Benson v. Allstate Fire and Casualty Insurance Company

Filing 97

ORDER denying 86 Motion for Summary Judgment by Magistrate Judge Kathleen M. Tafoya on 1/15/2020.(jgonz, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Magistrate Judge Kathleen M. Tafoya
Civil Action No. 17–cv–00866–KMT
AUSTIN BENSON,
Plaintiff,
v.
ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY,
Defendant.
ORDER
This matter is before the court on Defendant’s “Motion for Summary Judgment.”
([“Motion”], Doc. No. 86.) Plaintiff has responded in opposition to the Motion, and Defendant
has replied. ([“Response”], Doc. No. 89; [“Reply”], Doc. No. 94.)
On April 2, 2015, Plaintiff Austin Benson was involved in a single-vehicle car accident.
(Doc. No. 13 at 4-7 [“Undisputed Facts”], at 5 ¶ 1.) As a result of the accident, Plaintiff
reportedly suffered various injuries. ([“Complaint”], Doc. No. 4 at 2 ¶ 9.) After settling the
liability portion of his claim against the at-fault party for the maximum limits of that individual’s
insurance policy, Plaintiff filed this lawsuit, on March 9, 2017, against his own automobile
insurance provider, Defendant Allstate Fire and Casualty Insurance Company [“Allstate”], to
recover underinsured motorist [“UIM”] benefits.1 (Undisputed Facts 5 ¶¶ 2-4; see Compl. 3-8 ¶¶
11-67.) In his Complaint, Plaintiff asserts the following causes of action: (1) unreasonable delay
1

This lawsuit was initially filed in Colorado state court. (Doc. No. 1 at 1 ¶ 1, Ex. A.) The case
was then removed, on April 7, 2017, on the basis of diversity jurisdiction. (Id. at 4 ¶ 18.)

and denial of UIM benefits, pursuant to C.R.S. §§ 10-3-1115 and 10-3-1116; (2) declaratory
judgment regarding entitlement to UIM benefits; and (3) bad faith breach of an insurance
contract. (Compl. 3-8 ¶¶ 11-67.)
As part of his original UIM claim, Plaintiff sought compensation for lost wages, in the
amount of $16,800.00, which he claimed to have incurred as a result of the car accident.2
(Undisputed Facts 5; Mot. Ex. B at 10.) On June 4, 2018, Defendant received permission to
amend its Answer in this lawsuit, to add an affirmative defense for insurance fraud relating to
Plaintiff’s wage loss claim. (Doc. Nos. 23, 33.) Specifically, Defendant alleges that Plaintiff
made material misrepresentations with respect to his lost wages, as well as the reasons for the
termination of his employment prior to the accident. (Doc. No. 23 at 3.) Defendant contends
that those misrepresentations were sufficient to trigger the fraud clause of Plaintiff’s insurance
policy, voiding his coverage thereunder. (Id. at 5.) Defendant now moves for summary
judgment, in its favor, based on that affirmative defense. (Mot. 8-17.)
STANDARD OF REVIEW
Summary judgment is appropriate if “the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the initial
burden of showing an absence of evidence to support the nonmoving party’s case. Celotex, 477
U.S. at 325. “Once the moving party meets this burden, the burden shifts to the nonmoving party
to demonstrate a genuine issue for trial on a material matter.” Concrete Works, Inc. v. City &
County of Denver, 36 F.3d 1513, 1518 (10th Cir. 1994) (citing Celotex, 477 U.S. at 325). The
2

Plaintiff withdrew his wage loss claim via responses to interrogatories, which were served after
the commencement of this lawsuit. (Mot. 2, Ex. G at 78:21-24.)
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nonmoving party may not rest solely on the allegations in the pleadings, but instead, must
designate “specific facts showing that there is a genuine issue for trial.” Celotex, 477 U.S. at
324; see also Fed. R. Civ. P. 56(c).
“A ‘judge’s function’ at summary judgment is not ‘to weigh the evidence and determine
the truth of the matter but to determine whether there is a genuine issue for trial.’” Tolan v.
Cotton, 572 U.S. 650, 656 (2014) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 249
(1986)). Whether there is a genuine dispute as to a material fact depends upon “whether the
evidence presents a sufficient disagreement to require submission to a jury,” or conversely,
whether the evidence “is so one-sided that one party must prevail as a matter of law.” Carey v.
U.S. Postal Service, 812 F.2d 621, 623 (quoting Anderson, 477 U.S. at 251-52). A disputed fact
is “material” if “under the substantive law it is essential to the proper disposition of the claim.”
Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.1998) (citing Anderson, 477 U.S. at
248). A dispute is “genuine” if the evidence is such that it might lead a reasonable jury to return
a verdict for the nonmoving party. Thomas v. Metropolitan Life Ins. Co., 631 F.3d 1153, 1160
(10th Cir. 2011) (citing Anderson, 477 U.S. at 248). “Where the record taken as a whole could
not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine issue for
trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing First
Nat’l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968)).
In evaluating a motion for summary judgment, a court may consider admissible evidence
only. See Johnson v. Weld Cnty., 594 F.3d 1202, 1209–10 (10th Cir. 2010). The factual record
and reasonable inferences therefrom are viewed in the light most favorable to the party opposing
summary judgment. Concrete Works, 36 F.3d at 1517. However, this standard does not require

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the court to make unreasonable inferences in favor of the non-moving party. Carney v. City &
Cnty. of Denver, 534 F.3d 1269, 1276 (10th Cir. 2008). The nonmovant must establish, at a
minimum, an inference of the presence of each element essential to the case. Hulsey v. Kmart,
Inc., 43 F.3d 555, 557 (10th Cir. 1994).
ANALYSIS
In its Motion, Defendant argues that it is entitled to summary judgment on all of
Plaintiff’s claims, because Plaintiff violated his insurance policy’s fraud clause. (Mot. 17.)
Defendant contends, specifically, that Plaintiff “knowingly and intentionally made material
misrepresentations as to whether he quit or was terminated from his job prior to the accident and
his ability or inability to work.” (Id.) Defendant is adamant that, pursuant to the terms of the
insurance policy, Plaintiff’s “egregious fraudulent conduct voids coverage of the entire UIM
claim.” (Id. at 3.)
The insurance policy at issue here contains the following clause: “We may not provide
coverage for any insured who has made fraudulent statements or engaged in fraudulent conduct
in connection with any accident of loss for which coverage is sought under this policy.” (Mot.
Ex. I at 7.)
Such fraud clauses have been found to be enforceable by both Colorado and Tenth
Circuit courts. See, e.g., Am. Diver’s Supply & Mfg. Corp. v. Boltz, 482 F.2d 795, 797–98 (10th
Cir. 1973); Martinez v. Hartford Underwriters Ins. Co., No. 12-cv-02405-MJW, 2014 WL
2016569, at *2 (D. Colo. May 15, 2014); Nw. Nat’l Ins. Co. v. Barnhart, 713 P.2d 1360, 1361-62
(Colo. App. 1985). And, importantly, violation of a fraud clause voids the entire claim, not just
the portion to which the fraud pertains. See Am. Diver’s, 482 F.2d at 797 (“[T]he fraud clause

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intentionally imposes different standards of responsibility and damages—absolute honesty and
forfeiture of all benefits of the policy and not merely unintended benefits[.]”) (emphasis in
original).
To establish fraud arising from the violation of a fraud clause, an insurer must prove three
elements: (1) that the insured misrepresented or omitted some fact; (2) that the misrepresentation
or omission was “material;” and (3) that there was “intent to deceive on the part of the insured.”
Sunflower Condo. Ass’n, Inc. v. Owners Ins. Co., No. 16-CV-2946-WJM-NYW, 2018 WL
2196089, at *3 (D. Colo. May 14, 2018) (quoting Martinez, 2014 WL 2016569, at *2); see Am.
Diver’s, 482 F.2d at 797. Here, Defendant argues that Plaintiff made material, intentional
misrepresentations with respect to two issues: (1) the nature of his separation from the job he
held prior to the car accident; and (2) his ability to work during the 210 days for which he
claimed lost wages. (Mot. 3.)
A.

Plaintiff’s Statements Concerning his Prior Employment

Defendant argues, first, that Plaintiff made certain misrepresentations as to whether he
had quit, or been fired from, his previous job. (Id. at 3, 11.) In support of that contention,
Defendant has produced evidence to show that, while pursuing his UIM claim, Plaintiff told
Allstate that he had quit his job, even though he had previously told the Colorado Department of
Labor that he had been terminated from the position. (Mot. Ex. H at 49:23-50:25; Doc. No. 70 at
42:9-17.)
Plaintiff, for his part, does not appear to dispute that he supplied Defendant and the
Colorado Department of Labor with contradictory positions regarding the nature of his
employment separation. (See Resp. 2-3.) Rather, Plaintiff argues that his representation to

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Defendant, that he “quit” his job, was not a misrepresentation, because it “ha[s] never changed
and w[as] truthful.” (Id.) Plaintiff contends further that, even if the statement was a
misrepresentation, it was not material to his UIM claim. (Id. at 8.) Finally, Plaintiff argues that
Defendant “ignores competent evidence that any issues were created by mistake, not intentional
representation.” (Id. at 2.)
There is no question that, at the time of the car accident, Plaintiff was unemployed. (Mot.
Ex. G at 66:23-25, 67:24-68:1.) And, it is undisputed that Plaintiff told Allstate that he had quit
his job right before the car accident. 3 (Mot. Ex. B at 2.) The parties dispute, therefore, is limited
to whether Plaintiff’s representation that he “quit” his job is a misrepresentation; whether the
statement was material, even if it was a misrepresentation; and whether Plaintiff had any intent to
deceive anyone by making the statement.
The record shows that, within a few weeks of the car accident, Plaintiff retained Scott
Landry to represent him in all legal matters arising from the incident. (Mot. 6 ¶ 21, Ex. H at
8:25-9:12.) At Mr. Landry’s suggestion, Plaintiff also applied for unemployment benefits with
the Colorado Department of Labor, during the same period that he was pressing forward on his
insurance claim. (Id. at 6 ¶ 20; see Doc. No. 26-2 at ¶ 4.) After his application for benefits was
denied by the Colorado Department of Labor, Plaintiff appealed the decision, and was
represented in the appeal by Mr. Landry. (Mot. 6 ¶ 22, Ex. H at 8:4-18.) The issue on appeal
was limited to whether Plaintiff quit his job (voluntary resignation), or whether he was fired
(involuntary termination). (Id. at 6 ¶ 24, Ex. H at 8:8-18.) At the hearing for unemployment
benefits, Plaintiff’s former employer took the position that Plaintiff quit his job, however, Mr.
3

There was never a representation that Plaintiff’s employment was discontinued, as a result of
the car accident.
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Landry argued, on Plaintiff’s behalf, that Plaintiff had been fired. (Mot. 7 ¶ 27; Doc. No. 70 at
42:9-17.)
In the employment context, circumstances may exist, where an individual has resigned
from his employment, but legally, is still considered to have been involuntarily terminated. See,
e.g., Green v. Brennan, 136 S. Ct. 1769, 1777 (2016) (quoting Penn. State Police v. Suders, 542
U.S. 129, 141 (2004)) (explaining that “[t]he constructive-discharge doctrine contemplates a
situation in which an employer [creates such intolerable working conditions] . . . that a
reasonable person . . . would have felt compelled to resign,” and that “Title VII treats that
resignation as tantamount to an actual discharge”). In such circumstances, an individual can
truthfully state to the world at large that he has resigned from his job; but nevertheless, for other
purposes, the law will consider that same individual to have been fired from that same job. Thus,
simply using the term “quit” in one context, while using the term “fired” in another context, does
not necessarily render either statement to be a lie.
At his deposition, Plaintiff provided the following testimony, when asked why he had
stopped working one week prior to the car accident:
I didn’t stop. My general manager let me go because she said that I resigned, but
I called them and let them know I was going to be late. When I got there, they
said that I had voluntarily quit pretty much because I wasn’t there when I was
supposed to be; something like that. I can’t remember the specifics.
(Mot. Ex. G at 68:4-9.) Mr. Landry, at his own deposition, testified that it was his
understanding, that in the initial unemployment benefits proceeding, the hearing officer “had
made a determination that [Plaintiff] was not eligible for unemployment benefits because it
agreed with his former employer’s position that he voluntarily terminated as opposed to being
involuntarily terminated.” (Mot. Ex. H at 51:12-17.) The appellate court, however, ultimately
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reversed the lower court, and found that Plaintiff had, in fact, been involuntarily terminated,
thereby entitling him to unemployment benefits. (See Mot. 5 ¶ 16, Ex. F.)4
On this record, then, the extent to which Plaintiff’s statements regarding his separation
from employment shortly before the car accident constitute misstatements, thereby qualifying as
fraud under the fraud clause of the insurance policy, presents a genuine disputed issue of material
fact that precludes summary judgment. Further, whether such statements were material, and
whether such statements were made by Plaintiff with an intent to deceive either Allstate, or the
Colorado Department of Labor, also present genuine disputed issues of material fact, including
the quintessential jury responsibility to determine the credibility of witnesses. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“Credibility determinations, the weighing of the
evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of
a judge, whether he is ruling on a motion for summary judgment or for a directed verdict.”)
Therefore, summary judgment is inappropriate on this issue.
B.

Plaintiff’s Statements Concerning his Ability to Work

Defendant also argues that Plaintiff made misstatements regarding his ability to work in
the aftermath of the car accident, during the period for which he claimed lost wage damages.
(Mot. 11.) In making that argument, Defendant points to evidence that Plaintiff told Allstate that
he was physically unable to work from the date of the accident, April 2, 2015, until January
2016, thereby accruing $16,800.00 in lost wages. (Mot. 4-5 ¶¶ 8, 12, Ex. B at 10, Ex. E at 3.)

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This Undisputed Fact is partially disputed, in that some of the unemployment benefits which
Plaintiff received were ultimately repaid. However, it is undisputed that Plaintiff’s tax returns do
show that he received unemployment benefits in 2015. (See Mot. Ex. F.)
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Defendant contends that, upon his initial application for unemployment benefits, Plaintiff “was
required to show that he was able to and available for work.” (Mot. 11.)
Plaintiff, in response, has produced his own deposition testimony to show that he did not
work, at all, during the time period at issue. (Resp. Ex. 1 at 72:20-74:9.) At his deposition,
Plaintiff also testified that he was unable to meet the physical labor requirements of at least one
job, due to his injuries from the car accident. (Id.)
Here, the record shows that Plaintiff consistently represented to Defendant that he was
unable to work for a certain time period after the car accident, due to his injuries. In a June 30,
2016 demand letter, Plaintiff’s attorney, Mr. Landry, informed Allstate that, prior to the car
accident, Plaintiff “was looking forward to obtaining another job when he returned to Colorado,”
but that because of his injuries, Plaintiff “was not able to work for approximately one year after
the accident.” (Mot. Ex. B at 2.) In that letter, Mr. Landry made clear that Plaintiff “missed
approximately 210 days of work due to his injuries.” (Id. at 10.) Mr. Landry emphasized that
Plaintiff “was unable to work for almost an entire year, and now only does so under duress.” (Id.
at 11.) By letter dated October 3, 2016, in which he contested Defendant’s initial evaluation of
the UIM claim, Mr. Landry wrote, in relevant part: “[Plaintiff] was unable to work from April 2,
2015 to January 2016. We provided written confirmation that his hourly wage prior to the
accident was $10.00 per hour and you are aware that he missed approximately 210 days of work
due to his injuries.” (Mot. Ex. E at 3.)
The uncontroverted evidence before the court shows that Plaintiff did not work at any
paid employment position in the immediate aftermath of the car accident, and that this period of
unemployment overlapped, at least in part, with a period during which Plaintiff received

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unemployment benefits. (See Mot. Ex. F.) Importantly, Defendant has not presented any
evidence to show that Plaintiff did, in fact, tell the Colorado Department of Labor that he was
physically able to perform any and all work. Nor has Defendant produced evidence to show that
Plaintiff could, in fact, work.
To prove that Plaintiff misstated his ability to work, Defendant cites the Colorado
unemployment statute, C.R.S. § 8-73-107, which provides, in relevant part, that: “Any
unemployed individual shall be eligible to receive benefits with respect to any week only if the
division finds that . . . [t]he individual is able to work and is available for all work deemed
suitable[.]” C.R.S. § 8-73-107(1)(c)(I) (emphasis added). The statute requires a finding by the
Colorado Department of Labor, and it does not imply that a claimant made a statement regarding
his ability to work at any and all jobs. In this case, there is no evidence that Plaintiff registered
for work at an unemployment office or, if he did, what the contents of such a registration
contained. See Mitchell v. City of Moore, Okla., 218 F.3d 1190, 1199 (10th Cir. 2000) (stating
that a court is “not obligated to comb the record in order to make [a party’s] arguments for
him”).
It is also worth noting that knowledge of the Colorado unemployment statute cannot
necessarily be imputed to Plaintiff, simply because he employed a lawyer for one phase of the
proceedings. Indeed, the record shows that Mr. Landry did not assist Plaintiff with the original
paperwork to initiate his claim for unemployment benefits. (Mot. Ex. H at 8:8-12, 16:8-16.) At
his deposition, Mr. Landry testified that he told Plaintiff that he “didn’t see that it was any
problem, that he should go ahead and apply [for unemployment benefits].” (Id. at 12:14-13:5.)
Mr. Landry also testified that he does not, and has never, believed that “one of the requirements

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for submitting an application for unemployment benefits [is] that at the time you submit that
application you are . . . physically and mentally capable of working.” (Id. at 19:3-8.)
It is true that “[a]n attorney is presumed to know the law, and an attorney’s knowledge is
imputed to the client if it relates to the proceedings for which the attorney has been employed.”
Murry v. GuideOne Specialty Mutual Ins. Co., 194 P.3d 489, 494 (Colo. App. 2008). However,
the record here does not show that Mr. Landry represented Plaintiff in his application for
unemployment benefits. And, there is no evidence presented which would allow the court or the
jury to infer that Plaintiff, himself, would have read and understood the Colorado Revised Statute
with respect to unemployment benefits.
Therefore, it is again uncertain whether Plaintiff made any misstatement with respect to
his ability to perform work during the time period at issue. But, even if such a misstatement
could be shown, summary judgment would still not be appropriate. Specifically, the materiality
of a misrepresentation is a mixed question of law and fact, that under most circumstances, should
be determined by the trier of fact. See Turley v. State Farm Mut. Auto. Ins. Co., 944 F.2d 669,
672 (10th Cir.1991); Long v. Ins. Co. of N. Am., 670 F.2d 930, 934 (10th Cir.1982). Also, intent
to deceive on the part of the insured may only be implied if the misrepresentations or omissions
were made knowingly and deliberately. See Wagnon v. State Farm Fire & Cas. Co., 146 F.3d
764, 768 (10th Cir. 1998). For that determination, credibility of the witnesses, including
Plaintiff, will be a key component.
Whether a party has committed fraud that is sufficient to void his insurance policy is
almost always a question of fact for the jury to determine, and not a question of law. See Varady
v. White, 595 P.2d 272, 273 (Colo. App. 1979); see also Dozier v. Twin Peak Ranch, Inc., 424

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P.2d 368, 368 (Colo. 1967). The issues here, including whether a misrepresentation was made,
whether the misrepresentation, if made, was material, and whether Plaintiff knowingly and
deliberately made such a misrepresentation with the intent to mislead or deceive, are all issues
involving disputed facts and the inferences therefrom. Therefore, summary judgment on
Defendant’s affirmative defense of insurance fraud is inappropriate.
It is therefore
ORDERED that Defendant’s “Motion for Summary Judgment” (Doc. No. 86) is
DENIED.
Dated January 15, 2020.

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