Free Reply to Response to Motion - District Court of Colorado - Colorado

Case 1:00-cv-02098-REB-MJW

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Thomas, B. v. State Farm Mutual COLORADO COURT OF APPEALS ______________________________________________________________________________ Court of Appeals No.: 06CA1895 Jefferson County District Court No. 05CV4008 Honorable Jane A. Tidball, Judge ______________________________________________________________________________ Bethany A. Thomas, Plaintiff-Appellant, v. State Farm Mutual Automobile Insurance Company, an Illinois insurance company, Defendant-Appellee. ______________________________________________________________________________ JUDGMENT AND ORDER AFFIRMED Division IV Opinion by: JUDGE VOGT Webb and Bernard, JJ., concur NOT PUBLISHED PURSUANT TO C.A.R. 35(f) Announced: November 15, 2007 ______________________________________________________________________________ Darling, Bergstrom & Milligan, P.C., Bruce G. Smith, Brandi J. Pummell, Denver, Colorado, for Plaintiff-Appellant Fisher, Sweetbaum, Levin & Sands, P.C., Jon F. Sands, Kimberle E. O'Brien, Denver, Colorado, for Defendant-Appellee

Exhibit 4

Case 1:00-cv-02098-REB-MJW

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Plaintiff, Bethany A. Thomas, appeals the judgment entered on a jury verdict finding defendant, State Farm Mutual Automobile Insurance Company, liable for damages in the amount of $2,500 on her breach of contract claim and not liable on her claim for bad faith breach of contract. She also appeals the trial court's order directing the parties to bear their own costs. We affirm. Plaintiff was injured when another car struck the rear end of her vehicle. At the time of the accident, she was insured under a State Farm automobile insurance policy which included underinsured motorist (UIM) coverage up to $100,000 and personal injury protection (PIP) coverage up to $100,000. After receiving $25,000 in settlement of her claim against the other driver, plaintiff sought additional compensation from State Farm under her UIM coverage. State Farm, which had already paid $99,824.26 in medical expenses pursuant to the PIP coverage in plaintiff's policy, offered and paid an additional $3,500 on plaintiff's UIM claim. Plaintiff then brought this action. Before trial, plaintiff filed a motion in limine to exclude evidence or statements that State Farm had paid her $99,824.26 in medical benefits. Plaintiff acknowledged that she would be
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precluded from recovering the first $50,000 paid as PIP benefits, but she argued that the fact that it was State Farm who had paid them was irrelevant. She further contended that she was not precluded from recovering sums in excess of $50,000 because those payments were made, not pursuant to the $50,000 basic PIP coverage mandated by law, but pursuant to the additional $50,000 enhanced PIP coverage she had purchased. Although plaintiff's motion did not state the amount she had paid for PIP coverage, the policy declarations page in the record indicates that her total premium for PIP coverage for the period from November 26, 2001, to February 9, 2002, was $24.04. The trial court denied the motion, finding that the result sought by plaintiff would not be "just or fair" and that the rationale for excluding the $50,000 paid under basic PIP coverage applied to the $50,000 paid under enhanced PIP coverage as well. The jury was accordingly told of the amount State Farm had paid plaintiff under her PIP coverage and was instructed to exclude up to $100,000 in medical expenses from any damages award. The trial court directed a verdict for State Farm on plaintiff's claim for punitive damages. The jury returned a verdict for State
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Farm on the bad faith claim and for plaintiff on the contract claim, awarding her $2,500 on that claim. The trial court denied plaintiff's motion for postjudgment relief except insofar as the motion sought prejudgment interest. Plaintiff submitted a bill of costs in the amount of $9,864.74, but the court concluded that she was not the prevailing party and, accordingly, ordered each party to bear its own costs. I. Plaintiff contends the trial court erred in excluding from her potential UIM recovery against State Farm the sums State Farm paid for her medical benefits under her enhanced PIP coverage. She concedes that the $50,000 paid under her basic PIP coverage is not recoverable pursuant to former section 10-4-713(1) of the nowrepealed Auto Accident Reparations Act (No-Fault Act), ch. 94, sec. 1, §§ 13-25-1 to -23, 1973 Colo. Sess. Laws 334-45 (formerly codified as amended at §§ 10-4-701 to -26; repealed effective July 1, 2003, Ch. 189, sec. 1, § 10-4-726, 2002 Colo. Sess. Laws 649). However, she argues that former section 10-4-713(1) refers only to basic PIP coverage, and that the PIP benefits she received under the enhanced PIP coverage she purchased are not excludable under the
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"collateral source" rule because they fall within the contract exception in the statute codifying that rule. See § 13-21-111.6, C.R.S. 2007 (requiring that tort damages awards be reduced by amount injured person has been compensated from a collateral source, but excepting from that rule compensation "by a benefit paid as a result of a contract entered into . . . by . . . such person"). We are not persuaded. Even assuming that enhanced PIP coverage is not excluded under former section 10-4-713(1), we discern no basis for reaching the result urged by plaintiff in a case where (1) plaintiff has been fully compensated for her losses, and (2) her compensation came from the same party from whom she seeks additional damages. A. The purpose of UIM coverage is to help ensure full compensation for losses caused by the negligent conduct of financially irresponsible motorists. Kral v. American Hardware Mut. Ins. Co., 784 P.2d 759, 764-65 (Colo. 1989); Munger v. Farmers Ins. Exchange, ___ P.3d ___, ___ (Colo. App. No. 06CA0101, July 12, 2007).

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The Colorado Supreme Court has declined to allow setoffs from UIM benefits where doing so would undermine the goal of preventing inadequate compensation to injured parties. See Barnett v. American Family Mut. Ins. Co., 843 P.2d 1302, 1309 (Colo. 1993) (rejecting insurer's argument that social security disability benefits could be set off from UIM award as benefits from a collateral source, and reasoning that such benefits fell within contract exception to collateral source rule); Kral, 784 P.2d at 765 (policy provision and agreement reducing insurer's liability for UIM coverage by amount of insured's recovery in civil action against third parties were unenforceable to extent any reduction in benefits impaired ability of insured to achieve full compensation for loss caused by uninsured motorist); Newton v. Nationwide Mut. Fire Ins. Co., 197 Colo. 462, 467-68, 594 P.2d 1042, 1045 (1979) (policy provision allowing insurer to subtract PIP benefits from amounts payable under UIM coverage, thereby reducing UIM coverage to less than the statutorily required minimum and requiring insured to absorb portion of his loss, was unenforceable). However, the supreme court has consistently recognized that the principle articulated in the cases cited above does not apply if
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the insured has been fully compensated, such that its application would result in double recovery for the insured. See Barnett, 843 P.2d at 1308, 1309 n.5 (recognizing concern about granting insured windfall by allowing double recovery for same loss, and reiterating procedure suggested in Newton to prevent double recovery of PIP and UIM benefits); Kral, 784 P.2d at 766 (recognizing that General Assembly did not intend to allow double recovery for same loss and holding that insurer could enforce its release-trust agreement to extent that payment of UIM benefit would "result in insured's receiving sums in excess of her total loss"); Newton, 197 Colo. at 468, 594 P.2d at 1046 ("The proper method to preclude the possibility of recovery of PIP-type losses under both PIP and [UIM] coverages would be to eliminate PIP paid benefits from the [UIM claim], then allow recovery of [UIM] benefits to the extent non-PIP benefits are proved, up to the policy limits. This procedure would preclude actual double recovery of no-fault benefits while allowing the insured the full protection of the [UIM] coverage for which he paid a premium."); see also Alliance Mut. Cas. Co. v. Duerson, 184 Colo. 117, 124, 518 P.2d 1177, 1181 (1974) (upholding policy limitation on UIM coverage, finding legislative intent satisfied, and
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observing that adoption of contrary rule would produce "the anomalistic result of double recovery"). The principle recognized in Barnett, Kral, Newton, and Alliance is codified in section 10-4-609, C.R.S. 2007, which sets forth the requirement that automobile insurers provide protection against uninsured motorists. The statute includes the following provision: (5) The maximum liability of the insurer under the uninsured motorist coverage provided shall be the lesser of: (a) The difference between the limit of uninsured motorist coverage and the amount paid to the insured by or for any person or organization who may be held legally liable for the bodily injury; or (b) The amount of damages sustained, but not recovered. § 10-4-609(5), C.R.S. 2007. Divisions of this court have consistently upheld section 10-4609(5), as well as insurance policy provisions consistent with that statute, and have rejected contentions that the statute and the policy provisions violate public policy. See Freeman v. State Farm Mut. Auto. Ins. Co., 946 P.2d 584, 585 (Colo. App. 1997); Carlisle v. Farmers Ins. Exchange, 946 P.2d 555, 557 (Colo. App. 1997);

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Farmers Ins. Exchange v. Walther, 902 P.2d 930, 935-36 (Colo. App. 1995); see also Terranova v. State Farm Mut. Auto. Ins. Co., 800 P.2d 58, 61 (Colo. 1990) (section 10-4-609 does not require full indemnification of losses suffered at the hands of uninsured motorists under all circumstances). Consistent with section 10-4-609(5), the UIM coverage portion of the State Farm policy includes the following provisions in the "limits of liability" section: 2. Any amount payable under this coverage shall be reduced by any amount paid or payable to or for the insured for the same damages for bodily injury under the liability coverage. 6. We will not pay any amount which would duplicate payments the insured has received or will receive for the same elements of loss. We perceive no reason for declining to apply the policy provisions, which we do not find ambiguous, as well as section 104-609(5)(b), C.R.S. 2007, to the situation presented here. Under both the statute and the policy provisions, as well as the case law cited above, plaintiff has no right to recover UIM coverage for sums that have already been paid to her, regardless of the source of such payment.

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B. Plaintiff's claim was properly rejected by the trial court for the additional reason that plaintiff is seeking recovery from the party who has already compensated her for the same losses. Such recovery is not permissible under Colorado Permanente Medical Group, P.C. v. Evans, 926 P.2d 1218 (Colo. 1996), and Quinones v. Pennsylvania General Ins. Co., 804 F.2d 1167 (10th Cir. 1986), on which the Evans court relied. In Evans, the supreme court held that the court of appeals had erred in applying the contract exception to the collateral source rule to deny a health maintenance organization (HMO) the right to offset medical expenses it had paid against the portion of the judgment for which it was responsible. Evans, 926 P.2d at 123031. The court concluded that denying offset of the medical expenses already paid by the HMO would result in a double recovery for the plaintiff and would be "contrary to the goal of section 13-21-111.6, which is to limit double recovery." Id. at 1232. The court further noted that the common law collateral source rule was not applicable in situations in which a plaintiff's compensation was attributable to the defendant, and that there was no indication
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that section 13-21-111.6 changed that intent. Id.; see also Van Waters & Rogers, Inc. v. Keelan, 840 P.2d 1070, 1074 (Colo. 1992) (collateral source rule not applicable when plaintiff's compensation was attributable to defendant). In Quinones, the insured contended that he was entitled to recover his past medical expenses from the insurer under the policy's UIM provisions even though the insurer had already reimbursed him for those medical expenses under the policy's medical payment provisions, and he asserted that the trial court had erred in refusing to so instruct the jury. The Tenth Circuit rejected the insured's reliance on the collateral source rule in support of his position, reasoning: The posture of the present case dictates that application of the collateral source rule would be inappropriate. This is not a suit against the tortfeasor in which we wish to avoid rewarding the tortfeasor by reducing his liability because of the happenstance that the plaintiff possessed the foresight to purchase insurance. The defendant in this action, Penn General, is also the "collateral source." No policy would be served by requiring Penn General to twice pay Mr. Quinones' past medical expenses. Even in the prototypical collateral source case, the tortfeasor is required to pay only once. In fact, when the collateral source is somehow identified with the tortfeasor, the collateral source rule is inapplicable in a suit against the tortfeasor. In effect, the source is not sufficiently collateral to or independent of the tortfeasor; it is as if the
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tortfeasor himself paid. In such cases, the tortfeasor's liability is reduced by the amount of payment made. . . . [W]e are not "excusing" Penn General from liability when we [forgo] the collateral source rule in this case; it has completely reimbursed Mr. Quinones' past medical expenses. Just as the rule's goal is not to reimburse plaintiffs twice, though oftentimes that is its effect, its goal is not to charge defendants twice, either. 804 F.2d at 1171-72 (emphasis in original)(citation omitted). We are unpersuaded by plaintiff's attempts to distinguish Evans and Quinones, and we find the rationale of these cases applicable to the situation presented here. Contrary to plaintiff's contention, the trial court's ruling did not result in a "windfall" for State Farm, render her premium payment for enhanced coverage meaningless, or allow State Farm to "take advantage of her" by retaining whatever portion of the premium paid for PIP coverage was attributable to enhanced PIP. Allowing plaintiff the double recovery she seeks in order to avoid such asserted windfall to State Farm would be contrary to the statute, the case law, and the policy provisions discussed above. Accordingly, the trial court did not err in excluding amounts State Farm had already paid plaintiff for medical benefits from her UIM recovery.
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II. We further conclude that the trial court acted within its discretion in refusing to award plaintiff her costs as the "prevailing party" in accordance with C.R.C.P. 54(d). A "prevailing party" within the meaning of C.R.C.P. 54(d) is one who prevails on a significant issue in the litigation and derives some of the benefits sought by the litigation. When a case involves multiple claims, some of which are successful and some of which are not, it is "left to the sole discretion of the trial court to determine which party, if any, is the prevailing party and whether costs should be awarded." Archer v. Farmer Bros. Co., 90 P.3d 228, 230-31 (Colo. 2004); accord Pastrana v. Hudock, 140 P.3d 188, 190 (Colo. App. 2006). In multiple claim cases, where either party could arguably be considered the prevailing party, the trial court is in the best position to evaluate the relative strengths and weaknesses of each party's claims, the significance of each party's successes in the context of the overall litigation, and the time devoted to each claim. Archer, 90 P.3d at 231; Pastrana, 140 P.3d at 190.

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Relying on Archer, the trial court here concluded that plaintiff was not entitled to costs as a prevailing party. The court noted that each party had prevailed on one claim; that plaintiff had received only a fraction of the damages she had sought; and that State Farm had also prevailed on the issue of punitive damages. The trial court's determination was well within its discretion. We do not agree with plaintiff that, under Dennis I. Spencer Contractor, Inc. v. City of Aurora, 884 P.2d 326 (Colo. 1994), the court was required to find her the prevailing party because the jury found in her favor on liability on the breach of contract claim. In Spencer, the plaintiff asserted two breach of contract claims and the jury found that the defendant had breached both contracts. Here, even if the bad faith claim were viewed as "dependent" on the contract claim, as plaintiff argues, Spencer would not require a cost award to plaintiff because she lost on liability on the bad faith claim. Moreover, as set forth above, in a multiple claim case such as this, the prevailing party determination is committed to the sole discretion of the trial court. See Archer, 90 P.3d at 231; Wheeler v. T.L. Roofing, Inc., 74 P.3d 499, 504 (Colo. App. 2003) (rejecting plaintiff's claim that Spencer required him to be deemed prevailing
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party because he prevailed on breach of contract claim, and concluding that, "where both parties have prevailed in part on the question of liability, the trial court is free to determine which is prevailing" for purposes of fee-shifting agreement and for C.R.C.P. 54(d) cost determination). Further, again contrary to plaintiff's contention, the trial court did not err in considering the small amount of the damages award and the fact that State Farm was not assessed punitive damages. See Archer, 90 P.3d at 232 (fact that defendants escaped large damages award and exemplary damages supported trial court's determination that they were prevailing parties); Pastrana, 140 P.3d at 190. The judgment and the order are affirmed. JUDGE WEBB and JUDGE BERNARD concur.

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