Free Response to Motion - District Court of Colorado - Colorado

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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.

PLAINTIFFS' RESPONSE TO DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiff, KELLY FINCHER, by her guardian, JAMES FINCHER, on behalf of herself, by and through her attorneys of record, submits her Response to Defendant's Motion for Partial Summary Judgment as follows: I. INTRODUCTION

In the context of this case, where this Court has previously carefully analyzed the reasonableness of Prudential's conduct and reformed the applicable policy to include APIP benefits effective May 8, 1994, the instant Motion For Summary Judgment filed by Defendant Prudential Property and Casualty Insurance Company (hereinafter "Prudential") makes no sense. Notwithstanding this reformation order, Prudential

argues that Fincher's claims--breach of contract, bad faith, and willful and wanton conduct--fail as a matter of law because it finally paid, twelve years late, the benefits

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due under the reformed contract and paid a portion of the interest due to Fincher under C.R.S. § 10-4-708. Under the Court's Findings Of Fact, Conclusions Of Law And Orders dated February 28, 2006 (hereinafter "Effective Date Order"), which established the effective date of reformation of the operative policy, Fincher's claims fail only if the APIP benefits due under the reformed contract were paid to Fincher within 30 days of the date they were submitted to Prudential, which occurred shortly after the May 8, 1994, accident. The facts, summarized in Section II, infra, establish that Prudential did not pay the benefits due until April 2006. Prudential ignores the effect of the Effective Date Order, which confirmed that the policy contained $200,000 in coverage as of May 8, 1994. Prudential knew shortly after the accident that Fincher's medical bills exceeded the basic PIP benefits and that it refused to pay those bills. Prudential argues that the Effective Date Order is not the same as a ruling that it acted in bad faith in delaying payment of the benefits. Fincher does not argue

otherwise and Fincher will demonstrate the facts that justify denial of Prudential's Motion below. However, the same facts that Fincher will recite are the same fact that underlie the Effective Date Order. That is, the Court rejected the legal arguments reurged by Prudential to show its conduct was "reasonable" and concluded that Prudential's payment of these benefits was untimely. [extended PIP] coverage in a timely fashion."). (Fincher "did not receive Prudential

Eff. Date Order p. 19.

acknowledges as much: by having paid interest to Fincher pursuant to C.R.S. § 10-4-

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708, Prudential conceded that the benefits were not timely paid. Under § 708, interest is due only when benefits are not paid when "due," which is thirty days after reasonable proof of the fact and amount of the expenses has been provided. 1 See Memorandum In Support Of Defendant's Motion For Partial Summary Judgment (hereinafter "Def. Mem.") p. 7. Because her bills were not paid timely, Fincher is entitled to have a jury assess whether the untimely payment of benefits breached the contract of insurance and if Prudential's actions were in bad faith or willful and wanton. Prudential argues that its failure to provide additional PIP benefits to Kelly Fincher under the reformed contract of insurance has been "reasonable." See, e.g., Def. Mem. at pp. 2, 9, 12, 14, 15, 16. Saying it does not make it so, especially when this Court has--admittedly for other purposes, but on the same facts--concluded otherwise. The Court has already concluded that Fincher did not "receive [her]

coverage in a timely fashion." Eff. Date Order p. 19. The issues that remain relate to the reasonableness of Prudential's conduct, which are fact issues for the jury. See Section III, infra. If anything, it is Prudential's breach of the contract that should be resolved as a matter of law, since it acknowledges that the operative facts are undisputed. Prudential's admission that the extended PIP benefits were not timely paid, and

1

Once the insurer refuses to provide coverage, no further obligation exists to tender bills, see Dupre v. Allstate Ins. Co., 62 P.3d 1024 (Colo. App. 2002) and Matherne v. Aetna Life and Cas. Ins. Co., 484 So.2d 740 (La. App. 1986), and the all PIP expenses, future and past, are resolved in a trial on damages. See Tait v. Hartford Underwriters Ins. Co., 49 P.3d 337 (Colo. App. 2001). Prudential's representative Gene Brown has also conceded that Fincher was not expected to submit further bills once informed that the coverage had been exhausted. Brown Deposition, Exh. 1 p. 54.

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this Court's analysis of Prudential's conduct and its reasons for not paying the extended benefits due, prove that Prudential is not entitled to summary judgment. Prudential's motion is based on points of fact and law that have already been resolved against Prudential. II. UNDISPUTED FACTS

From the beginning, Prudential was, or should have been, aware that its offer of APIP coverage did not comply with the CAARA, that Fincher had unpaid accidentrelated expenses, that it had an obligation to reform the policy and pay those expenses, and that because it did not do so, Fincher "did not receive [extended PIP] coverage in a timely fashion." Eff. Date Order p. 19. More specifically: 1. Long before Fincher was injured in 1994, Prudential was aware of the

amendment to the No-Fault Act requiring that no aggregate limitation on APIP benefits could be lower than $200,000, and Prudential accordingly submitted forms, rules, and rates to the Colorado Department of Insurance (CDOI) on November 13, 1989, and January 16, 1990. Reformation Trial Stipulated Exhibits (hereinafter, "Ref. Tr. Stip. Exh."). 7, 19; Ex. 56, pp. 2, 61. 2. While awaiting Colorado Division of Insurance approval of its forms, Prudential continued to use forms containing a noncompliant $150,000 cap. Doc. # 143, pp. 2-3; Exhibit 1, Gene Brown transcript, p. 66. 3. On May 8, 1994, Plaintiff Kelly Fincher injured as pedestrian (bicyclist) in car accident involving Prudential insured Anthony Bekeshka. 4. Only two weeks later, a memo to Prudential's Gene Brown dated May 24, 1994,

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noted that Kelly Fincher was comatose due to head injury, and: "We can expect medical and rehabilitation coverage of $50,000 to be exhausted, along with essential services, as the injuries speak for themselves." Ref. Tr. Stip. Exh. 42 at p. 3. 5. On June 10, 1994, Prudential received from Memorial Hospital a bill for the medical expenses for treatment of Kelly Fincher's accident-related injuries, in the amount of $108,395.75; of which Prudential paid, on or about July 12, 1994, only $39,676.90, exhausting the basic PIP medical coverage provided by the Bekeshka policy. Ref. Tr. Stip. Exh. 54 at pp. 45-46, Ref. Tr. Stip. Exh. 53. 6. On or about September 3, 1994, Fincher's Basic PIP medical and rehabilitation expenses of $100,000 were exhausted. Further payment of benefits was declined by Prudential. Ref. Tr. Stip. Exh. 53, at "Claim Suffix Display--Screen 3." 7. A CDOI Market Conduct Examination of Prudential dated September 23, 1997, reported that its 5/93 policy was non-compliant with the CAARA regarding loss of income benefits. Doc. 167, Ex. 10. 8. On or before October 23, 1998, the June 11, 1998, Bonnie Ruth Life Care Report disclosed in the Fincher bodily injury suit against Prudential's insured projected Life Care Plan expenses as between $2,177,558.67-$2,366,850.20. Exh. 2. 9. In a report disclosed to Prudential on or about June 16, 1998, in the same suit against Prudential's insured, expert L. Christopher Griffiths documents future medical and impairment to earning capacity due to accident-related injuries in excess of $1,300,000. Doc. # 114 at Exhibit 9. 10. The instant action was commenced on August 24, 2000, including claims for

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medical expenses and loss of income. Exh. 3. 11. Plaintiffs' counsel disclosed to Prudential on January 2, 2001, the report of L. Christopher Griffiths, Ph.D., detailing Kelly Fincher's probable impairment of future earning capacity at $1,311,955.59, as well as a present value of Kelly Fincher's Life Care Plan expenses as between $2,550,154.34 - $2,792,533.09. Exh. 4. 12. Plaintiffs produced to Prudential on August 10, 2001, copies of medical bills for treatment of Kelly Fincher's accident-related injuries, totaling $186,731.65, attached to Plaintiffs' Response to Defendant's Second Set of Discovery. Ex 5. 13. A summary of Kelly Fincher's medical bills totaling $186,731.65, was provided to Prudential as a supporting exhibit to Plaintiffs' Response to Defendant's Motion to Dismiss and Motion for Summary Judgment filed October 15, 2001. Doc. #39 at Exhibit 70. 14. Prudential does not dispute that Fincher's bills are accident related, and that Fincher has made a loss of income claim Exh. 1 at pp. 38, 43. 15. On or about March 31, 2005, or 548 days following the Tenth Circuit's Order and Judgment, Prudential tenders to Fincher a payment of $92,500. That tender of payment was not negotiable, because it included "CHAMPUS FISCAL INTERMEDIARY" as a payee on the draft. Exh. 6. 16. On April 12, 2006, nearly 12 years after the accident and some 925 days from the date of the Tenth Circuit's Order and Judgment, Prudential tendered for the first time a negotiable payment to Fincher of $92,500, finally paying extended PIP benefits under the Bekeshka policy. Exh. 7.

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17. On or about May 31, 2006, some 976 days after the Tenth Circuit reformed the Prudential policy, and more than three months after this Court established the date of reformation of the subject policy, Prudential tendered a check to Plaintiffs in the amount of $202,000.00, a partial payment of the statutory interest "commencing from the date the benefits recovered were due" under Colo. Rev. Stat. § 10-4-708(1.8). Exh. 8. III. ARGUMENT

In support of its motion, Prudential posits two arguments, both of which relate to legal issues instead of factual matters. First, Prudential claims that its belated payment of the extended PIP benefits renders Fincher's breach of contract claim moot, and second, that its actions in delaying that payment were reasonable as a matter of law. Prudential is wrong on both counts. A. Fincher's Breach Of Contract Claims Are Not Moot Consistent with the facts documented in this response and the law of this case contained in the Effective Date Order, Prudential admits, both in its memorandum in support of its motion, and by its conduct (payment of interest pursuant to C.R.S. § 10-4708), that it did not timely pay benefits to Fincher. Def. Mem. p. 7. Because Prudential admits both by its words and by its actions that it did not timely pay Fincher the benefits due to her under the reformed contract of insurance, Fincher's breach of contract claim has not been "mooted" by Prudential's admittedly untimely payment, but rather established by it. 2 When an insurer fails to pay benefits to an insured, the insured may
Fincher objected to Prudential's motion to exceed the Court's Practice Standards (REB. Civ Practice Standard V. I. 4) with the instant motion, and when the Court granted Prudential's motion to exceed the page limit, the time for filing a cross motion for summary judgment had passed. However, given that the motion has now been allowed and Prudential has admitted that it untimely paid the benefits due, the court
2

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"seek remedies under contract law, tort law, and the Colorado Auto Accident Reparations act." Giampapa v. American Family Mutual Ins. Co., 64 P.3d 230, 234 (Colo. 2003) (affirming jury verdict against PIP insurer for breach of contract, violation of the No-Fault Act, and bad faith breach of contract). "[T]he fact that an insurer eventually pays an insured's claims will not prevent the insured from filing suit against the insurer based on its conduct prior to the time of payment." Goodson v. American Standard Ins. Co., 89 P.3d 409, 414 (Colo. App. 2004). Goodson makes clear that an insurer cannot avoid claims based on failure to pay timely by the simple expedient of finally paying the bills "at the last minute." Id. If all nonpayment claims could be dismissed based on late payment of just the benefits and interest due, no insurer would ever pay on time. See Cary v. United of Omaha Life Ins. Co., 68 P.3d 462, 468 (Colo. 2003) ("If the only damages an insurer will have to pay upon a judgment of breach are the amounts that it would have owed under the policy plus interest, it has every interest in retaining the money, earning the higher rates of interest on the outside market, and hoping eventually to force the insured into a settlement for less than the policy amount."). Prudential also bases its mootness argument on its payment of interest to Fincher, Def. Mem. at 7, but Fincher disputes that Prudential has paid the actual amount owed, Exh. 9, Affidavit of Gordon Beck, and in any event payment of an amount due before trial is not binding in the absence of an agreement by Plaintiff. C.R.S. § 104-708(1.7)(b). And, even if Prudential had paid the full amount of interest due, Fincher
could grant summary judgment in favor of Fincher sua sponte, or to the extent necessary, grant leave to

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still has a right to a verdict or ruling that Prudential breached the contract because it would support her claim for attorney's fees, and also under § 708(1.7) would prevent Prudential from avoiding a judgment based on its delayed payment. Tellingly, in urging this Court to conclude that Fincher's claims have been mooted, Prudential does not cite to a single authority interpreting the No-Fault Act. In addition, Prudential's attempt to bolster its arguments by pointing out the irrelevant fact that Fincher's medical bills were paid by her health insurer is equally unavailing. What Prudential fails to recognize is that these bills were paid by the health insurer only because Prudential failed to timely pay them. The health insurer would not have been required to pay those bills if Prudential had acted reasonably under the reformed contract and timely paid those bills when they were submitted to it. The sole issue on the breach of contract claim is whether Prudential paid the benefits within thirty days of them becoming due. It did not do so, and while the facts are seemingly one-sided, they are one-sided for a finding of a breach, not of mootness. Rather than grant summary judgment on this claim in favor of Prudential, the Court could appropriately enter summary judgment for Fincher. B. As A Matter Of Law And Fact, Prudential's Late Payment Of Benefits Under The Reformed Contract Of Insurance Was Not "Reasonable" Prudential's second argument, that its failure to pay the benefits owed to Fincher after reformation is reasonable as a matter of law, is based entirely on the erroneous premise that this Court's ruling establishing the effective date of reformation consists only of a finding that it "had a duty to offer Bekeshka extended PIP coverage with the
Fincher to urge a cross motion now on the breach of contract issue, where the facts are not in dispute. 9

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correct $200,000 cap as of the date of Plaintiff's accident in 1994." Def. Mem. p. 10 n. 4. This assertion is baseless and contrary to this Court's findings, which are grounded on entirely different conclusions about what Prudential was required to do and when. Based on a lengthy and detailed analysis, this Court found that Prudential has known for many years that it was required to reform the instant policy and provide extended PIP benefits to Fincher, but unreasonably chose not to do so. Eff. Date Order p. 15. The facts of record bear out this conclusion. The facts show that Prudential within a matter of weeks of the accident knew that the basic PIP coverage would be, and then was, exhausted. See Section II ¶¶ 4-6, supra. And, Prudential has never claimed that these medical expenses are not accident-related. Exh. 1, Brown

deposition, p. 38. The facts also show that Prudential was aware that Fincher also had an accident-related loss of income. Id. at 43. These income losses were documented in detail no later than June, 1998, when the report of Fincher's economic expert was disclosed to Prudential in the underlying tort action. See. Doc. # 114, Exhibit 9. And, there can be no dispute that Fincher asserted both claims for unpaid medical expenses and income loss when she filed her complaint in this action. Amended Complt. ¶ 19. In addition to its knowledge of these unpaid accident-related expenses and losses, as this Court has already noted, Prudential was also aware that the insurance policy it offered to its insured was flawed, and that reformation was the required remedy. See Clark I, supra, at 1242; Brennan, supra, at 553; Thompson, supra, at 990. Specifically, Prudential was aware that its $150,000 cap on APIP coverage did not comply with the CAARA. Section II, supra, ¶ 2.

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The issue to be resolved in establishing the effective date of reformation in a case like this is whether Prudential had a reasonable basis for its conduct in light of its awareness of its obligations under the No-Fault Act. See, e.g., Eff. Date Order p. 11. An early date of reformation is to be selected when an insurer did not act reasonably given its knowledge of and the clarity of its obligations. This Court expressly analyzed these considerations in reasoning that the Prudential policy should be reformed at an earlier date in order "to ensure that Fincher...receives compensation for the fact that she did not receive [extended PIP] coverage in a timely fashion." Eff. Date Order p. 19 (emphasis added). Prudential asserts that the Court's conclusion that its actions were unreasonable is not relevant to the same issue in the instant motion, but this contention is based on its reliance on legal arguments that this Court has already rejected. These arguments contradict the Court's finding that Prudential's policy should be reformed as of the date of the underlying accident. For example, Prudential asserts that its failure to provide APIP benefits to Ms. Fincher under the reformed policy was "reasonable" based on its arguments about the meaning of the ruling in Thompson, supra. Def. Mem. p. 15. Ignoring that such an argument is for the jury to decide, this Court's ruling based on these same facts is directly to the contrary: After Thompson, Prudential was or should have been aware that reformation of an insurance policy was the appropriate remedy when an insured was not offered the optional PIP coverage required by the CAARA. As of September, 1996, Prudential was aware that its offer to Bekeshka was not compliant with the APIP provisions of the CAARA, and that reformation of the policy to provide APIP coverage was the proper remedy.

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Ref. Order p. 15-16 (emphasis added). A knowing violation of the CAARA's requirements and failure to reform the policy and provide APIP benefits to an insured for nearly twelve years after the accident cannot be "reasonable" as a matter of law, as Prudential argues, especially given this Court's previous findings. Prudential's reliance on Judge Babcock's ruling in Clark v. State Farm Mutual Auto. Ins. Co., 292 F.Supp.2d 1252, (D. Colo. 2003), (Clark II) E, Def. Mem. at 6, 15, is equally misplaced. Judge Babcock, using the same analytical framework this Court used in the Effective Date Order, found that the insurer in Clark II acted reasonably, and therefore although the policy was similarly reformed due to the insurer's violation of the CAARA, the effective date of the reformation was the date of Judge Babcock's order. Id. at 1270. Here, the opposite is true; as this Court noted at page 21 of its Effective Date Order, "the circumstances in this case differ significantly." The Court assessed the Clark factors and found that an earlier date of reformation was warranted because Prudential knew that it had violated the CAARA, knew what the remedy was, and still failed to provide Ms. Fincher the benefits to which she was entitled. Prudential's bald assertion that it should be treated like the insurer in Clark II despite the unmistakable distinction between the effective date ruling in that case and this one, is baseless, if not frivolous. Instead, all of the remedies that were not available in Clark II are available here, precisely because this Court, based on Prudential's different misconduct and knowledge of that misconduct, reached the opposite conclusion. Moreover, if the conclusion in Clark II had been different, and the effective date earlier, then the precise trial that is set in October here would have occurred in Clark. Clark I, 319 F.3d at 1244.

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Prudential's legal arguments have already been rejected, so the question of whether Prudential acted in bad faith when it delayed payment of extended PIP benefits to Fincher for nearly 12 years is not appropriately decided by summary judgment, but rather by a jury. "The issue of good or bad faith is ordinarily a question of fact for the jury." Hatfield v. Barnes, 168 P.2d 552, 553 (Colo. 1946) (summary judgment improper where factual question remained as to party's good faith). "Generally, a court may not resolve issues pertaining to a party's good faith or lack thereof on summary judgment because this decision requires an evaluation of a party's subjective intent." Decibel Credit Union v. Pueblo Bank & Trust Co., 996 P.2d 784 (Colo. App. 2000) (citing Hatfield, supra); Ranger v. Fortune Ins. Co., 881 P.2d 394 (Colo. App. 1994) (determination of bad faith as a matter of law precluded where there are existing, unresolved questions of material fact)); see also Dale, infra, 948 P.2d at 554 ("because there are genuine issues as to material facts [regarding plaintiff's bad faith claims], summary judgment was erroneously granted"). Prudential has admitted violating the No-Fault Act with respect to the timely payment of claims, and following the long-delayed deposition of Prudential's Gene Brown with respect to its handling of Fincher's claim, a deposition that Prudential permitted only after Judge Watanabe's order based on Plaintiff's motion to compel, bad faith expert Mike Hodges has opined that Prudential did indeed act in bad faith. Exh. 10. In addition, Fincher can support her bad faith claims with Mr. Brown's testimony about Prudential's knowledge of the unpaid expenses and its conduct relating to Prudential's obligations under the CAARA. Viewed in a light most favorable to Fincher, Mr. Brown's

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testimony shows that the conduct of Prudential was unreasonable and in violation of the law, making summary judgment inappropriate. To state a bad faith insurance claim in Colorado, it "is the affirmative act of the insurer in unreasonably refusing to pay a claim and failing to act in good faith...that forms the basis for liability in tort." Farmers Group, Inc. v. Trimble, 691 P.2d 1138, 1142 (Colo. 1984). The focus of the claim is on the insurer's decision to refuse to make or to delay making payments owed under an insurance policy. Goodson v. American Standard Ins. Co., 89 P.3d 409 (Colo. 2004). In bad faith cases, the issue of whether an insurer has acted reasonably is an objective one, based upon evidence of industry standards. Goodson, supra. The unfair claims practices listed in § C.R.S. § 10-31104(1)(h) do not establish a standard of care actionable in tort, but they may be used as evidence of industry standards. American Family Mut. Ins. Co. v. Allen, 102 P.3d 333, 344 (Colo. 2004). Several of those practices could implicate conduct occurring after litigation has begun, such as not attempting in good faith to effectuate a prompt, fair, and equitable settlement once, as the facts show here, liability has become reasonably clear. C.R.S. § 10-3-1104(1)(h)(VI). Here, liability for Plaintiff's accident-related medical expenses has been clear since 1994, and Prudential has also long been aware of her claim for loss of income benefits. See Section II, supra, ¶¶ 8-10. Despite that knowledge, and the fact that these unpaid expenses remained unchanged in the interim, Prudential did not pay these benefits until some 12 years later. Prudential's admission that the payment was

untimely is further evidence of its unreasonable conduct given that nothing changed

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between when its obligation to pay the benefits became reasonably clear and when the benefits were paid. Therefore, the jury is entitled to consider whether Defendant's

acknowledged failure to timely pay the accident-related expenses, whether before or after suit was filed and legal arguments were asserted, was unreasonable. The Colorado Supreme Court in Dale v. Guaranty National Insurance Co., 948 P.2d 545 (Colo. 1997), reversed a grant of summary judgment in favor of the insurer where the insurer delayed payment of the benefits awarded to the plaintiff in an arbitration proceeding. Plaintiff in that case alleged bad faith on the part of Guaranty National for, among other things, issuing a nine party check after being ordered by a panel of arbitrators to pay certain No-Fault benefits to its insured. Because Ms. Dale could not get the check approved by the other eight payees, and had to return it, there was a mere two month delay in her receiving proper payment. The Supreme Court observed that "the tort of bad faith breach of insurance contract encompasses an entire course of conduct," including after an entry of judgment. Id. at 552. Based largely on the bad faith subsequent to judgment in causing a two month delay, the Supreme Court reversed the lower court's grant of summary judgment to the insurer, and reinstated the plaintiff's bad faith claims, including those deemed to be without merit by the arbitrator. In this case, Prudential's failure to pay Fincher extended PIP benefits under the reformed insurance policy caused a twelve year delay in the receipt of these benefits, and its actions are therefore evidence of a violation of its duty of good faith and fair dealing. The Dale ruling also points out that the Colorado legislature has declared certain enumerated unfair claim settlement practices by insurers to be unreasonable

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under C.R.S. § 10-3-1104(1)(h), and that evidence of a consistent pattern of delaying payments was relevant in proving an insurer's bad faith. Similarly, in Tait v. Hartford Underwriters Insurance Co., 49 P.3d 337 (Colo. App. 2001), the Colorado Court of Appeals, referring to C.R.S. § 13-21-102(3), affirmed an increased award of exemplary damages in a bad faith breach of insurance contract action based on the insurer's improper conduct after suit was filed. The Court of

Appeals viewed the insurer's conduct as the kind of willful and wanton conduct the insurer knew or should have known would have aggravated the plaintiff's damages. More recently, citing Tait, the Colorado Supreme Court in Coors v. Security Life of Denver Insurance Co., 112 P.3d 59, 67 (Colo. 2005), determined a trial court's increase in an award of punitive damages against an insurer under § 13-21-102(3) was justified, because a trial court "may increase an award based on behavior during the pendency of the case." The supreme court noted the trial court found the insurer "obscured and misrepresented who its decision makers were and failed to meet its most basic discovery and disclosure obligations even after being compelled to produce information." Id. at 67. These rulings all demonstrate that an insurer is subject to bad faith claims for an unreasonable failure to pay benefits at any time--that "the tort of bad faith breach of insurance contract encompasses an entire course of conduct," including after an entry of judgment, Dale, supra, 948 P.2d at 552. The Dale ruling clearly would encompass the judgment of the Tenth Circuit in this case, after rejecting the same legal arguments that Prudential posits in the instant motion, that the policy here was required to be

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reformed. Prudential's motion must be denied because Plaintiff is entitled to submit to the jury the question of whether Prudential's conduct since the date of reformation is a bad faith breach of the reformed contract of insurance. The cases Prudential relies upon do not counsel otherwise. Prudential

misinterprets Brennan v. Farmers Alliance Mutual Insurance Co., 962 P.2d 500 (Colo. App. 1998), Brandon v. Sterling Beef Co., 827 P.2d 559 (Colo. App. 1992), Tozer v. Scott Wetzel Servs., Inc., 883 P.2d 496 (Colo. App. 1994), and State Farm Mut. Auto. Ins. Co. v. Lee, 353 F. Supp. 2d 1119 (D. Colo. 2005), as providing support for the idea that its self-described "reasonable legal positions" entitle it to summary judgment. First, Brennan in no way supports Defendant's position. On the contrary, that decision makes clear that an insurer's duty to pay benefits under a reformed contract is triggered at the time of reformation: "Farmers was not obligated to pay the additional PIP benefits until the policy was reformed, and Farmers paid the benefits which were due under the policy in a timely manner." Brennan, 962 P.2d at 557. Indeed, the gist of Brennan is that if the reformation date were earlier, the insurer would have to defend against a bad faith claim. Id. Brandon also does not support Defendant's position. In Brandon, pursuant to a statutory right to appeal, the defendant insurer appealed a disputed factual finding by an administrative hearing officer with regard to the source of the plaintiff's injuries. The court in Brandon held that, in defending a claim of unreasonableness, which is what is to be determined at the trial in this matter, "an insurer may challenge claims which are fairly debatable and will be found to have acted in bad faith only if it has intentionally

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denied (or failed to process or pay) a claim without a reasonable basis." Brandon, 827 P.2d at 561 (citing Travelers Ins. Co. v. Savio, 706 P.2d 1258 (Colo. 1985)). Here, however, Prudential has admitted that Plaintiff's accident-related medical expenses were not timely paid, and her claims therefore are not "fairly debatable." Instead, the facts show that Fincher was due extended PIP benefits as a result of Prudential's failure to comply with the CAARA, and that it should have recognized that payment was due under a reformed policy many years before Prudential finally paid. At a minimum,

Prudential unreasonably delayed payment for many years even after it knew in 1996 that that the policy covering Fincher must be reformed to provide extended PIP benefits. Eff. Date Order p. 15-16. Prudential's reliance on Tozer v. Scott Wetzel Servs., Inc., 883 P.2d 496 (Colo. App. 1994) is equally ineffective. The Tozer ruling is specific to the Colorado workers' compensation statute. 883 P.2d at 498-99 (addressing the standard under C.R.S. § 843-216(1)). In American Guarantee and Liability Insurance Co. v. King, 97 P.3d 161, 168 (Colo. App. 2004), the Colorado Court of Appeals specifically declined to apply Tozer to bad faith tort claims. The court found that the standard announced in Tozer "unduly limits the calculus of `unreasonable' in the insurance bad faith context." King, 97 P.3d at 169. Prudential contends that it has not acted in bad faith, because it relied on "reasonable legal positions." This is disputed and is at the core of Plaintiff's bad faith claim, and is fact-based. It also ignores this Court's ruling, the law of the case, that Prudential's positions were not reasonable, and relies on the assumption that Prudential

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could somehow avoid its obligations under C.R.S. § 10-4-708 and Reg. 5-2-8 simply by continuing to believe in its rejected legal positions. This obviously is not permitted by the No-Fault Act, and Prudential does not and cannot cite to any authority that would allow it to ignore its obligations under the statute and the regulation with respect to the "undisputed" medical expenses it has now acknowledged were not timely paid. For example, after the Tenth Circuit's ruling, if Prudential elected to delay payment on an unreasonable basis it is liable, and Plaintiff has enough disputed issues of fact (and evidence) to prove her bad faith claims, the question is properly sent to a jury. For this reason, Prudential's reliance on State Farm Mut. Auto. Ins. Co. v. Lee, 353 F. Supp. 2d 1119 (D. Colo. 2005) is ineffective. In that case, where coverage had not already been established by multiple court orders, Judge Figa concluded that the insurer's legal argument against providing coverage was reasonable, id. at 1129. The issue here is completely different, and relates to Prudential's lack of a reasonable basis for paying benefits that it knew to be past due under coverage that it knew to be required under the CAARA. For the same reason, Prudential's brief mention of Pham v. State Farm Mutual Automobile Insurance Co., 70 P.3d 567 (Colo. App. 2003) is inapposite. IV. CONCLUSION

Despite the facts of record and the recent deposition of Prudential's representative demonstrating Prudential's knowledge that its offer of extended PIP benefits was in violation of the CAARA, and that Fincher had unpaid accident-related medical expenses and income losses, this Court's unequivocal conclusion that Prudential's conduct was "unreasonable," and its arrival at the opposite conclusion from

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that reached by Judge Babcock in Clark II, Prudential argues in this motion, without providing any new facts or even asking the Court to reconsider the effective date order, that it has now mooted or precluded all claims by untimely paying the benefits due and by calculating and paying interest and thereby admitting that the benefits were paid after they were "due," that the very same conduct this Court analyzed and concluded was unreasonable is instead "reasonable." Given the ample evidence of failure to timely pay benefits both admitted by Prudential and adduced by Plaintiff, the question of whether Prudential is liable on these claims is for the jury.

Respectfully submitted this August 23, 2007.

s/Leif Garrison Robert B. Carey Leif Garrison The Carey Law Firm 2301 East Pikes Peak Ave. Colorado Springs, Colorado 80909 Phone: (719) 635-0377 Fax: (719) 635-2920 Email: [email protected] Steve W. Berman, WSBA #12536 HAGENS BERMAN, L.L.P. 1301 Fifth Avenue, Suite 2900 Seattle, WA 98101 L. Dan Rector FRANKLIN D. AZAR & ASSOCIATES, PC 5536 Library Lane Colorado Springs, CO 80918 Attorneys for Plaintiffs

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CERTIFICATE OF SERVICE I hereby certify that on this August 23, 2007, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF System, which will send notification to the following email addresses: [email protected] Additionally, a copy was mailed to the following: Kelly Fincher 436 Longleaf Ct. O'Fallon, IL 62269 s/Leif Garrison Robert B. Carey Leif Garrison The Carey Law Firm 2301 East Pikes Peak Ave. Colorado Springs, Colorado 80909 Phone: (719) 635-0377 Fax: (719) 635-2920 Email: [email protected]

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