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

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

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 00-cv-02098-REB-MJW KELLY FINCHER, by her guardian, JAMES FINCHER, on behalf of herself and all others similarly situated, Plaintiffs, v. PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, a New Jersey Corporation, Defendant. PLAINTIFF'S REPLY TO DEFENDANT'S MEMORANDUM IN OPPOSITION TO PLAINTIFF'S MOTION FOR ATTORNEYS FEES Defendant ("Prudential") posits multiple arguments against Plaintiff's request for attorney fees pursuant to the clear mandate of C.R.S. § 10-4-708(1.7), but these arguments are largely unsupported by any authority, and do not overcome the fundamental reality that an insured who successfully recovers PIP benefits is entitled to recover reasonable attorney fees. This Court's rulings and award of damages in its

October 9, 2007, Order Concerning Motion For Summary Judgment (hereinafter "Doc. 277") make clear that Plaintiff did prevail in her action seeking PIP benefits, and Prudential's attempt to convince the Court that Plaintiff is not entitled to any attorney fees despite the unequivocal statutory language and the explicit rulings of this Court, must fail. Prudential's primary argument, that C.R.S. § 10-4-708 does not apply to Plaintiff's recovery of No-Fault benefits in this case, is belied both by its own actions and the law of this case. Moreover, Prudential seeks to add requirements to the language of § 10-4-708, in violation of the mandate of the Colorado Supreme Court. See Adams v. Farmers Ins.
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Group, 983 P.2d 797, 803-4 (Colo. 1999) (court of appeals erred when it "read an unenumerated prerequisite into the attorney fees provision."). To recover attorney fees under § 10-4-708(1.7), an insured simply must recover past due benefits, or, in other words, "succeed monetarily" in the action against the insurer. Adams, 983 P.2d at 802-3. In describing the factual background for the instant motion, Prudential leaves out two key facts. First, by its payment of interest to Plaintiff on the past due APIP benefits at issue in this case, interest that it expressly acknowledged was due to her under C.R.S. § 10-4-708 (noted by the Court at Doc. 277 p. 5), Prudential admitted that § 10-4-708 applies to the claims at issue in this case. Exhibit 1 (letter calculating interest "in accordance with C.R.S. § 10-4-708(1)"). Second, Prudential did not tender the benefits due under the reformed contract of insurance until April 12, 2006, more than 30 days after the Court's February 28, 2006 Order reforming the policy. Exhibit 2 (check and cover letter). A. C.R.S. § 10-4-708 applies to the benefits recovered by Plaintiff in this action Prudential's argument that C.R.S. § 10-4-708 does not apply here because the benefits are extended, or "APIP" benefits is incorrect. As an initial matter, Prudential

should be judicially estopped from asserting this argument. Prudential successfully argued to this Court in its motion for summary judgment that Plaintiff's claims had been mooted by its payment of interest "calculated...under former C.R.S. § 10-4-708." Def. Mem. Brief In Supp. Of Mtn. For Summ. J. p. 4. Prudential thus has already acknowledged Plaintiff's entitlement to interest under §10-4-708, and cannot now be heard to argue that "C.R.S. § 10-4-708 applies only to the recovery of basic, rather than extended, PIP benefits." Def. Opp. p. 4. Judicial estoppel prevents a party from succeeding in maintaining one position in a case, and later relying on a contradictory argument in an attempt to prevail in another
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phase of a case. See Maine v. New Hampshire, 532 U.S. 742, 749 (2001). The purpose of the doctrine is to protect the integrity of the judicial process by prohibiting parties from deliberately changing positions according to the exigencies of the moment. Id. Having succeeded on summary judgment, Prudential should not be permitted to take a position that is directly contrary to its earlier arguments. Prudential's changed position is also contrary to the law of this case contained in the Court's ruling regarding Prudential's motion for summary judgment. This Court held that with respect to her breach of contract claim, Plaintiff was entitled only to "payment of her APIP claims, payment of statutory interest, and payment of any award of attorney fees by the court based on her breach of contract claim," referring to section 10-4-708(1.7)(c). Doc. 277 p. 9. Prudential fails to explain why its argument is not contrary to the law of this case, and cites only to two rulings by other courts, neither of which is persuasive. It cites to Smith v. Farmers Insurance Exchange, 983 P.2d 71 (Colo. App. 1998), rev'd on other grounds, 9 P.3d 335 (Colo. 2000). However, Smith is inapposite here because the court based its ruling on the fact that the insured lost on his statutory claims, whereas Plaintiff here prevailed on her statutory claims based on Prudential's violations of the No-Fault Act. Prudential also cites without explanation the trial court ruling in Lopez v. American Family Mutual Insurance Co, No. 05-CV-02603-RPM (D. Colo. May 16, 2007) (Ex. F. to Def's Opp.), an action for APIP benefits like this one, but fails to acknowledge two critical distinctions. First, the trial court in Lopez indicated that § 10-4-708 would apply to the claims at issue, but the insurer did not violate its requirements. Id. at p. 4. Second, the rationale for the trial court's ruling in Lopez is completely at odds with this Court's rulings on reformation and summary judgment. In Lopez the court ruled that the insurer violated
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C.R.S. § 10-4-710 instead of § 10-4-708, whereas this Court has already concluded that Prudential breached the reformed contract of insurance and violated C.R.S. § 10-4-708 by its tardy payment of the benefits due under the reformed contract. Doc. 277 at p. 10. 1 Colorado courts have routinely assumed that the provisions of section 10-4-708 apply to actions for enhanced PIP. For example, in the seminal case Brennan v. Farmers Alliance Mutual Insurance Co., 961 P.2d 550 (Colo. App. 1998), the Colorado Court of Appeals clearly contemplated that the insured would have been entitled to an award of interest and attorney fees had the benefits been overdue. Id. at 557. In Hudgins v. Financial Indemnity Co., which involved a similar claim for APIP benefits due to statutory violations, the trial court relied on § 10-4-708(1.7) to award more than $500,000 in attorney fees to the successful insured. Hudgins v. Financial Indemnity Co., No. 03cv1295 (Denver Dist. Ct., January 7, 2008) (Order Re Plaintiff's Motion For Attorney Fees) (Attached as Ex. 3). Courts in other contexts have also concluded that APIP and basic PIP benefits are interchangeable and to be accorded the same treatment. See, e.g., Zahner v. American Family Mut. Ins. Co., 2007 WL 851626 *4-5 (Colo. App. 2007) (workers compensation offset for PIP benefits applied to APIP as well as BPIP benefits despite statutory reference only to BPIP benefits); DiCocco v. National General Ins. Co., 140 P.3d 314, 319 (Colo. App. 2006) (citing Brennan; PIP and APIP coverages treated the same for determination of primacy); Thomas v. State Farm Mut. Auto. Ins. Co., No. 06CA1895 (Colo. App. November 15, 2007) (although statute referred only to basic PIP, APIP benefits could similarly be offset from UIM coverage) (Ex. 4).
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Prudential's position would also lead to the anomalous result that an insurer found to have clearly violated the No-Fault Act regarding APIP benefits, as here, would be in a better position with respect to attorney fees than an insurer who erroneously declined to pay BPIP benefits based on a good faith dispute about whether certain expenses were reasonable, necessary, and accident related. 4

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B.

Plaintiff was not required to obtain a judgment following a trial Prudential's argument that Plaintiff was not "successful" in the proceeding under

C.R.S. § 10-4-708(1.7)(c) and cannot recover her attorney fees because the benefits paid to her were never reduced to a post-trial money judgment is also incorrect. Prudential cites only to the unpublished opinion in Goodwin v. Homeland Central Insurance Co., No. 05CA2038, 2007 WL 1839863 (Colo. App. June 28, 2007) for support, ignoring that the facts of that case are entirely different. In Goodwin, the court denied the request for attorney fees because it concluded that the plaintiffs did not prove that the insurer failed to pay benefits when due. Goodwin, 2007 WL 1839863 at *7. Here, in contrast, Plaintiff not only obtained reformation but also obtained summary judgment including an award of damages on her claim for breach of contract, with this Court expressly ruling that Prudential failed to pay benefits when due. Doc. 277 p. 9-10. Goodwin does not create a technical requirement that the monetary success be reduced to a particular type of judgment following a trial, but rather requires that the Plaintiff recover benefits that were past due, which Plaintiff here did pursuant to the Court's entry of judgment in her favor. The argument that the damages awarded to Plaintiff by this Court were not recovered in a "proceeding" as described in C.R.S. § 10-4-708 is also wrong. The statute specifically permits an "action in contract" when benefits are not paid as required, and the Court awarded damages to Plaintiff based on her contract claim. Prudential cites to no authority, nor has Plaintiff found any, suggesting that a successful insured is not entitled to statutory fees merely because the contract action was resolved on summary judgment. Prudential did not tender the APIP benefits due to Plaintiff until April 12, 2006, Doc. 277 p. 5, despite the clear requirement of C.R.S. § 10-4-708(1) that such benefits be paid
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within 30 days. Plaintiff therefore succeeded monetarily in a proceeding, recovered past due benefits, and is entitled to attorney fees. See Adams, 983 P.2d at 802-3. C. Plaintiff's Notice to Insurer fully complied with C.R.S. § 10-4-708 Prudential next asserts, based on a misreading of the statute and without citation to any authority, that Plaintiff's Notice of Amount Claimed was deficient because it did not itemize all of her accident-related losses. However, the statutory language mandates that the notice "shall include no more than those amounts the insured claims are denied or not timely paid by the insurer." C.R.S. § 10-4-708(1.7) (emphasis added). Describing all of Plaintiff's damages, as Prudential contends was required, would have been a direct violation of the clear mandate that the notice list only those benefits that were denied or not timely paid. Here, because of the Court's reformation ruling imposing a $200,000 cap on the available coverage, the remaining amount of benefits that had both been denied at the outset of the litigation and then untimely paid later, was $92,500. Given the Court's ruling and the express statutory language, it would be inappropriate to penalize Plaintiff for not listing the accident-related losses that happened to far exceed the coverage available. D. Plaintiff fully documented her reasonable attorney fees Without citing to any authority, Prudential argues that the 125 pages of time entries submitted by Plaintiff's counsel are inadequate, "precluding any award of fees." Although it makes only vague unsupported references to perceived problems, counsel for a party seeking an award of attorney fees is not required to record in great detail how each minute of time was expended, but only to identify the general subject matter of the time expenditures. American Water Development v. City of Alamosa, 874 P.2d 352, 383 (Colo.

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1994). The detailed records submitted by counsel here, which describe each task by type, subject matter, attorney or paralegal name, time and rate, far exceed this requirement. Prudential also asserts without explanation that the itemized attorney fees documented by Plaintiff are unreasonable because "Plaintiff recovered only $92,500 in benefits," Def. Opp. p. 10, but the Colorado Court of Appeals in Spensieri, supra, rejected this argument long ago, noting that § 10-4-708 "does not preclude an award of attorney fees in excess of either the total amount of medical bills in controversy or the amount awarded." 804 P.2d at 271. The similarly unsubstantiated claim that the hourly rates charged by Plaintiff's attorney are "excessive for counsel seeking only PIP benefits for breach of insurance contract" is wrong; the Court is familiar with the issues in this case which are complex and go well beyond a typical breach of contract claim. E. Plaintiff's fees may not be reduced because she also pursued other claims Prudential next contends, again without citation to any authority, that Plaintiff cannot recover fees for the time her attorney spent on "purposes other than obtaining PIP benefits under her breach of contract claim." Def. Opp. p. 11. However, the Colorado Supreme Court ruled unequivocally in Adams, supra, that in assessing the availability and amount of attorney fees under § 10-4-708(1.7), "the trial court need only refer to a party's monetary success in the proceedings...." 983 P.2d at 802. No court has adopted Prudential's

argument; rather, § 10-4-708(1.7) mandates, as Prudential acknowledges, see Def. Opp. p. 12, that "the award of attorney fees to the insured shall be in direct proportion to the degree by which the insured was successful in the proceeding." (emphasis added). Prudential's argument that an insured's entitlement to fees can somehow be limited based on the existence of additional (and inextricably intertwined) remedies would
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improperly inject another requirement into the statutory language, and the Supreme Court in Adams made clear that this is not permitted. Adams, 983 P.2d at 803-4. In fact, the plaintiff in Adams also sought additional remedies, including bad faith breach of insurance contract, and yet the Supreme Court upheld the award of attorney fees based on the proportion of benefits recovered, without any reduction for other claims rejected by the jury. Id. at 799 n. 1, 800. No apportionment based on the pursuit of other claims was found to be appropriate in Adams, where the insured lost on the bad faith and related claims, and this Court should not accept Prudential's invitation to do so here. Prudential's argument that Plaintiff cannot recover the attorney fees related to succeeding on the reformation claim is also incorrect; without succeeding on the reformation claim, Plaintiff could never have recovered any damages. The time and effort her attorneys devoted to obtaining reformation of the policy was therefore essential to her "success" in this proceeding, and must be included in assessing the recovery of fees in accordance with § 10-4-708(1.7). Cf. Hudgins, Ex. 3. Prudential's citation to the Lopez and Goodwin rulings is inapposite here, as previously noted: those courts ruled that the insurer complied with the timely payment requirements of § 10-4-708, whereas here the Court has ruled that Prudential failed to timely pay the benefits due. Doc. 277 p. 10. F. Plaintiff won 100% of the benefits, and is entitled to recover 100% of her fees Conceding that "the amount of fees awarded must reflect the degree of Plaintiff's success in obtaining the claimed benefits," but once again without benefit of any supporting authority, Prudential next argues that Plaintiff's success rate is "less than 3 percent." Def. Opp. p. 13-14. Prudential again has it wrong. Both the Adams and

Spensieri rulings make clear that the statutory phrase "amount of benefits recovered"
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requires a factual comparison of the amount claimed with the insured's recovery. See Adams at 799 (jury verdict of $22,000 "represented thirty-eight percent of the total PIP benefits sought"); Spensieri at 270 ($9,879.36 claimed; jury "returned a verdict for Plaintiff in the amount of $2,550.50."). Thus, assessing the "degree of success" is based upon the amount of unpaid benefits awarded, not upon the question of whether the insured may have sustained accident-related injuries that might exceed the available coverage. Here, Plaintiff claimed and recovered unpaid benefits under the reformed policy in the amount of $92,500; after the court's rulings on the cap issue, the relevant coverage was $92,500 and Plaintiff recovered all of that amount. Although Plaintiff's evidence also identified accident-related expenses that exceeded the available coverage after the Court's ruling on the cap issue, the amount listed in the statutorily-mandated Notice to Insurer should be compared only to the benefits remaining based on the Court's ruling, and Plaintiff in fact recovered the entire amount. See also Hudgins, Ex. 3, p. 2 (existence of accident-related expenses in excess of $200,000 cap on coverage not relevant). 2 G. Prudential's offer of judgment does not affect the § 10-4-708 analysis Despite Prudential's whimsical arguments to the contrary, attorney fees under the No-Fault Act are not considered costs for the purposes of Fed. R. Civ. P. 68. Under Rule 68, if a defendant makes an offer of judgment which is rejected by the plaintiff, and the plaintiff later fails to recover more than the amount offered, the defendant may recover costs. When the Supreme Court considered the question of whether Rule 68 costs include attorney's fees, it held that for attorney's fees to be cognizable under Fed. R. Civ. P. 68,
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Prudential also argues that it offered in settlement more than the amount recovered, and that this offer should be considered pursuant to §10-4-708(1.7)(c)(II), but fails to note that the statute requires a "written settlement offer," and Prudential submitted only a letter describing a verbal settlement offer purportedly made during a settlement conference and an Offer of Judgment which is not effective under the No-Fault Act. 9

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the underlying statute must define attorney's fees as costs. Marek v. Chesny, 473 U.S. 1, 9 (1985). For example, in Marek, the Court examined statutes which stated, "[i]f the

petitioner shall finally prevail, he shall be allowed a reasonable attorneys' fee, to be taxed and collected as a part of the costs of the suit, " and that a court should "award to the prevailing party a reasonable attorney's fee as part of the costs. " 473 U.S. at 8 (emphasis added). There is no language in the No-Fault Act to indicate that attorney fees are considered part of costs; instead, the statute describes costs as separate amounts that can be considered by the judge or arbitrator. C.R.S. § 10-4-708(1.6). Prudential's reliance on Giampapa v. American Family Insurance Company, 12 P.3d 839, 842 (Colo. App. 2000) is misplaced, as that case addressed an award of fees on appeal. This case was reversed by the Colorado Supreme Court. The Colorado Supreme Court did not address this offhanded remark made by the Court of Appeals, which was made while analyzing whether the trial court had jurisdiction to award fees incurred on appeal following trial, not for Fed. R. Civ. P. 68 (or the state rule). Even then the court's remark could never equal the explicit statutory language required by Marek. Prudential never cites to the wording of § 708 in any way, and it cannot overcome the plain language of the statute which makes clear that the attorney fee provisions of 10-4-708(1.7) are completely distinct from the issue of costs, which is covered in subsection (1.6). Respectfully submitted this 10th day of January, 2008.

s/Leif Garrison Robert B. Carey Leif Garrison The Carey Law Firm 2301 East Pikes Peak Avenue Colorado Springs, CO 80909
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CERTIFICATE OF SERVICE (CM/ECF) I hereby certify that on 10th day of January, 2008, the foregoing was electronically filed with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: [email protected] s/Leif Garrison Leif Garrison

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