newton v. Nationwide Mutual Fire Insurance Co., 594 P.2d 1042 (Colo. 1979)—
involved the requirements of UM/UIM coverage, not settlements for less (or more) than the
amount of coverage.
In Kral v. American Hardware Mutual Insurance Co., 784 P.2d 759, 761 (Colo. 1989),
the court discerned a “strong policy adopted by the General Assembly to enable an insured who
purchases uninsured motorist protection to receive the benefits of that coverage to the extent
necessary for full compensation for loss caused by the negligent conduct of a financially
irresponsible motorist.” Id. at 764 (emphasis added). 1 There the insurance policy (given effect
by a release-trust agreement) included a subrogation clause requiring the insured to reimburse
her insurance company when she obtained money from a tortfeasor, potentially keeping her from
fully recovering for her loss. But the court did not say that insured parties were required to
accept nothing less than full compensation for their losses. Holding otherwise would put an end
Rivera v. American Family Insurance Group, 292 P.3d 1181 (Colo. App. 2012), identifies a similar
public policy, but Mr. Archuleta mistakenly cites this Colorado Court of Appeals case as a decision of the
Colorado Supreme Court.
to settlement negotiations for UM/UIM claims; why settle a claim if an insured party can always
threaten to run to court afterward and seek the remainder of the “full compensation” he might
win? Again, this would undermine Colorado public policy that “favor[s] voluntary agreements
to settle legal disputes.” Gates Corp. v. Bando Chem. Indus., Ltd., 4 F. App’x 676, 682 (10th
Cir. 2001) (unpublished).
Last, Loffland Bros. v. Industrial Claim Appeals Panel, 770 P.2d 1221 (Colo. 1989),
recognized that under the Workmen’s Compensation Act of Colorado, “the authority of the
Director to reopen claims extends to cases resolved by settlement agreements as well as to cases
resolved by administrative determinations; and to the extent a settlement agreement purports to
abrogate that authority, it is unenforceable.” Id. at 1226. This case does not hold that Colorado
public policy generally invalidates agreements releasing legal claims to compensation.
In any event, Mr. Archuleta received all he was entitled to before Calderon clarified the
law. As Calderon noted, there are two ways to interpret the statutory language at issue here and,
“[w]hen read in isolation, the phrase might be read either way.” 383 P.3d at 678. Mr.
Archuleta’s lawyers surely advised him to accept USAA’s offer with a MedPay setoff because
Colorado courts before Calderon construed the statute to allow such deductions. See, e.g.,
Bradford v. USAA Cas. Ins. Co., 14CA0915, at 4–5 (Colo. App. Aug. 6, 2015) (unpublished);
Calderon v. Am. Family Mut. Ins. Co., No. 13CA1185, 2014 WL 2149652, at *4 (Colo. App.
2014), rev’d, 383 P.3d 676 (Colo. 2016); Levy v. Am. Family Mut. Ins. Co., 293 P.3d 40, 48
(Colo. App. 2011); Carrion-Kozak v. Alghamdi, No. 13CV92, at 3 (Arapahoe Cty. Dist. Ct. Dec.
13, 2013); Romero v. State Farm Mut. Auto. Ins. Co., No. 12CV5644, at 2 (El Paso Cty. Dist. Ct.
May 3, 2013); Willyard v. Am. Family Mut. Ins. Co., No. 11CV931 (Boulder Dist. Ct. May 8,
2012); Evans v. Am. Family Mut. Ins. Co., No. 11CV2977, at 4 (Denver Dist. Ct. Dec. 21, 2011).
Mr. Archuleta’s attorneys gave good advice to accept USAA’s offer in light of the state of the
law at the time. Cf. Daigle v. Shell Oil Co., 972 F.2d 1527, 1543 (10th Cir. 1992). This
agreement cannot be rescinded with the benefit of hindsight. 2
Because Mr. Archuleta’s personal allegations concern only USAA, see Compl., ECF No.
9 at ¶¶ 3, 23–26, he does not have standing to bring a claim individually or on behalf of a class
against USAA Casualty Insurance Company. Additionally, since Mr. Archuleta’s substantive
claim fails, his request for declaratory relief must be dismissed as well.
For the reasons set forth above, Defendants’ Motion for Judgment on the Pleadings [ECF
No. 31] is GRANTED. Mr. Archuleta’s complaint is dismissed with prejudice. As the
prevailing party, defendants are awarded their reasonable costs pursuant to Fed. R. Civ. P.
54(d)(1) and D.C.COLO.LCivR 54.1.
DATED this 25th day of July, 2017.
BY THE COURT:
R. Brooke Jackson
United States District Judge
While Mr. Archuleta is bound to the settlement agreement he signed before Calderon (i.e., when his
insurance policy’s non-duplication clause was still valid), that does not mean a future litigant would
necessarily suffer the same fate if USAA leveraged this invalid provision in settlement negotiations after
Calderon. See, e.g., Crawford Rehab. Servs., Inc. v. Weissman, 938 P.2d 540, 547 (Colo. 1997) (“A
party that has been fraudulently induced to enter into a contract may rescind the contract to restore the
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