Free Reply to 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, Plaintiff, v. PRUDENTIAL PROPERTY AND CASUALTY INSURANCE COMPANY, a New Jersey Corporation, Defendant. PLAINTIFF'S REPLY TO DEFENDANT'S RESPONSE TO PLAINTIFF'S AMENDED MOTION FOR CLASS CERTIFICATION Prudential Property and Casualty Insurance Company ("Prudential") responds to Kelly Fincher's ("Fincher") motion for class certification by lacing its brief with state trial court orders which are inapplicable to the facts and claims stated here and were decided under different precedent. Virtually every order was issued before the ruling in Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d 703 (10th Cir. 2005) ("Clark III"), which confirmed that the terms of the policy itself can answer the question of whether a statutory offer of coverage was made. Clark III at 710. Fincher urges this Court to simply apply the federal rule to the unique facts presented here. Further, Prudential's response improperly urges this Court to rule on the merits at nearly every turn. At this stage, the court only identifies the substantive claims and defenses of the parties and the essential elements of those claims and defenses to ensure that plaintiff, if she is right, can prevail under Rule 23. Joseph v. General Motors Corp., 109 F.R.D. 635, 637 (D.Colo. 1986). The principle issue here ­ did Prudential comply with C.R.S. § 10-4-710(2)(a) ­ is a 1

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common issue answered by a review of the insurance policy. Fincher alleges that all class members were issued policies that do not comply with the law on enhanced PIP offers.1 The remedy for each violation is reformation of the contract. This Court can employ either an alternative or a hybrid certification, essentially handling the equitable claims under (b)(2) and the damages claims under (b)(3). See 2 Newberg on Class Actions § 4:14 fn. 22 (4th ed.). Prudential's arguments are addressed in the order presented: The Proposed Class Is Properly Defined A class must be sufficiently defined so that it is administratively feasible for the court to determine whether a particular individual is a member. Davoll v. Webb, 160 F.R.D. 142 (D.Colo.1995). This class definition is subject to refinement based upon further development of the record. Cook v. Rockwell Intern. Corp., 151 F.R.D. 378 (D.Colo. 1993). Prudential argues that the class definition proposed is inadequate2 because it includes persons who were offered APIP coverage or were provided APIP benefits. Def.'s Br. at 2. But no insured who purchased a PIP policy during the class period could have been offered the required coverages because Prudential did not have the coverages available for sale. Am. Compl., ¶ 26-27. Prudential also argues that those who have not yet received benefits are improperly in the class, but the class members have a right to have their policy rights and obligations declared, even before a breach. C.R.S. § 13-51-101, et seq., & -107. The class definition needs only to identify those who did not receive the statutory offer, which it does. Some may get declaratory relief only.3 Prudential's reliance on Biby is misplaced. First, unlike in Biby, the class definition is limited in time, and Fincher presents a legal argument for tolling based exclusively on Prudential's conduct. See C.R.S. § 10-4-706(4)(b); Civale v. State Farm Mut. Auto. Ins. Co., 02CA2331 (Colo. Ct. App. February 19, 2004). Second, if Fincher's tolling argument fails, the

This fact should be taken as true. J.B. ex rel. Hart v. Valdez, 186 F.3d 1280, 1290 n. 7 (10th Cir. 1999). 2 Notwithstanding Fincher's express disavowal of the definition in the complaint, Prudential presents the definition to the Court as if Fincher is pursuing it. 3 Likewise, this right exists for those insureds paid enhanced PIP as a courtesy.

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Court should simply adjust the class period to fit the dates the Court acknowledges as timely. Cook v. Rockwell Intern. Corp., 151 F.R.D. 378 (1993). The class period could start no later than 1996. Nelson v. State Farm Mut. Auto. Ins. Co., 419 F.3d 1117 (10th Cir. 2005). Lastly, Biby's use of the "totality" test was rejected by the Tenth Circuit in Clark III, which confirmed that the policy itself must contain the coverages required by statute. Clark III at 710.4 Prudential claims that it can prove a valid offer was made by oral statements or documents other than the policy. Def's Br. at 2, 8. Non-policy documents cannot be used, see Brennan v. Farmers Alliance Mut. Ins. Co., 961 P.2d 550, 555 (Colo. App. 1998), to resuscitate policy defects. The corollary of written notices being rejected is that oral statements cannot modify the insurance policy, either. Prudential's argument that Fincher lacks standing to "represent" anyone with lost wage claims or insured under a post-1994 policy demonstrates only that Prudential misapprehends standing in class actions.5 Fincher has standing because her own claim has been sustained. Prudential undoubtedly means that Fincher is not typical of the claims she seeks to represent. See 1 Newberg on Class Actions § 2:5 (4th ed.). Prudential's objection is a typicality issue not a standing issue and is analyzed in the typicality section below. Under the proposed definition, only those insured by a policy issued without a compliant offer of enhanced PIP are in the class. These class members are ascertainable from defendant's records.

An excellent illustration of the impact of Clark III comes from the Hudgins case, which Prudential relies on. (See Def's Br. at 1 fn. 2, which cites to the former ruling by the Hudgins court but makes no mention of the rulings after Clark III.) Initially the court in Hudgins denied summary judgment because of factual considerations, but after Clark III came down the trial court reversed course and granted summary judgment on the issue of reformation referring specifically to the "new authority" of Clark III. The trial court noted that the totality of the circumstances test is "only useful once it is shown that the policy is compliant with the statute." Hudgins April 11, 2006, Order at 3 (attached as Exhibit 1), and because the policy did not comply with the statute, enhanced PIP was required to be read into the policy. On reconsideration, the trial court further noted that, under Clark III, the analysis begins and, when not contained in the policy, ends with the policy language, and that the totality of the circumstances could do nothing to cure the defect in the policy. Hudgins April 25 Order at 2 (attached as Exhibit 2). 5 Neither Monarch Asphalt Sales Co. v. Wilshire Oil Co., 511 F.2d 1073 (10th Cir. 1975) (dealing with a situation where the proposed class representative does not fall within the class definition), nor Allee v. Medrano, 416 U.S. 802 (1974) (concluding that a union does have standing to represent its members in a class action), which Prudential relies on in its analysis, deal with the issue of Fincher's standing.

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Numerosity Numerosity requires only a reasonable estimate of the size of the class.6 Furthermore, a court must consider a class's geographic dispersion and whether the members' names and addresses are easily ascertainable. Rodriguez v. Bar-S Food Co., 567 F.Supp. 1241, 1247 (D.Colo. 1983). Here, Prudential has improperly eliminated 168 class members from the time period it concedes based on a unilateral merits determination, and ignores the class members who would reside in the later time periods. A reasonable estimate of the purported class based on the disclosed numbers suffices, and on the numbers conceded by Prudential numerosity is met.7 Plaintiff has demonstrated a reasonable estimate of the class it seeks to certify and therefore satisfied numerosity, especially since it is not contested that the class members are geographically dispersed. Commonality Commonality requires only a single issue common to the class. J.B. ex rel. Hart v. Valdez, 186 F.3d 1280 (10th Cir. 1999). Issues that are not common to the class are irrelevant. Bayles v. American Medical Response of Colorado, Inc., 950 F.Supp. 1053 (D.Colo. 1996). Prudential first argues that Fincher is not raising a common question because the question has been resolved against Prudential. Losing an issue does not render a common issue uncommon. Prudential also argues that if a wage-loss defect exists, the reformation does not include medical benefits. This merits-based conclusion is contrary to the law of the case. Nevertheless, Prudential's objection reveals another common issue: if the defect is

"Plaintiffs' inability to provide an exact number does not preclude class certification. Considering the estimated number of class members, joinder would certainly not be practical in this action. Thus, Plaintiffs have satisfied the numerosity requirement." Goodnight v. Shalala, 837 F.Supp. 1564, 1582-83 (D.Utah 1993); Rex v. Owens ex rel. Oklahoma, 585 F.2d 432, 435 (10th Cir.1978)(Plaintiffs "must produce some evidence or otherwise establish by reasonable estimate the number of class members who may be involved."). 7 In addition, the class may not be limited to only those who have sought maximum benefits. Every insured whose policyholder did not receive a statutory offer of APIP has a right to declaratory relief, as alleged.

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one for wage-loss, does the reformation include medical benefits? Prudential also argues no common question exists because there are two different defects, Fincher suffering from only one of them. The questions remain: does a failure to offer unlimited in time and amount medical and wage loss benefits violate C.R.S. § 10-4710(2)(a)? If so, what is the scope of the reformation? Each question satisfies 23(a)(2). Lastly, the ruling regarding Fincher's effective date of reformation applies only to Fincher so far, but Plaintiff is now seeking to either extend the ruling to other class members or to prove class-wide what effective date should be imposed. This Court is well aware that the material evidence for this determination is predominantly, if not exclusively, based on common facts. See generally Fincher v. Prudential Ins. Co., 76 Fed.Appx. 917, 2003 WL 22245945 (10th Cir. 2003). Typicality "[D]iffering fact situations of class members do not defeat typicality under Rule 23(a)(3) so long as the claims of the class representative and class members are based upon the same legal or remedial theory." Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir.1988); Penn v. San Juan Hospital, Inc., 528 F.2d 1181, 1189 (10th Cir.1975); Milonas v. Williams, 691 F.2d 931, 939 (10th Cir.1982) (every member of the class need not be in a situation identical to that of the named plaintiff). Prudential barely touches on this issue, first looking to Rector v. City and County of Denver, an inapposite case dealing with a certified class where the class representatives were found not to have Article III standing because they did not themselves have a claimed controversy over the citations issued to them. Prudential then claims argues that because there are two specimen (form) insurance policies, typicality is not satisfied. Prudential argues that the period 1992-1994 involves the policy insuring Fincher, which has an aggregate-limit defect, while the replacement policy, equally defective, violated the same statute by improperly limiting wage-loss benefits. Contrary to Prudential's statements, Kelly Fincher's policy has a wage-loss defect, which was posited in her complaint. Am. Compl., ¶ 26. Prudential asserts that Fincher's 5

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wage-loss claim is irrelevant, yet the claim is pending and Prudential's request for summary judgment was denied. Prudential's dichotomy that Kelly Fincher has a different defect is flat out false, and Prudential's reliance on a discovery order to invalidate a pending claim is absurd, as is its claim that Fincher has no wage-loss, a fact disproved at the "effective date of reformation" hearing. In any event, the core question remaining is, are the claims similar enough? The claims of class members with a wage-loss defect involve the same statute, are based on the same legal theory, are defended on the same basis by Prudential, are determined with the same contract and statutory analysis, and result in the same remedy. There is no germane distinction between the two in remedy or the source of the right or the legal theory. Fincher's claims are typical of the class's claims, as she suffered from both defects. Even if they were not, the Court could cure the problem by using subclasses for each policy. See Marcus v. Kansas, Dept. of Revenue, 206 F.R.D. 509 (D.Kan. 2002). This relatively simple fix permits a separate class representative to be designated for the second defect. See Shankroff v. Advest, Inc., 112 F.R.D. 190 (S.D.N.Y. 1986); Mauldin v. Wal-Mart Stores, Inc., 2006 WL 739696 (N.D.Ga. 2006). Adequacy of the Class Representative and Class Counsel Prudential argues that (1) Fincher has no standing to pursue a claim, (2) that she is inadequate because neither she nor her father were the policyholder and her father is interested in only her benefit, and (3) Fincher's counsel is inadequate as class counsel. First, as discussed above, Fincher has standing, and Fincher is typical of wage-loss claimants and other-defect class members. Second, a pedestrian can represent other eligible injured persons. Prudential again adverts to Biby without mentioning intervening authority that mooted the Court's query (which wasn't even relied on for the ruling). However, in Clark III, the court, noting that Fincher established that reformation applies in any situation where the statute was violated regardless of the insureds category, stated that the plaintiff's status as a pedestrian does not "limit the class of eligible injured persons for which [he] maybe be named class representative upon subsequent class certification proceedings." Clark III at 714. 6

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Fincher's father is adequate, as he has prosecuted the case over a six-year span; he attended the hearing in April 2005 in person with Kelly and his wife, even though he had to travel from out of state; he has submitted to depositions on two dates; he has responded to all discovery requests, including interrogatories signed by him whenever asked; and he has never attempted to settle his daughter's individual case over the class interests. In his deposition, he sought to define a class action, he acknowledged that he might have to answer for costs, and he did his best to stay on top of a complex claim. He is adequate. Third, Fincher's counsel is not inadequate because they opted to certify only the basic reformation claim.8 Not only is it a necessary antecedent to any claim, but it is strategically sound to do so. The primary purpose of the action is to ensure that the class is advised of its potential coverage and prove that the offer was not made as required by law. Once reformation occurs, if the payment of benefits is deemed to be incidental to the action, those benefits will be recovered; if not, they will have to be pursued individually. Either way, an insured will have to pursue other claims individually. The Class Claim Meets the Requirements of 23(b)(2) Prudential has acted or refused to act on grounds generally applicable to the class. Prudential does not really dispute that it sold its policies with uniform form documents to the class as a whole. Prudential simply disputes the impact of doing so, and relies on a meritsbased attack on Plaintiff's claim that Prudential was unable to offer the APIP coverage. Def's Br. at 11. Prudential's main defense9 is that state trial courts rejected certification requests, which it supports by citation to decisions without any real analysis. Prudential's reliance on these, many of which are on appeal, is inappropriate, especially given the ample Fed. R. Civ. P. 23 precedent reaching a different conclusion than the "authorities" cited by Prudential.
Prudential's insinuation that Fincher's counsel is just blindly filing duplicative requests is belied by the facts. Each request has sought to eliminate the concerns of the courts, be they legal or class representative deficiencies. The core issue here--a defect in the uniform insurance documents--is inherently something that can be handled on a collective basis, and Fincher's counsel has diligently attempted to solve such problems. Fincher's counsel has achieved certification of these very issues in a manner far broader than sought here. 9 Prudential's typicality arguments and ability to comply with the statute despite the defects, raised here again, were previously addressed.
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While the primary relief sought here must be injunctive or declaratory in a case, it does not have to be the only relief sought. Rich v. Martin Marietta Corp., 522 F.2d 333 (10th Cir. 1975). This action, unlike almost all other injunctive actions, requires injunctive action for any claim to exist. Here, the declaratory and injunctive relief must be brought, and if successful, would entitle members to additional coverage and, possibly, benefits. As Bailey and Lebrilla (Pl.'s Amended Mtn at 3) show, there is a difference between damages and an insurance company acting in response to a court's declaration and paying additional benefits. "[D]amages are incidental if they flow to the class as a whole in connection to plaintiffs' injunctive claims, not if they rely on subjective differences between class members." Nicodemus v. Union Pacific Corp., 204 F.R.D. 479 (D.Wyo. 2001). Benefits here can be calculated for the class as a whole, rendering them "incidental" under any test. Fincher's

declaratory and injunctive claims seek only that which is required by Clark III: a declaration that each insured's policy is reformed to include enhanced PIP because Prudential could never legally sell enhanced PIP to the policyholder and a computation of the benefits due as a result of the reformation. If the benefits that flow automatically from the declaratory relief, just as they did in Brennan and Clark, each of whom received money judgments for the benefits due as a concomitant of their reformation claims, are not incidental, then Fincher seeks only issue or claim certification for the non-monetary aspects of reformation, and, if appropriate, 23(b)(3) certification for the payment of the non-incidental benefits that would flow from the declaratory relief. The requirements of 23(b)(2) have been met for all components of the reformation claim, and certification of the reformation claim is appropriate. The fact that subsequent damage claims might occur is not a reason to not certify these claims or issues; indeed, doing in common what can be done in common is one of the purposes of the class action rule. Tardiff v. Knox County, 365 F.3d 1 (1st Cir. 2004). The Class Claims Satisfy the Requirements of 23(b)(3) This case does not need "individual consideration" of each policy. The policies are all the same and must be by law. Prudential could only sell the policy certified to the state. If 8

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this form document is defective, the statute has been violated. Clark III at 710. All other issues raised by Prudential are merits-based and irrelevant. The amounts class members will receive never defeats certification, as they almost always are different. And the amounts due can be calculated from the books of Prudential with ease (over 95% of the monies owed could be calculated from the wage-losses already paid, as the amount owed is a percentage thereof deriving solely from the higher minimum percentage of wage loss under APIP). As for the timeliness issue, if Fincher is correct and the failure to advise of the true extent of coverage tolls the statue, then when other bases for tolling or accrual arose is irrelevant. Prudential argues Civale is specific to the case facts; but the point remains the statutory violation is the same--the insurer did not advise the insured of the correct amount of coverage. This timeliness issue can be addressed on a class-wide basis because Fincher's tolling argument relies exclusively on Prudential's compliance with the statute, so there are no individual facts to take into account. But in any event, as Prudential concedes, the class period would be no shorter than the statutory period back from the date of the complaint. On superiority, Prudential claims there is no way to conduct this trial and individual actions are better. First, this type of certified reformation claim has been successfully litigated in the past, including computation and distribution class-wide of benefits. Second, individual actions cannot be superior when the insurer has not informed its insureds that it never complied with the statute and they are entitled as a right to greater coverage. Superiority deals with alternatives that resolve the matters, not ways to avoid responsibility. If Prudential had accurately informed its insureds of these rights, it might well have a point. As for a "trial plan," the claim is predominately a legal one based on the form policy and would be prosecuted as follows: the two form insurance policies would be reviewed by the Court to see if unlimited medical and wage loss coverage exist for all eligible injured persons, and if they do not, the Court would declare that C.R.S. § 10-4-710 was violated and that the policies of all class members must be reformed. If the Court concluded that an effective date of reformation can be established class-wide or that the tolling argument is 9

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valid, hearings would occur. If the Court concluded otherwise, the class period would be adjusted accordingly, and thereafter, the benefits, which are not dependent on the effective date of reformation and which are calculable from Prudential's books and records or via class-wide proof or statistics would be paid either through this action ­ by trial or agreement if no dispute exists ­ or in individual actions on a policy that is already reformed. On the other hand, if this action is not certified, then every insured who has somehow figured out he has a claim will file individual actions, each of which will look to the exact same issues and facts. RESPECTFULLY SUBMITTED this 26th day of June, 2006. THE CAREY LAW FIRM s/L. Dan Rector L. Dan Rector Robert B. Carey The Carey Law Firm 2301 East Pikes Peak Ave. Colorado Springs, Colorado 80909 Phone: (719) 635-0377 Fax: (719) 635-2920 Email: [email protected] Attorneys for Plaintiff

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CERTIFICATE OF SERVICE (CM/ECF) I hereby certify that on 26th day of April, 2006, electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: [email protected] s/L. Dan Rector L. Dan Rector 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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