Opinion
Civil Action No. 1:23-cv-00159-DDD-SBP
2023-09-28
David E. ESPY, Plaintiff, v. CSAA GENERAL INSURANCE COMPANY d/b/a AAA Insurance Company, Defendant.
John J. Mattey, John J. Mattey, LLC, Parker, CO, Richard A. Orona, Orona Garcia & Duran PC, Pueblo, CO, for Plaintiff. Justin Hans Zouski, Tucker Holmes, P.C., Centennial, CO, Kurt Hans Henkel, The Henkel Law Firm, Denvr, CO, Winslow Russell Taylor III, Campbell Wagner & Frazier, LLC, Greenwood Village, CO, for Defendant.
John J. Mattey, John J. Mattey, LLC, Parker, CO, Richard A. Orona, Orona Garcia & Duran PC, Pueblo, CO, for Plaintiff. Justin Hans Zouski, Tucker Holmes, P.C., Centennial, CO, Kurt Hans Henkel, The Henkel Law Firm, Denvr, CO, Winslow Russell Taylor III, Campbell Wagner & Frazier, LLC, Greenwood Village, CO, for Defendant.
ORDER GRANTING MOTION TO DISMISS
Daniel D. Domenico, United States District Judge
Plaintiff David Espy brought this case against his insurance company, Defendant CSAA, alleging breach of contract and common-law and statutory bad faith denial of benefits. The question presented by the pending motion to dismiss is straightforward: does the statute of limitations for such claims begin to run when the plaintiff knows he has been injured by a hit-and-run driver or does it begin to run later, when he learned the details of his insurer's internal handling of his claims? The answer is the former, so the motion is granted.
BACKGROUND
For purposes of this order, the following facts are accepted as true. On January 16, 2018, Mr. Espy was injured in a car crash that he alleges was not his fault. Doc. 4 at 2. As he was driving west on Colfax an unknown vehicle pulled out from a side street, causing a Ford truck to swerve toward and collide with Mr. Espy's vehicle. Id. Mr. Espy himself then swerved into another vehicle and into the eastbound lanes of Colfax, where he collided head on with a Jeep. See Doc. 4 at 1-3 Doc. 13 at 2-3; Docs. 13-2, 13-5. The next day, January 17, 2018, Mr. Espy reported to CSAA that he was injured in the accident, and a week later, on the 24th, his attorney notified CSAA that the police report indicated that an unknown vehicle had caused the accident by pulling out in front of the truck. Doc. 4 at 2. Over the ensuing months, Mr. Espy received all of the $10,000 medical payment coverage under his CSAA policy, but incurred expenses well beyond that amount, about which he informed CSAA. Id. at 3. CSAA knew of the police investigation showing an unknown vehicle started the chain reaction and obtained an arbitration decision assigning fault to unknown drivers. Id. In January 2019, a CSAA representative told Mr. Espy's attorney that CSAA had not prevailed in arbitration and that the insurer of a third party was denying liability. Id. This suit was filed on December 21, 2022. Doc. 1.
LEGAL STANDARD
In addressing a motion to dismiss for failure to state a claim under Rule 12(b)(6), a court's role is to "determine whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed." Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007). At this stage, courts look to the specific allegations of the complaint to determine whether they plausibly support a legal claim for relief—that is, a complaint must include "enough facts to state a claim for relief that is plausible on its face." TON Servs., Inc. v. Qwest Corp., 493 F.3d 1225, 1236 (10th Cir. 2007). In doing so, the court "must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff." Alvarado v. KOBTV, LLC, 493 F.3d 1210, 1215 (10th Cir. 2007).
Because this is a diversity case, Colorado law governs whether Mr. Espy's claims are barred by a statute of limitations. Burnham v. Humphrey Hosp. Reit Trust, Inc., 403 F.3d 709, 712 (10th Cir. 2005). A motion to dismiss may be granted on the basis of a statute of limitations defense "where 'the allegations of the complaint itself set forth everything necessary to satisfy the affirmative defense, such as when a complaint plainly reveals that an action is untimely.' " Andonissamy v. Hewlett-Packard Co., 547 F.3d 841, 847 (7th Cir. 2008) (quoting United States v. Lewis, 411 F.3d 838, 842 (7th Cir. 2005)); accord Dummar v. Lummis, 543 F.3d 614, 619 (10th Cir. 2008).
ANALYSIS
This case is about whether Mr. Espy can recover from CSAA for injuries caused by the unknown driver who drove away after starting the chain-reaction accident that injured Mr. Espy. For purposes of this motion, I presume that Mr. Espy could prove that CSAA owed him benefits under the policy, breached its agreement to provide them, and did so unreasonably and in bad faith. The only question is whether Mr. Espy's claims are barred by the applicable statute of limitations. The facts alleged in the complaint show that by January 24, 2018, at the latest, Mr. Espy was aware that the unknown driver was involved and that "uninsured motorist coverage would apply." Doc. 4 at 2. CSAA argues that Mr. Espy's claims accrued at that point. Mr. Espy argues that they did not accrue until he "knew or should have known that CSAA wronged him in the handling of his claim," which was not until he received a copy of his claims file in July 2022. Doc. 13 at 9.
The parties attach numerous documents to their briefing on the motion. See Docs. 10-1, 10-2, 13-1 to 13-14. Some of these are referred to in the plaintiff's complaint, which can be an exception to the usual rule that motions to dismiss must be assessed on the basis of the complaint alone without reference to external evidence. See Gee v. Pacheco, 627 F.3d 1178, 1186 (10th Cir. 2010). The attached documents here, however, merely add detail and confirmation to the allegations in the complaint rather than anything that materially alters the analysis, so it is not necessary to invoke that exception.
The question then is whether claims such as these accrue when the plaintiff learns he has injuries caused by an uninsured motorist, as CSAA argues, or when he learns of wrongful actions by his insurer, as Mr. Espy argues. Colorado law favors CSAA.
I. Breach of Contract
Mr. Espy's breach-of-contract claim is subject to a three-year statute of limitations. Colo. Rev. Stat. § 13-80-107.5(1)(a), (b). Since this case was filed on December 21, 2022, that means the question is whether the claim accrued before December 21, 2019. A breach-of-contract claim accrues "after both the existence of the death, injury, or damage giving rise to the claim and the cause of the death, injury, or damage are known or should have been known by the exercise of reasonable diligence." Colo. Rev. Stat. § 13-80-107.5(3).
Mr. Espy makes little effort to defend this claim specifically other than a general complaint that this "is one of a growing number of cases in Colorado" in which an insurer "waits for the alleged three-year statute of limitations to pass" in order to avoid paying uninsured motorist claims. Doc. 13 at 1. The crux of the response otherwise is to show that CSAA kept its file "open through the expiration of the alleged three-year statute of limitations. At no time did Defendant CSAA contact Plaintiff Espy or his representatives to discuss his uninsured motorist claim or request any additional information." Id. at 6. But under Colorado law, that is not relevant to the accrual of his breach-of-contract claim. The only questions are when he knew of his injury, which according to the complaint was January 16, 2018, and when he knew that the injury was caused by an uninsured motorist, which was at the latest January 24, 2018. If Mr. Espy's claim was not paid within three years of then, Colorado law required him to file suit. He did not do so, so the claim must be dismissed.
II. Common-Law and Statutory Bad Faith
Mr. Espy's response is more germane to the bad-faith claims, but the result is the same. Both the common-law and statutory bad-faith claims are subject to a two-year limitations period. See Olson v. State Farm Mut. Auto. Ins. Co., 174 P.3d 849, 853 (Colo. App. 2007) ("All tort actions for bad faith must be commenced within two years after the cause of action accrues." (citing Colo. Rev. Stat. § 13-80-102(1)(a))); Wardcraft Homes, Inc. v. Emps. Mut. Cas. Co., 70 F. Supp. 3d 1198, 1213 (D. Colo. 2014) (claims for violation of Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116 accrue in the same manner as common-law bad-faith claims); Farmers Grp., Inc. v. Trimble, 691 P.2d 1138, 1142 (Colo. 1984) (bad-faith tort claim accrues upon unreasonable failure to pay claim). As Mr. Espy points out, "[e]ach bad faith act constitutes a separate and distinct tortious act, on which the statute of limitation begins to run anew when plaintiff becomes aware of the injury and its cause." Cork v. Sentry Ins., 194 P.3d 422, 427 (Colo. App. 2008).
So, what acts of bad faith does Mr. Espy point to? See Zarevo v. State Farm Mut. Auto. Ins. Co., No. 22-CV-00117-RMR-NYW, 2022 WL 1061910, at *5 (D. Colo. Apr. 8, 2022) (bad-faith complaint must contain "factual allegations identifying specific conduct of [insurer] that was allegedly unreasonable" beyond denial of claim). The response is not particularly clear. It largely consists of a summary of facts (largely internal communications) gleaned from CSAA's claims file—not the complaint. Mr. Espy summarizes the facts as showing that through at least February 2021 (after the three-year statute of limitations period had expired), "CSAA was aware monies were owed to Plaintiff for his uninsured motorist claim and an investigation into the claim was warranted." Doc. 13 at 6. I agree that this is a reasonable interpretation, but even assuming it is so, it does not change the result.
CSAA argues that I should, for that reason, not consider any of these facts. That position has some merit, but since they could possibly be added by amendment and the result is not changed, I consider them, nonetheless.
By his own explanation, Mr. Espy, and his attorneys, were told on January 24, 2018, that CSAA did not consider his claim to fit the requirements for UM coverage because the unknown vehicle did not hit him, the Ford truck did. Id. at 3. Mr. Espy also notes that while CSAA, internally, wrote up an "Action Plan" in January 2018 that included monitoring possible uninsured motorist liability, it apparently did not follow up "other than to reach out to Plaintiff's counsel and close the underinsured motorist exposure." Id. at 3-4.
It appears undisputed, as Mr. Espy argues, that within a couple of weeks of the collision, CSAA knew that an unidentified motorist (and thus an uninsured motorist under the terms of the policy, see Doc. 10-2 at 22-23) was believed to have caused the accident yet denied Mr. Espy's claim for uninsured motorist coverage. But it is also undisputed that Mr. Espy and his attorneys knew this too—they knew that an uninsured motorist was involved, that the police report blamed the uninsured motorist for the crash, and they had been told that CSAA was nonetheless not covering the uninsured motorist claim. Doc. 4 at 2-3 (Mr. Espy's attorney advised CSAA on January 24, 2018 that the police report documented an unidentified non-contact vehicle; CSAA advised Mr. Espy's attorney that same day that it was denying the uninsured-motorist claim); Doc. 13 at 2-6 (same). Per Mr. Espy's complaint, all that is necessary under the policy to have a viable uninsured motorist claim is damages caused by such a motorist. Under Trimble, then, these claims accrued by then. See 691 P.2d at 1142. That was well before the December 2020 deadline created by statute.
Mr. Espy's response emphasizes that CSAA continued to receive information about the accident and to internally discuss potential uninsured motorist exposure over the next few years. See Doc. 13 at 3-6. But receiving information and discussing the possible implications of a case internally are not acts of bad faith—if anything they are part of the requisite investigation. The rest of Mr. Espy's response is about things that CSAA didn't do: it didn't "contact or otherwise advise Plaintiff or his counsel and the denial was made in error," id. at 3; it "failed to obtain statements from any adverse party or witness," id. at 4; it "took no action, other than to reach out to Plaintiff's counsel and close the underinsured motorist exposure," id.; it "did not take any action upon receipt off the motor vehicle traffic accident report," id.; "at no time did [CSAA's representative] reach out to Plaintiff or his representatives to correct the factual misstatement concerning the benefits available to Plaintiff," id.; it "failed to argue the potential liability of the [subject] vehicle in an inter-company arbitration," id. at 5; it "took no further action such as reaching out to Plaintiff and determining what additional medical treatment and/or bills [ ] had been incurred in the nine [ ] months since the documents had been provided to Defendant CSAA," id. at 5-6; and "[a]t no time did Defendant CSAA contact Plaintiff Espy or his representatives to discuss his uninsured motorist claim," id. at 6.
While the response calls this a factual misstatement, the interpretation of an insurance policy is a legal question, not a factual one. Wardcraft Homes, 70 F. Supp. 3d at 1203.
While these are all probably good examples of why insurance companies are held in low regard, they miss the point when it comes to the statute of limitations. The key thing CSAA didn't do is suggest to Mr. Espy that it was reconsidering its early denial of uninsured-motorist coverage. Mr. Espy and his attorneys were informed of the denial at the outset, and there is no evidence in the complaint, or attached to the parties' briefs, that Mr. Espy or his attorneys were ever told that the claim was being reopened. This then is not an example of what Mr. Espy calls the "growing number of cases" where an insurer leads an insured to believe a claim is being considered while the statute of limitations passes "and then subsequently denies the claim." Doc. 13 at 1. Instead, it is one in which "the crucial evidence" is not what the defendant knew, but the evidence that "should have put [the insured] on notice that [the insurer] was not processing her UM claim." Gargano v. Owners Ins. Co., 623 F. App'x 921, 929 (10th Cir. 2015). Here, that notice was explicit and early. What didn't happen after that notice only reinforced that message.
In April 2018, CSAA's representative did apparently write to Mr. Espy's attorneys stating she was opening a "precautionary underinsured motorist claim." Doc. 13 at 5. But that was in relation to the Ford truck, not the unknown driver and vehicle that is the subject of this case.
It appears that Mr. Espy and his attorneys (and perhaps CSAA internally) were confused by the unusual, multi-car nature of the accident here. Various potential claims against various drivers were being considered and assessed during the years that passed between the accident and this lawsuit. See, e.g., supra note 4. But this case is now about one particular claim, relating to the unknown driver, and that claim was denied within weeks of the accident. Given that Mr. Espy was represented by counsel who knew the facts surrounding that driver's involvement and CSAA's position, he had all the information necessary for this claim well before the statute of limitations ran. See Gargano, 623 F. App'x at 922 (there is "no reasoned basis why [plaintiff's] UM claim did not accrue some time before [expiration of the limitations period], which was almost nine months after she retained counsel, and almost eleven months after she reported the accident").
As alleged, CSAA may well have handled Mr. Espy's claim in bad faith. But under Colorado law, once an insured knows that he has a claim that is not being processed, let alone a claim that has been explicitly denied, the onus is on him to file suit within two years. Mr. Espy and his attorneys were told in 2018 that CSAA was not going to process his uninsured motorist claim. Mr. Espy did not pursue his claim against CSAA for over four years. That is too late.
CONCLUSION
Defendants' Motion to Dismiss, Doc. 10, is GRANTED, and the plaintiff's complaint is DISMISSED WITH PREJUDICE.
See Brereton v. Bountiful City Corp., 434 F.3d 1213, 1219 (10th Cir. 2006) (if complaint fails to state a claim under Rule 12(b)(6) and granting leave to amend would be futile, dismissal with prejudice is appropriate).