Opinion
Civil Action No. 19-cv-03008-RBJ
2021-02-23
ADDISON INSURANCE COMPANY, an Iowa corporation, Plaintiff, v. Michael VEVERKA, an individual, Defendant. Michael Veverka, an individual, Counterclaim Plaintiff, v. Addison Insurance Company, an Iowa corporation, Counterclaim Defendant.
Elaine Katherine Stafford, Lelia Kathleen Chaney, Lambdin & Chaney, LLP, Denver, CO, for Plaintiff/Counterclaim Defendant. Eric Brandon Ballou, Frickey Law Firm, Lakewood, CO, Peter Michael Anderson, Carlo Francisco Bonavita, Peter M. Anderson, The Law Office of Peter M. Anderson, Longmont, CO, for Defendant/Counterclaim Plaintiff.
Elaine Katherine Stafford, Lelia Kathleen Chaney, Lambdin & Chaney, LLP, Denver, CO, for Plaintiff/Counterclaim Defendant.
Eric Brandon Ballou, Frickey Law Firm, Lakewood, CO, Peter Michael Anderson, Carlo Francisco Bonavita, Peter M. Anderson, The Law Office of Peter M. Anderson, Longmont, CO, for Defendant/Counterclaim Plaintiff.
ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
R. Brooke Jackson, United States District Judge
This is an auto insurance case in which the insurance company seeks a declaratory judgment that defendant is not entitled to insurance coverage. Before the Court are plaintiff/counterclaim defendant's motion for summary judgment (ECF No. 39) and defendant/counterclaim plaintiff's partial motion for summary judgment (ECF No. 44). For the reasons discussed below, both motions are DENIED.
I. FACTUAL BACKGROUND
A. Undisputed facts
The undisputed facts are as follows. Plaintiff Addison Insurance Company ("Addison") is an insurance corporation based in Iowa. ECF No. 1 at ¶1. Defendant Michael Veverka is an individual who resides in Colorado. Id. at ¶2. At the time of the events underlying this case, Mr. Veverka was the sole owner and sole employee of Veverka Company, Inc. ("VCI"), a Colorado corporation. ECF Nos. 25 at ¶10; 25-1 at ¶4. Addison issued an insurance policy, "Commercial Auto Coverage Part," which was effective from April 29, 2019 to April 29, 2020. ECF No. 43-1 at 1. Veverka Company, Inc. is listed as the "named insured" on the policy. Id. at 2.
On August 26, 2019 at 2:56pm Mr. Veverka deposited a check for $150.00 from Chris Loncarich to "Mike Veverka" at Grand Valley Bank in Fruita. ECF No. 43-6. Later that day, at approximately 7:45pm, Mr. Veverka was driving his personally owned 1982 Yamaha motorcycle. A negligent driver struck him from behind, which caused Mr. Veverka to fly off the motorcycle. ECF Nos. 25 at ¶¶5–6; 27 at ¶¶5–6. He sustained serious injuries, including road rash and broken bones, some of which were permanent. ECF Nos. 25 at ¶5; 25-1 at ¶7; 27 at ¶5; 43-4 at 5.
At the time of the accident, the insurance policy issued to VCI by Addison was in effect. ECF No. 43-1 at 1. Mr. Veverka's motorcycle was separately insured by Nationwide. ECF Nos. 1 at ¶15; 25 at ¶15. The negligent driver was insured by Progressive under an automobile policy with $25,000 per person liability. ECF Nos. 1 at ¶16; 25 at ¶16. Following the accident, Mr. Veverka settled with the negligent driver's insurance company for $25,000. He settled an underinsured motorist claim with his personal automobile carrier, Liberty Mutual, for $100,000. Finally, he settled an underinsured motorist claim with Nationwide, his motorcycle's insurer, for $300,000. ECF Nos. 39 at ¶¶8–10; 43 at ¶¶8–10. Mr. Veverka subsequently asserted a claim for underinsured motorist benefits under the Addison insurance policy issued to VCI. ECF Nos. 39 at ¶11; 43 at ¶11.
The insurance policy issued by Addison contains the following language relevant to the cross motions for summary judgment:
NAMED INSURED: Veverka Company Inc ...
ITEM TWO SCHEDULE OF COVERAGES AND COVERED AUTOS
This policy provides only those coverages where a charge is shown in the PREMIUM column below. Each of these coverages will apply only to those "autos" shown as COVERED AUTOS below.
| COVERAGES | COVERED AUTO SYMBOLS | LIMIT OF INSURANCE | PREMIUM |
|---|---|---|---|
| Covered Auto Liability | 07 | $1,000,000 | 1,391 |
| Medical Payments | 07 | See supplemental declarations | 37 |
| Uninsured Motorists – BI only (including underinsured motorists) | 07 | $300,000 | 75 |
...
COMMERCIAL AUTO COVERAGE PART ...
SCHEDULE OF COVERED AUTOS YOU OWN
| ITEM THREE | ||||
| UNIT NO. | YEAR | MAKE | MODEL | VEHICLE ID |
| 001 | 1970 | White | Dump Truck | BB0048700451 |
...
BUSINESS AUTO COVERAGE FORM
SECTION I – COVERED AUTOS :
Item Two of the Declarations shows the "autos" that are covered "autos" for each of your coverages. The following numerical symbols describe the "autos" that may be covered "autos". The symbols entered next to a coverage on the Declarations designate the only "autos" that are covered "autos".
A. Description of Covered Auto Designation Symbols
| Symbol | Description of Covered Auto Designation Symbols | |
|---|---|---|
| ... | ||
| 07 | Specifically Described "Autos" | Only those "autos" described in Item Three of the Declarations for which a premium charge is shown (and for Covered Autos Liability Coverage any "trailers" you don't own while attached to any power unit described in Item Three). |
...
C. Certain Trailers, Mobile Equipment and Temporary Substitute Autos If Covered Autos Liability Coverage is provided by this Coverage Form, the following types of vehicles are also covered "autos" for Covered Autos Liability Coverage: ...
3. Any "auto" you do not own while used with permission of its owner as a temporary substitute for a covered "auto" you own that is out of service because of its:
a. Breakdown;
b. Repair;
c. Servicing;
d. "Loss"; or
e. Destruction....
SECTION II – COVERED AUTOS LIABILITY COVERAGE
A. Coverage ...
1. Who Is An Insured :
The following are "insureds":
a. You for any covered "auto".
b. Anyone else while using with your permission a covered "auto" you own, hire or borrow except:
(1) The owner or anyone else from whom you hire or borrow a covered "auto".
(2) Your "employee" if the covered "auto" is owned by that "employee" or a member of his or her household....
SECTION IV – BUSINESS AUTO CONDITIONS
The following conditions apply in addition to the Common Policy Conditions:
A. Loss Conditions ...
2. Duties In The Event Of Accident, Claim, Suit Or Loss We have no duty to provide coverage under this policy unless there has been full compliance with the following duties:
a. In the event of "accident", claim, "suit", or "loss", you must give us or our authorized representative prompt notice of the "accident" or "loss". Include:
(1) How, when, and where the "accident" or "loss" occurred;
(2) The "insured's" name and address;
(3) To the extent possible, the names and addresses of any injured persons and witnesses.
b. Additionally, you and any other involved "insured" must:
(1) Assume no obligation, make no payment or incur no expense without our consent, except at the "insured's" own cost;
(2) Immediately send us copies of any request, demand, order, notice, summons or legal paper received concerning the claim or "suit".
(3) Cooperate with us in the investigation or settlement of the claim or defense against the "suit".
(4) Authorize us to obtain medical records or other pertinent information.
(5) Submit to examination, at our expense, by physicians of our
choice, as often as we reasonably require.
ECF No. 43-1 at 5–6, 10–12, 17.
The Addison insurance policy also includes a Colorado-specific "endorsement" relevant to the motions for summary judgment:
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. COLORADO UNINSURED MOTORISTS COVERAGE – BODILY INJURY
A. Coverage
1. We will pay all sums the "insured" is legally entitled to recover as compensatory damages from the owner or driver of an "uninsured motor vehicle". The damages must result from "bodily injury" sustained by the "insured" caused by an "accident". The owner's or driver's liability for these damages must result from the ownership, maintenance or use of an "uninsured motor vehicle"....
B. Who Is An Insured
If the Named Insured is designated in the Declarations as: ...
2. A partnership, limited liability company, corporation, or any other form of organization, then the following are "insureds":
a. Anyone "occupying" or using a covered "auto" or a temporary substitute for a covered "auto". The covered "auto" must be out of service because of its breakdown, repair, servicing, "loss", or destruction....
F. Additional Definitions ...
5. "Uninsured motor vehicle" means a land motor vehicle or "trailer": ...
b. That is an underinsured motor vehicle....
Id. at 26–27, 29–30.
B. Disputed facts
The parties dispute a number of additional facts. I recite them here because these disputes are relevant to the outcome of the parties’ motions. Mr. Veverka states in his affidavit that on the day of the accident, he had been "dressing up washed out spots around culverts" and "hauled in a load of ¾ rock" with his dump truck. ECF No. 25-1 at ¶10. He states that he noticed the dump truck had a "dangerously low tire," "a leaky valve stem," and "a light bulb needing replacement." Id. at ¶11. He "hurried home" before the tire went flat. Id. He states that he returned the dump truck "to the parking lot where it is stored," and he then "traveled on the motorcycle to pick up parts for the repair so [he] could continue [his] jobs." Id. at ¶12. Addison denies all of the above allegations. ECF Nos. 25 at ¶¶7–8; 27 at ¶¶7–8. Besides the affidavit, neither party has presented evidence supporting or refuting any of these allegations.
In his response to Addison's motion for summary judgment, Mr. Veverka further stated that he was using the dump truck to deliver a load of rocks to Chris Loncarich. ECF No. 43 at 3. He wrote that he used his motorcycle to deposit the check from Mr. Loncarich. After that he drove the motorcycle to pick up truck repair parts, and the accident occurred. Id. Neither party has presented evidence on any of these statements.
Mr. Veverka claims that Addison never spoke to him before denying his claim, and that Addison's investigation was limited to one phone call to the office of plaintiff's then-counsel. ECF Nos. 25-1 at ¶15; 43 at ¶5. Addison denies these claims. ECF No. 46 at ¶¶4–7. A Claim File Detail Report from UFG Insurance has an entry from one Amy Erickson referring to Mr. Veverka that states, "[h]e was not in the course of his employment, he was heading home from work." ECF No. 43-4 at 5. A transcript from a phone call between Amy Erickson and Terra McClanahan, a paralegal at the Law Office of Peter Anderson, reveals that Ms. McClanahan made those statements to Amy Erickson over the phone. ECF No. 43-3 at 8:2-6. The parties do not dispute the authenticity of the claim file notes or the phone call transcript. However, they do dispute the context surrounding Mr. Veverka's use of his motorcycle and the crash.
II. PROCEDURAL BACKGROUND
Plaintiff Addison filed a complaint for declaratory judgment on October 22, 2019, asking this Court to find that the Addison insurance policy issued to VCI did not provide coverage for the motorcycle accident. ECF No. 1. Defendant Mr. Veverka filed an answer and counter-complaint on December 20, 2019. In it he asked this Court to find that there is coverage and also brought counterclaims against Addison for bad faith breach of contract and violation of C.R.S. §§ 10-3-1115 and 10-3-1116. ECF No. 10. After a hearing, the Court dismissed certain allegations in Mr. Veverka's counter-complaint and gave him leave to amend. ECF No. 21. Mr. Veverka filed an amended answer and counter-complaint on March 11, 2020, which included an additional claim for breach of contract. ECF No. 25. Plaintiff filed its own answer to defendant's counter-complaint on March 24, 2020. ECF No. 27.
Both parties then filed motions for summary judgment. Addison moved for summary judgment on its declaratory judgment claim and all of Mr. Veverka's counterclaims on May 18, 2020. ECF No. 39. Mr. Veverka responded on June 5, 2020, and Addison replied on June 17, 2020. ECF Nos. 43, 46. Mr. Veverka moved for partial summary judgment just on the insurance coverage issue on June 5, 2020. ECF No. 44. Addison responded on June 17, 2020. ECF No. 47. Mr. Veverka filed his reply on July 10, 2020. ECF No. 51.
III. STANDARD OF REVIEW
A court may grant summary judgment if "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). The moving party has the burden to show that there is an absence of evidence to support the nonmoving party's case. See Celotex Corp. v. Catrett , 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmoving party must "designate specific facts showing that there is a genuine issue for trial." Id. at 324, 106 S.Ct. 2548. A 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 v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A material fact is genuine if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson , 477 U.S. at 248, 106 S.Ct. 2505. The court will examine the factual record and make reasonable inferences in the light most favorable to the party opposing summary judgment. See Concrete Works of Colo., Inc. v. City and Cty. of Denver , 36 F.3d 1513, 1517 (10th Cir. 1994).
When parties file cross motions for summary judgment, the court is entitled to assume that no evidence needs to be considered other than that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain as to material facts. Nat'l Union Fire Ins. Co. of Pittsburgh, PA v. Fed. Ins. Co. , 213 F. Supp. 3d 1333, 1339 (D. Colo. 2016), aff'd , 734 F. App'x 586 (10th Cir. 2018) (unpublished). "[T]he reasonable inferences drawn from affidavits, attached exhibits, and depositions are rendered in the light most favorable to the non-prevailing party." Id. (citing Jacklovich v. Simmons , 392 F.3d 420, 425 (10th Cir. 2004) ).
IV. ANALYSIS
This Court has jurisdiction pursuant to 28 U.S.C. § 1332. In diversity cases such as this one, the Court applies the substantive law of the forum state. Barrett v. Tallon , 30 F.3d 1296, 1300 (10th Cir. 1994). Here, the parties agree that Colorado is the correct forum, and thus Colorado law applies. ECF Nos. 39 at 6; 44 at 5. "When federal courts are called upon to interpret state law, they must look to rulings of the highest state court, and if no such rulings exist, they must endeavor to predict how the high court would rule." Lovell v. State Farm Mut. Auto. Ins. Co. , 466 F.3d 893, 899 (10th Cir. 2006) (citations omitted).
A. Plaintiff's claim for declaratory judgment on insurance coverage
Insurance policies are construed under the same principles that govern the interpretation of any contract. Compass Ins. Co. v. City of Littleton , 984 P.2d 606, 613 (Colo. 1999). In interpreting a contract, courts seek to give effect to the reasonable expectations of the parties. Terms are given their plain and ordinary meaning unless the intent expressed in the contract indicates an alternative interpretation should be used. Id. Colorado courts also recognize that unlike a negotiated contract, an insurance policy is often imposed on a "take-it-or-leave-it basis." Thompson v. Md. Cas. Co. , 84 P.3d 496, 501 (Colo. 2004) (citing Huizar v. Allstate Ins. Co. , 952 P.2d 342, 344 (Colo. 1998) ). "Therefore, [courts] assume a ‘heightened responsibility’ in reviewing insurance policy terms to ensure that they comply with ‘public policy and principles of fairness.’ " Id.
"Courts may neither add provisions to extend coverage beyond that contracted for, nor delete them to limit coverage." Cyprus Amax Minerals Co. v. Lexington Ins. Co. , 74 P.3d 294, 299 (Colo. 2003). "However, because of the unique nature of insurance contracts and the relationship between the insurer and insured, courts do construe ambiguous provisions against the insurer and in favor of providing coverage to the insured." Id. (citing Chacon v. Am. Family Mut. Ins. Co. , 788 P.2d 748, 750 (Colo. 1990) ). A provision is ambiguous if it is subject to more than one reasonable interpretation. Cruz v. Farmers Ins. Exch. , 12 P.3d 307, 311 (Colo. App. 2000). "In determining whether there is an ambiguity in a policy provision, a court must evaluate the policy as a whole using the generally accepted meaning of the words employed." Id. "[A] mere disagreement between the parties regarding the interpretation of the policy does not create an ambiguity." Id.
There are numerous ways an individual can be covered under the insurance policy at issue here. If Mr. Veverka were the "named insured," for example, he would almost certainly be covered. But there is no question that Mr. Veverka is not the "named insured" under the Addison policy—the policy is instead in the name of his company, Veverka Company, Inc. ECF No. 43-1 at 5. Mr. Veverka would also be covered had he been driving a "covered auto" under the policy. However, it is also undisputed that at the time of the accident, Mr. Veverka was driving his motorcycle, while the only covered auto explicitly listed in the policy is the 1970 white dump truck. ECF Nos. 39 at 9–10; 43-1 at 5. There are also other categories of people who can be an "insured" under the policy. Under the section "Who Is An Insured" (II.A.1), an "insured" includes "[y]ou for any covered auto" and "[a]nyone else while using with your permission a covered ‘auto’ you own, hire, or borrow ...." ECF No. 43-1 at 11. This would include, for example, Mr. Veverka driving the dump truck, a covered auto with the permission of VCI. In that situation Mr. Veverka is an "insured." However, one exception to this section is for "[y]our ‘employee’ if the covered ‘auto’ is owned by that ‘employee’ or a member of his or her household." Id. at 12. In other words, an employee driving a covered auto is not covered under the policy if that covered auto is owned by the employee or a household member instead of being owned by the "named insured." For example, if Mr. Veverka, as an employee of VCI, owned the dump truck instead of VCI, the plain language of this provision would exclude him from coverage even if the dump truck were still a covered auto.
Addison cites this provision to argue that Mr. Veverka is not an "insured" under the policy as either an owner or an employee. I agree with respect to this provision specifically—section II.A.1 on its own clearly excludes Mr. Veverka from coverage while using his motorcycle, which is not a covered auto nor owned by VCI.
However, Mr. Veverka claims he falls under a different provision of the policy. That is the "temporary substitute" provision, which forms part of a Colorado-specific endorsement incorporated into the policy. It states that if the named insured is a partnership, LLC, or corporation, anyone occupying or using a "temporary substitute" for a covered auto is an insured, provided that the covered auto is "out of service" due to breakdown, repair, servicing, loss, or destruction. ECF No. 43-1 at 26–27. Put differently, the policy states that if the covered auto—in this case the white dump truck—is out of commission for one of those reasons, Mr. Veverka will still have coverage if he is driving a "temporary substitute" for that dump truck. Mr. Veverka alleges that this is exactly the function that his personally owned motorcycle played at the time of the crash, i.e. that it was serving as a temporary substitute for the dump truck because the latter had a flat tire and other repair issues. ECF Nos. 25 at 9.
Addison contends that the policy does not provide coverage because the motorcycle was not a temporary substitute for the dump truck. I read Addison's argument as have two parts: (1) a personally-owned motorcycle such as Mr. Veverka's cannot , as a matter of law, be a temporary substitute for his dump truck covered auto; and (2) Mr. Veverka's motorcycle was not , in fact, being used as a temporary substitute for his dump truck at the time of the accident. I address each argument separately.
1. Whether a motorcycle can be a temporary substitute
In its motion for summary judgment Addison states, "there is no plausible explanation as to how a 1982 Yamaha motorcycle can be a temporary substitute for a dump truck." ECF No. 39 at 14. It notes that Mr. Veverka used the dump truck to haul rock and clean culverts, and it argues that a motorcycle is incapable of those same uses. Id. Mr. Veverka counters that he used his motorcycle to deposit a check and to pick up auto parts for the dump truck, functions that both a dump truck and a motorcycle can fulfill. ECF No. 43 at 12.
Whether there is insurance coverage in this case turns on what a "temporary substitute" under the policy actually means. Unhelpfully, neither party cites any Tenth Circuit or Colorado law that sheds light on this question. But there are at least some decisions addressing the issue. Interpreting similar language to that at issue here, the Tenth Circuit has explained "temporary substitute" as follows:
The objective of the substitution provision is to afford temporary coverage to an insured who is using a borrowed vehicle because he or she is unable to use the vehicle designated in the policy for one of the specified reasons.... It has been repeatedly said that the purpose of a substitute automobile provision is not to defeat liability but, rather, to provide additional coverage for the insured yet reasonably define coverage by limiting the insurer's risk to one operating vehicle at a time for a single premium.
Houston Gen. Ins. Co. v. Am. Fence Co. , 115 F.3d 805, 807 (10th Cir. 1997) (citations omitted). The Tenth Circuit also stated that "[t]he term ‘substitute’ connotes the replacement of one thing for another." Id. at 807 (citing St. Paul Fire & Marine Ins. Co. v. Nationwide Mut. Ins. Co. , 79 Md.App. 734, 558 A.2d 1244, 1247 (1989) ).
An initial question is whether a two-wheel vehicle like a motorcycle can generally be a temporary substitute for a four-wheel vehicle like a truck. Courts have come out both ways on this issue. Where the policy language does not specify that the temporary substitute is an "automobile," courts have found the provision to include motorcycles. E.g. Foremost Ins. Co. v. Motorists Mut. Ins. Co. , 167 Ohio App.3d 198, 854 N.E.2d 552, 555 (2006) (interpreting language identical to policy language here to encompass a motorcycle); Hartford Acc. & Indem. Co. v. Goossen , 84 Cal.App.3d 649, 148 Cal. Rptr. 784, 786 (1978) (finding that motorcycle could be a temporary substitute under policy that used "motor vehicle" language); W. Cas. & Sur. Co. v. Budig , 213 Kan. 517, 516 P.2d 939, 941 (1973) (holding that when policy defined "automobile" as "vehicle" it could encompass motorcycles, and thus motorcycle could properly be a temporary substitute under the policy). Furthermore, this district has paraphrased the term "temporary substitute for a covered ‘auto’ " as "temporary replacement vehicle," which suggests temporary substitutes can be any vehicle, not just a four-wheel one. Phila. Indem. Ins. Co. v. Cruz , No. 18-CV-00622-RBJ, 2019 WL 2578310, at *5 (D. Colo. June 24, 2019), appeal dismissed , No. 19-1264, 2019 WL 7602326 (10th Cir. Dec. 18, 2019). Only when the temporary substitute language specifies "auto" or "automobile" do courts find that motorcycles cannot fit within the definition. E.g. Royal Indem. Co. v. Rolofson , 213 Cal.App.3d 373, 261 Cal. Rptr. 720, 722 (1989) (finding that the term "auto" was not reasonably understood by the average person to include a motorcycle, and thus a motorcycle could not be a temporary substitute under the policy); Roug v. Ohio Sec. Ins. Co. , 182 Cal.App.3d 1030, 227 Cal. Rptr. 751, 753–55 (1986) (holding that an automobile "while ... temporarily used as a substitute for an insured automobile" could not include a motorcycle because automobiles have four wheels); Mittelsteadt v. Bovee , 9 Wis.2d 44, 100 N.W.2d 376, 380 (1960) (interpreting "temporary substitute automobile" to exclude motorcycles because motorcycles are not automobiles).
Here, Addison's policy language simply states that a "temporary substitute" is covered—it does not use the words "auto" or "automobile" to cabin that term. I see no reason why a motorcycle could not generally serve as a temporary substitute for another type of vehicle. To the extent this language is ambiguous, I must interpret it in favor of Mr. Veverka. Cyprus , 74 P.3d at 299. The next question is what vehicles can be temporary substitutes for others in specific circumstances. Colorado law on this issue is unfortunately not very clear. Cases determining whether the provision applies often do not analyze the term in depth. In Morrison v. Droll , for example, the Colorado Court of Appeals found that an individual insurance policy did not cover an accident because the named insured owned the vehicle allegedly used as a temporary substitute, which made the provision automatically inapplicable. 41 Colo.App. 354, 588 P.2d 383, 385 (1978). The court thus did not analyze what kind of vehicle qualified as a temporary substitute at all. Id. Meanwhile in Robles , the Court of Appeals interpreted a different term—"replacement"—to mean "when the vehicle described in the policy has been disposed of (for example, by transfer of ownership) or, if the insured retains ownership of the described vehicle, it is physically or legally inoperable, and another vehicle of equivalent use is substituted." Mid-Century Ins. Co. v. Robles , 271 P.3d 592, 596 (Colo. App. 2011). While this case sheds some light on the issue, it did not specifically address when one vehicle is or is not a temporary substitute for another.
Finally, in Smith the Colorado Court of Appeals found that the temporary substitute provision did not extend coverage to use of a bicycle in place of an insured vehicle. Interpreting identical language to the policy provision here, the Colorado Court of Appeals concluded that the contract terms, "by their plain and ordinary meaning, do not provide underinsured motorist coverage for [defendant]’s injuries incurred while riding a bicycle for personal reasons. In those circumstances, [defendant] was not an ‘insured.’ " Gen. Ins. Co. of Am. v. Smith , 874 P.2d 412, 414 (Colo. App. 1993). Smith too proves unhelpful in defining temporary substitute because, unlike motorcycles and automobiles, bicycles are not motorized vehicles. Nor is it possible, much less required, to purchase auto insurance for a bicycle.
Because of the dearth of Colorado law on this question, Addison and Mr. Veverka urge this Court to look to other jurisdictions and other sources of law. A leading insurance law treatise notes that "[u]ninsured motorist (UM)/underinsured motorist (UIM) policies also generally cover a vehicle used temporarily as a substitute for an insured vehicle when the insured vehicle is incapacitated from normal use because of breakdown, repair, servicing, loss, or destruction." STEVEN PLITT ET AL. , COUCH ON INSURANCE , § 123:28 (3rd ed. 1995). The Supreme Court of North Dakota provides a comprehensive explanation of the temporary substitute concept:
The purpose of a temporary substitute vehicle provision is to extend temporary protection to an insured who is unable to use an insured vehicle because of its breakdown, repair, servicing, damage or loss. It indicates the intention of the insurer to cover only one automobile of the insured and to avoid covering more than one automobile for a single premium. It is contemplated that the same use will be made of the substituted vehicle as would have been made of the one originally insured. A substitute coverage clause is for the benefit of the insured. Accordingly, if any construction is required of a substitute clause, it should be for his benefit. At the same time, ambiguity is not to be found where none exists, and the contract must be interpreted as written, and the substitution provision is neither to be unreasonably extended to materially increase the risk contemplated by the insurer, nor is it to be narrowly applied against the insured, inasmuch as the clause is designed for his protection.
Farmland Mut. Ins. Co. v. Farmers Elevator, Inc. of Grace City , 404 N.W.2d 473, 476 (N.D. 1987) (internal quotation marks and citations omitted). The Supreme Court of Wisconsin offers a similar explanation:
A substitute automobile within the meaning of the policy is one actually but only temporarily used in place of the specified automobile, i.e., for the same use the insured car would have been used except for its withdrawal from all normal use and while such withdrawal is because of its breakdown, repair, servicing, loss or destruction.
Lewis v. Bradley , 7 Wis.2d 586, 97 N.W.2d 408, 411–12 (1959).
Both of these decisions conclude that a temporary substitute vehicle must be used "for the same use" as the insured vehicle. A Montana court has also held that "the proper test for identifying a temporary substitute vehicle is whether it is put to the same use to which the covered vehicle would have been put but for its withdrawal from service." Stonehocker v. Gulf Ins. Co. , 383 Mont. 140, 368 P.3d 1187, 1192 (2016). However, the term "same use" in the context of vehicles is itself ambiguous. Must a temporary substitute be able to fulfill all the uses the insured car could, as Addison implies? Or is it sufficient for a substitute to simply be a vehicle used in the context the insured vehicle would have been used at the time of the accident, had the insured vehicle not been out of service?
In some instances, courts have concluded that the substitute vehicle must have the same capacity and be actually used for all the same tasks for which the insured vehicle is normally used. The court in Falls Lake Nat'l Ins. Co. v. Martinez , a case cited by plaintiff, defined temporary substitute as "a vehicle that is used in place of an insured vehicle .... Accordingly, ‘in order for coverage to attach in this case, the temporary substitute vehicle must have been performing a function that the disabled insured vehicle would have been performing but for its temporary disability.’ " No. 7:16CV00075, 2016 WL 7439425, at *7 (W.D. Va. Dec. 22, 2016) (quoting Duncan Auto Realty, Ltd. v. Allstate Ins. Co. , 754 So.2d 863, 865 (Fla. 3rd DCA 2000) ). That court concluded that a tractor used as a tow truck could not be a temporary substitute for another tractor whose use was to deliver goods. Id. Similarly, in Spillers the Louisiana Court of Appeals concluded that an employee's pick-up truck could not be a temporary substitute for his 18-wheeler truck covered under the insurance policy. Spillers v. ABH Trucking Co. , 713 So. 2d 505, 512 (La. App. 2 Cir. 1998). The court defined "temporary substitute" as a vehicle that "must be used ... in the same capacity as the vehicles insured ...." Id. The court reasoned that on the day of the accident, the driver used his pick-up truck to repair the 18-wheeler, not to transport lumber and saw dust as the 18-wheeler did, and thus the pick-up was not used in the same capacity. Id. at 513.
A North Dakota case also fits this trend. There, the insured vehicle was a truck-tractor used to pull a semi-trailer. While it was getting repaired the driver rented a different truck-tractor that could also pull a semi-trailer, and that is exactly what he used it for. Farmland Mut. Ins. Co. v. Farmers Elevator, Inc. of Grace City , 404 N.W.2d 473, 476 (N.D. 1987). The court concluded that "because both vehicles were truck-tractors put to the same use, our construction of the policy does not materially increase the risk contemplated by the insurer," and thus the temporary substitute exception applied. Id. at 477. These decisions suggest that to be a temporary substitute, the substitute vehicle must be identical nearly in both capacity and actual use as the covered vehicle. Yet, other courts have interpreted temporary substitute provisions more broadly. In Stonehocker , a woman working at a guest ranch used her pickup truck with attached trailer to transport guests and haul their luggage, tasks that normally another employee would have done with a Suburban. 368 P.3d at 1187. The Montana court found that the provision applied. It reasoned that the policy provided coverage because "[t]he fact that she would not have driven the Suburban under normal circumstances does not negate the fact that on the day of her injury, she was using her pickup to perform a task normally performed by the Suburban." Id. at 1193. In Lewis , a young man got into an accident while using his family's farm truck in place of his broken-down Plymouth to drive to church and run errands. Lewis , 97 N.W.2d at 411–12. The Wisconsin court concluded that the truck served as a temporary substitute for the car, even though the truck had always been confined to farm work and had never before been used to drive to church or for personal reasons. Id. at 410, 413. It based its holding on evidence showing that the Plymouth would have been used for the trip had it not been broken down. Id. at 411.
Likewise, in Little v. Safeguard Ins. Co. the Louisiana Court of Appeals reviewed a jury verdict finding that a Ford Tudor Sedan was used as a temporary substitute for a Ford Courier panel truck by the insured to maintain and service vending machines while the Courier was under repair. 137 So. 2d 415, 420–21 (La. App. 3 Cir. 1962). The court affirmed the jury's verdict even though the Courier was specially suited to the vending machine business, whereas the Tudor was a simple passenger car, and the insured had driven the Tudor for personal reasons as well as business. Id. And in Bivins an individual rented and used a large tractor-trailer to haul lumber when his company's dump truck broke down and became inoperable. Bivins v. Ace Wrecking & Excavating Co. , 409 S.W.2d 97, 98 (Mo. 1966). The court rejected the insurer's argument that a tractor-trailer could not be a temporary substitute for the dump truck covered under the policy because the covered truck was not normally used to transport lumber in the length, qualities, or distance for which the tractor-trailer was used. The court reasoned that "[i]t is the use, not the capacity, of the vehicle that is important." Id. at 99.
These latter cases suggest that even if the substitute vehicle and covered vehicle are not a perfect match—even if one cannot or does not fulfill all the uses the other normally does—the temporary substitute provision may still apply. This conclusion is further supported by the various courts who have held that a motorcycle can be a temporary substitute for a four-wheel automobile, despite their obvious differences in capacity and use. E.g. Foremost , 854 N.E.2d at 555 (finding that the driver had substituted his motorcycle for his BMV when the latter vehicle would not operate due to mechanical problems); Goossen , 148 Cal. Rptr. at 786 ; Budig , 516 P.2d at 941.
Colorado law is unclear on the scope of temporary substitute vehicles. Law from other jurisdictions does not point to a clear answer one way or the other, as courts have come to differing conclusions on how broadly the term can be defined. As a result, I find that the term "temporary substitute" in Addison's policy does not restrict what vehicles are covered in the way that Addison contends. The language is subject to more than one reasonable interpretation, which means it is ambiguous. Had Addison wanted to restrain the definition of temporary substitute to exclude motorcycles, it could have done so. But it did not. I resolve the ambiguity in favor of Mr. Veverka. Cyprus , 74 P.3d at 299. I find that the policy here does not restrict a motorcycle from being a temporary substitute for a dump truck as a matter of law.
2. Whether Mr. Veverka has proven that he used his motorcycle as a temporary substitute for the dump truck
Though I find for Mr. Veverka on the temporary substitute legal issue, my analysis does not end there. The question of whether he has proven that his motorcycle in fact served as a temporary substitute for his dump truck—or whether Addison has proven that it did not—still remains. After reviewing the evidence, I conclude that there is a genuine factual dispute on this issue that must go to a jury.
In support of his partial motion for summary judgment Mr. Veverka points to his affidavit, in which he asserts that his dump truck had multiple repair issues and was thus out of service. He also asserts in his affidavit that he used his motorcycle to deposit a work check and purchase auto parts, thus fulfilling, according to him, the requirements for a temporary substitute vehicle under the insurance policy. ECF No. 25-1 at ¶¶9–12. Addison denies these allegations. ECF No. 27 at ¶¶7–8. Though Addison has not offered additional evidence that directly disputes Mr. Veverka's claims, his claims are merely allegations in a self-serving document prepared for litigation. He has not provided any independent evidence to back up his assertions, such as receipts for the spare auto parts or photos of the dump truck's damage. While Mr. Veverka did submit a photocopy of the check deposit record and check, the time stamp is nearly five hours before the accident. ECF No. 43-6. Mr. Veverka has provided no explanation for the gap in time between this purported work-related errand and the crash. As Addison points out, there are also inconsistencies in his story regarding the sequence of events following his use of the dump truck to haul rock and wash out culverts. ECF No. 39 at 14–15.
In support of its own motion for summary judgment, Addison repeatedly asserts that Mr. Veverka was not in the scope of his employment when the accident occurred because his prior counsel stated that he was on his way home. ECF Nos. 39 at 2, 14; 46 at 3, 5; 47 at 7. Mr. Veverka insists that whether he was in the scope of his employment when he was riding the motorcycle is irrelevant to the temporary substitute issue. ECF Nos. 43 at 3; 51 at 1. I have found no law suggesting that being in the scope of one's employment, as that phrase is used as a legal term of art, is a requirement for a vehicle being a temporary substitute. But Mr. Veverka used the dump truck as a company vehicle. He himself points to business-related errands that he was running while using the motorcycle as the main reason it was a temporary substitute for his dump truck. His own argument belies the importance of the context in which he rode the motorcycle. Furthermore, in this district Judge Daniel found that the "temporary substitute" provision of a very similar policy did not apply because the defendant, whose company was the named insured, was riding his personal motorcycle. Federated Mut. Ins. Co. v. Enright , No. 15-CV-00551-WYD-KMT, 2016 WL 1059467, at *6 (D. Colo. Mar. 17, 2016). There the Judge noted that defendant was not engaged in a business endeavor for his company but was instead riding his motorcycle on personal time. Id. at *1. My colleague's decision also suggests that whether the context of a vehicle's use is for pleasure or business bears on whether the vehicle is a temporary substitute.
The purpose for which Mr. Veverka was using the motorcycle—and whether it was business or personal—is undoubtedly relevant to whether his motorcycle in fact served as a temporary substitute for VCI's dump truck. If it were not relevant, the policy would automatically extend coverage to Mr. Veverka's motorcycle even if he were using it for a completely different purpose than he would have used the dump truck. Such a result would be contrary to the meaning of "temporary substitute" and case law interpreting the term.
Mr. Veverka has presented sufficient facts to suggest that he was using his motorcycle in place of the dump truck for business-related tasks at the time of the accident. Meanwhile, Addison has presented sufficient facts to undermine this inference. A reasonable jury could find for either party. There is a genuine factual dispute as to this issue. The Court therefore denies both plaintiff and defendant's motions for summary judgment as to insurance coverage.
B. Defendant's claims for breach of contract, bad faith, and violation of C.R.S. §§ 10-3-1115 and 10-3-1116
In addition to claiming insurance coverage under the Addison policy, Mr. Veverka in his counter-complaint brings claims for breach of contract, bad faith breach of insurance contract, and violation of C.R.S. §§ 10-3-1115 and 10-3-1116. ECF No. 25 at ¶¶23–45. Addison moves for summary judgment on all of these claims. ECF No. 39 at 15–19.
1. Breach of contract
Mr. Veverka alleges that he has complied with all conditions precedent to coverage under the insurance contract, while Addison has breached the contract by refusing to pay the full amount of uninsured/underinsured motorist benefits owed to him. ECF No. 25 at ¶¶36–43. Addison moves for summary judgment on this claim. It argues that Mr. Veverka has failed to provide any proof of damages, as he has not disclosed any medical bills or records related to his injuries. ECF No. 39 at 16. Addison also argues that there is no evidence it failed to perform its obligations under the contract because the issue of whether coverage is warranted is undecided and before this Court. Id.
The elements for a breach of an insurance contract claim in Colorado are (1) existence of a contract; (2) performance by plaintiff or some justification for nonperformance; (3) failure to perform contract by defendants; and (4) damages to plaintiff. Williams v. Owners Ins. Co. , 621 F. App'x 914, 918 (10th Cir. 2015) (unpublished) (citing W. Distrib. Co. v. Diodosio , 841 P.2d 1053, 1058 (Colo. 1992) ); see also Cassidy v. Millers Cas. Ins. Co. of Texas , 1 F. Supp. 2d 1200, 1212 (D. Colo. 1998). Neither party disputes that a valid contract exists. There are genuine disputes of fact as to the other elements, however. As discussed in section IV.A.2, a core dispute is whether the policy covered the accident under the temporary substitute provision, which will determine whether or not Addison failed to perform its obligations under element three. There is also a dispute under element two as to Mr. Veverka's performance. While Mr. Veverka claims that he has fulfilled his obligations under the contract, Addison points to a provision of the policy that states the insurer has no duty to provide coverage unless the insured has fully complied with certain requirements. ECF No. 43-1 at 17. Those requirements include cooperating with the investigation of a lawsuit, submitting to medical examinations, and authorizing the release of medical records to the insurer. Id. Addison contends that even if coverage extended to the accident, its own performance was not due because Mr. Veverka did not comply with these obligations, particularly because of his failure to provide medical or billing records. ECF No. 39 at 16. Based on the record before me, it indeed appears that Mr. Veverka has not provided this information.
Finally, there is also a factual dispute as to damages under element four. Addison again points to Mr. Veverka's failure to prove what damages he is owed for his medical and other expenses. In response Mr. Veverka asserts that proof of damages is not required for his claim. He argues that "[p]roof of actual damages is not an essential element of a breach of contract claim." Interbank Investments, LLC v. Eagle River Water & Sanitation Dist. , 77 P.3d 814, 818 (Colo. App. 2003). However, Interbank stands for the proposition that when a party proves breach of contract but cannot prove specific, concrete injury to him or herself, the party may still recover nominal damages. It does not stand for the proposition—as Mr. Veverka urges this Court to find—that the fourth element of a breach of contract claim is always optional. Defendant here has not yet established breach. Furthermore, Mr. Veverka's countercomplaint makes clear that he seeks not nominal damages, but actual damages in the form of "harms and losses, including non-payment/loss of UIM benefits owed to him ...." ECF No. 25 at ¶44. Proof of damages is thus essential to his claim.
I also note that this Court has addressed the damages issue in this case before. At a hearing on February 20, 2020 Addison reported that Mr. Veverka had not provided any damages computation or supporting documents for that calculation as required by FED. R. CIV. P . 26(a). I made it clear to Mr. Veverka's counsel that he and his client needed to get into compliance with the rule. As far as I am aware, Mr. Veverka had still not complied with this requirement nearly five months later when the parties filed their final replies to the cross motions for summary judgment. See ECF Nos. 43 at 14–15; 46 at 6–7.
Mr. Veverka has pointed to little evidence in support of his breach of contract claim, and I am concerned about his non-compliance with rule 26(a). Nonetheless, I find that dismissal of this claim would be improper. The lack of evidence is largely a result of the underdeveloped record before the Court. When the motions for summary judgment were filed, "discovery [had] only just begun," expert disclosures were not due, and Mr. Veverka had yet to take any depositions, as he points out. ECF No. 43 at 13. I denied Mr. Veverka's motion to extend discovery deadlines in the fall on the grounds that whether additional discovery was warranted would depend on this Court's ruling on summary judgment. ECF Nos. 52, 53, 54. There appear to be genuine factual disputes as to three of the breach of contract elements, and it would be inappropriate to grant summary judgment before discovery is complete. Additional discovery will permit the parties to offer evidence on their respective obligations and performance under the contract. I will also grant Mr. Veverka one final opportunity to provide a damages computation and to comply with FED. R. CIV. P . 26(a), as rule 26(a)(1)(A)(iii) permits, but this must be done no later than the completion of the additional discovery that I will discuss with counsel. I therefore deny Addison's motion for summary judgment on this claim. But I do so without prejudice. Addison may renew its motion after the parties have completed the additional discovery that is needed.
2. Bad faith and violation of C.R.S. §§ 10-3-1115 and 10-3-1116
Mr. Veverka also brings claims for bad faith breach of an insurance contract and violation of C.R.S. §§ 10-3-1115 and 10-3-1116. For his bad faith cause of action, Mr. Veverka alleges that Addison deprived him of the policy benefits he was owed, failed to communicate with him prior to denying his claim, misrepresented policy terms and provisions with respect to a temporary substitute vehicle, and placed its own pecuniary interests above Mr. Veverka's. ECF No. 25 at ¶27. For his cause of action under C.R.S. §§ 10-3-1115 and 10-3-1116, Mr. Veverka alleges that Addison unreasonably delayed or denied payment of benefits owed to him by failing to properly investigate his claim before denying it. Id. at ¶31; ECF No. 43 at 16. He points to Addison's single phone call with his counsel, and the fact that Addison never asked follow-up questions or sought to speak with him directly prior to this litigation. ECF No. 43 at 16. Addison moves for summary judgment on both of these claims, asserting that plaintiff has provided no proof that its conduct was unreasonable. ECF No. 39 at 18.
"When an insured sues his or her insurer for bad faith breach of an insurance contract, the insured must prove that (1) the insurer acted unreasonably under the circumstances, and (2) the insurer either knowingly or recklessly disregarded the validity of the insured's claim." Sanderson v. Am. Family Mut. Ins. Co. , 251 P.3d 1213, 1217 (Colo. App. 2010) (citing Goodson v. Am. Standard Ins. Co. of Wisconsin , 89 P.3d 409, 415 (Colo. 2004) ); see also Travelers Ins. Co. v. Savio , 706 P.2d 1258, 1275 (Colo. 1985). In addition to recognizing this bad faith claim in tort, Colorado provides a statutory claim for unreasonable delay or denial of payment of insurance benefits. C.R.S. §§ 10-3-1115(1)(a), 10-3-1116(1). A first-party claimant like Mr. Veverka may bring an action for fees, costs, and double damages if his "claim for payment of benefits has been unreasonably delayed or denied." C.R.S. § 10-3-1116(1). "[A]n insurer's delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action." C.R.S. § 10-3-1115(2). Whether an insurer's conduct was reasonable is "determined objectively, based on proof of industry standards." Goodson , 89 P.3d at 415. "The aid of expert witnesses is often required in order to establish objective evidence of industry standards." Id.
For the bad faith claim, I agree that Mr. Veverka has presented no evidence that Addison knowingly or recklessly disregarded the validity of his claim. The record as it stands shows that Mr. Veverka was not the named insured under the policy, and that he was not driving the only "covered auto" (the dump truck) under the policy at the time of the accident. The single provision extending coverage to the accident is the temporary substitute one, which he raised only in response to Addison's complaint for declaratory judgment. In its initial investigation of the accident, Addison’ was told by a representative of Mr. Veverka that he was going home from work on his personal motorcycle at the time of the accident. Under the facts available to Addison at that time, it seems likely that nothing would have suggested the temporary substitute provision applied. To the Court Addison's conduct sounds more in negligence than knowing or reckless disregard. Relatedly, Mr. Veverka's evidence that Addison acted unreasonably under C.R.S. §§ 10-3-1115 and 10-3-1116 is minimal. He points to no expert testimony or other objective indication that Addison's conduct was unreasonable by industry standards. As Addison notes, at this stage it is not even clear whether Mr. Veverka is entitled to coverage under the policy.
But Mr. Veverka's claims here are undermined by the same infirmities in the record that apply to his breach of contract claim: he had not deposed experts or developed proof of objective industry standards before the parties filed their motions for summary judgment. Nor has either party presented evidence on the steps that Addison took to assess Mr. Veverka's claim before denying it, which would be relevant to both his bad faith and unreasonable delay/denial claims. Thus, here too granting summary judgment would be inappropriate, even though the bad faith claims strike the Court as thin even now. The Court denies Addison's motion for summary judgment without prejudice as to Mr. Veverka's bad faith and unreasonable delay/denial claims. Addison may renew its motion as to these claims after discovery is complete.
ORDER
1. Plaintiff and defendant's motions for summary judgment as to insurance coverage are both DENIED.
2. Plaintiff's motion for summary judgment as to breach of contract, bad faith, and violation of C.R.S. §§ 10-3-1115 and 10-3-1116 is DENIED without prejudice.
3. The parties are instructed to set a telephonic status conference with the Court to discuss what additional discovery is needed to resolve the latter three claims.