Free Brief - District Court of Colorado - Colorado

Case 1:00-cv-01841-LTB-KLM

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IN THE UNITED STATES DISTRICT COURT FOR THE STATE OF COLORADO

Civil Action No. 00-cv-01841-LTB-PAC RICKY EUGENE CLARK, on behalf of himself and all others similarly situated, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Defendant.

PLAINTIFF'S BRIEF IN SUPPORT OF HIS AMENDED PROPOSED CLASS DEFINITION

Plaintiff Ricky Eugene Clark, by and through his attorneys of record, respectfully submits this brief on the issue of class definition following the Court's Order of September 28, 2006, as follows: I. Introduction Plaintiff filed his original complaint in this case on August 24, 2000, seeking reformation of the State Farm insurance policy under which he was insured to include the statutory coverages described in Colo. Rev. Stat. § 10-4-710. Plaintiff brought the action on behalf of himself and a class of similarly situated individuals, and originally sought to define that class as:

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All injured persons covered under a State Farm automobile insurance policy who were not offered extended coverage as required by Colo. Rev. Stat. § 10-4-710 of the Colorado Auto Accident Reparations Act, and who were not provided the additional benefits provided for therein. Complaint at ¶ 9. Defendant State Farm now moves the court to address the issue of class definition before allowing further discovery or considering motions for class certification. State Farm's Status Conference Statement at 5. Specifically, Defendant alleges that Plaintiff can only represent a class of pedestrian PIP claimants and not all injured persons. Id. After the status conference, it was agreed that the parties would proceed with briefs defining the scope of the class prior to addressing class certification and the Court so ordered. September 28, 2006. In response to the Court's order, Plaintiff submits the following amended proposed class definition: All persons who received No-Fault benefits under a Colorado State Farm Mutual Automobile Insurance Company policy and were involved in an automobile accident occurring before the date of the first renewal of the policy under which they were insured happening on or after January 1, 1999. Excluded from the class are all State Farm executives, their legal counsel, and their immediate family members, the Court and its staff, and all employees of proposed Class Counsel. Plaintiff's proposed definition is appropriate because it is ascertainable and directly relates to the Defendant's violation of the statute. The commencement date of the
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Order of

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class period will have to be determined by the Court after hearing evidence related to issues of tolling and accrual. See, e.g., Civale v. State Farm Mut. Auto. Ins. Co., No 02CA2331 (Colo. Ct. App. February 19, 2004) (Ex. A) (applying the doctrine of equitable tolling to claims arising from a failure to offer extended PIP); Daugherty v. Allstate Ins. Co., 55 P.3d 224, 226 (Colo. Ct. App. 2002) (a cause for breach of contract accrues when the breach is our should have been discovered; a cause for bad-faith breach of contract accrues when both the injury and its cause are or should have been known); Garrett v. Arrowhead Improvement Ass'n, 826 P.2d 850, 853 (Colo. Ct. App. 1992) (recognizing tolling as an equitable remedy based on concealment of facts pertinent to the existence of a claim). This is an equitable determination that can be made by the Court after a hearing to adduce relevant evidence, at a propitious time. The proposed end date is appropriate in this case because the defect in State Farm's policy was not cured solely by the development of the compliant endorsement, number 8650AJ. Existing policies were not automatically changed; for those policies, the defect was cured on the first issuance (renewal) after the coverage existed and was offered. Consequently, because the endorsement was offered and mailed to class members during the renewal cycle after it became

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effective on January 1, 1999, the appropriate ending date is the first renewal thereafter. II. The proposed class definition meets all threshold requirements. To be certifiable, a class must generally be adequately defined so that class members are ascertainable. See Roman v. ESB, Inc., 550 F.2d 1343, 1348 (4th Cir. 1976); Davoll v. Webb, 160 F.R.D. 142, 144 (D. Colo. 1995). To be ascertainable, a class must be sufficiently described such that a court could, if called upon, determine whether a particular person is a member. Davoll, 160 F.R.D. at 144. Plaintiff's proposed class is sufficiently ascertainable. A review of State Farm's records can determine whether a particular individual received No-Fault benefits under a State Farm policy and the date of the accident. III. The proposed class definition is appropriate because the right to reformation arises out of State Farm's violation of the statute and extends to all persons who were denied the opportunity to receive extended PIP coverage as a result. While State Farm's argument that only pedestrians were aggrieved by the policy flaw, and thus they should be the only members of the putative class, is attractive at first blush, this approach is inconsistent with controlling law. Such a remedy would leave each reformed policy with disparate coverage for the different categories of eligible injured persons, which is contrary to the rule in Brennan v.

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Farmers Alliance Mut. Ins. Co., 961 P.2d 550, 553 (Colo. Ct. App. 1998). Moreover, it is not the policy flaw ­ here the so-called "pedestrian exclusion" ­ that defines the extent of the reformation; the policy as a whole is reformed because the offer was necessarily inadequate by virtue of the impermissible restriction imposed by State Farm. A violation of Colo. Rev. Stat. § 10-4-710 mandates reformation of a policy to include the coverage required to be offered, not reformation for a particular individual. Under Colorado law, when an insurer has violated the No-Fault Act by failing to offer extended PIP benefits as required by section 10-4-710, the policy must be reformed to contain the required coverage. Thompson v. Budget Rent-ACar Sys., Inc., 940 P.2d 987, 990 (Colo. Ct. App. 1996). The remedy is the same regardless of the nature of the flaw and extends to all injured persons. Therefore, it is appropriate for the class definition to cover all eligible injured persons and not just pedestrians. The Colorado Court of Appeals held in Thompson that when an insurer fails to fulfill the offer requirement of Colo. Rev. Stat. § 10-4-710, "additional coverage in conformity with the required offer is incorporated into the agreement by operation of law." 940 P.2d at 990. The coverage that is required to be offered, and that is therefore incorporated into the agreement, is medical and wage-loss

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benefits, unlimited in time and amount, "for the same persons and under the same conditions applicable to mandatory basic PIP coverage." Brennan, 961 P.2d at 553. Thus, reformation by its terms extends to all categories of eligible injured persons as defined in section 10-4-707(1), and is not limited to addressing a specific flaw in the offer. Colorado's rule recognizes that when an insurer violates the statute by not making a proper offer of extended PIP coverage, all potential beneficiaries are deprived of the opportunity to receive that coverage because there is no way of knowing whether the named insured would have purchased an offer that was compliant. Under Thompson, insurers have "no right to a jury trial to determine whether the insured would have purchased the coverage. Not only would that determination be too speculative, it would allow insurers to circumvent the intent of the legislature." 940 P.2d at 990; see also Fincher v. Prudential Prop. & Cas. Co., 76 Fed. Appx. 917, 922 (10th Cir. 2003). Rather, the burden of failing to comply is placed on the insurer in order to further the No-Fault Act's purpose of ensuring adequate compensation for victims of automobile accidents. Colo. Rev. Stat. § 10-4-702. The sole question is whether the insurer violated the statute. If it did, it is assumed that the violation deprived all potential beneficiaries of the

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opportunity to receive coverage and the policy must be reformed as to all potential beneficiaries. Because Colorado law focuses on the conduct of the insurer, it is appropriate to define the class in this case based on State Farm's violation of the statute, rather than by the category of insured persons. This also comports with standards for

class identification. See, e.g., Daigle v. Shell Oil Co., 133 F.R.D. 600, 602 (D. Colo. 1990) (a class should be defined by the activities of the defendants) (citing Alliance to End Repression v. Rochford, 565 F.2d 975, 978 (7th Cir. 1977)). In this case, State Farm violated the statute by failing to offer APIP coverage that extended to all categories of injured persons. Clark v. State Farm Mut. Auto. Ins. Co., 319 F.3d 1234, 1241 (10th Cir. 2003) ("Clark I"). Because State Farm never had the coverage available for sale during the proposed class period, it could not have made a compliant offer to any policyholder during that time. Therefore, every person insured under a policy issued during that time was deprived of the opportunity to receive the extended coverage that the policyholder might have purchased if a compliant offer were made. Since Colorado law forbids speculation on whether a compliant offer would have been accepted by a particular policyholder, Thompson, 940 P.2d at 990, State Farm's failure caused the injury for every insured, and every policy must be reformed to include APIP coverage for

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all injured persons. Brennan, 961 P.2d at 554; Thompson, 940 P.2d at 990. Given the uniform failure by State Farm as to all insureds, the class should be defined based on that failure and not based on the status of the injured person. The Tenth Circuit has already recognized that reformation extends beyond pedestrians in this case. In Clark I, the Court of Appeals held that the policy in this case must be reformed and that, "pedestrians, like Clark, must be included in the class of beneficiaries eligible to receive those benefits," thereby recognizing that the group of those who could benefit was bigger than just pedestrians. Clark I, 319 F.3d at 1241 (emphasis added). The Court of Appeals affirmed this point in Clark III, when it recognized that this Court's opinion reforming the contract "`for pedestrians' neither restricts reformation of other State Farm policies to provide extended PIP benefits for eligible injured persons under subsection 707(1) nor limits the class of eligible injured persons for which Mr. Clark may be named class representative." Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d 703, 714 (10th Cir. 2005) ("Clark III") (emphasis added). In so holding, the Clark III opinion explicitly stated that the class in this case is not limited to pedestrians. Moreover, the court's use of the term "eligible injured persons" to describe the class is significant. Although the court clearly understood that the defect in this case was a pedestrian exclusion, the

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court declined to describe the class as limited to injured pedestrians. Instead, it chose to use "eligible injured persons" and reference the statutory definition of section 10-4-707(1), which includes all categories of injured persons covered by the No-Fault Act. If the Tenth Circuit had intended to limit the class to only pedestrians, it would have said so and described the class that way instead of using a term that it understood to refer to both pedestrians and non-pedestrians. As the Tenth Circuit recognized, reformation extends to all eligible injured persons under the rule of Brennan, and there is therefore no reason that Mr. Clark cannot represent a class that is broader than pedestrians. The fact that reformation is not limited by the nature of the error is demonstrated in other cases as well. For example, in Breaux v. American Family Mutual Insurance Co., a policy with a wage-loss defect was reformed to include both medical and wage-loss benefits. 387 F. Supp. 2d 1154 (D. Colo. 2005). Other courts have also certified classes that included all eligible injured persons. In Goodwin v. Homeland Central Insurance Co., the court certified a class to include: "[a]ll persons who were either a named insured, resident relative of the named insured, passenger or pedestrian...under Hawkeye-Security policies that were issued without an offer of extended PIP benefits coverage that included nonresident relative passengers and pedestrians." Goodwin, Case No. No 00CV44,

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Order (1) Granting Motion for Reconsideration; (2) Granting Motion to Amend Class Definition at 2 (Colo. Dist. Court, Otero County, December 30, 2003) (Ex. B). The Plaintiff's proposed class properly includes all eligible injured persons because under Colorado law, the right of reformation arises as to the contract, and it is the contract that is reformed to include the coverage that was required to be offered. That coverage, as described in Brennan and mandated by the statute, extends to all injured persons and is not limited based on the nature of the defect. The proposed class is therefore logically related to the alleged wrongful conduct. As the Tenth Circuit already recognized in Clark I and explicitly noted in Clark III, it is appropriate for Mr. Clark to represent all eligible injured persons in the class. IV. Conclusion Based on the foregoing, Plaintiff respectfully moves this Court to adopt the Plaintiff's proposed class definition and allow additional discovery and motions for class certification. Respectfully submitted this 27th day of October, 2006.

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s/Robert B. Carey Robert B. Carey Leif Garrison The Carey Law Firm 2301 East Pikes Peak Colorado Springs, CO 80909 Telephone: (719) 635-0377 L. Dan Rector Franklin D. Azar & Associates, P.C. 5536 Library Lane Colorado Springs, CO 80918 (719) 527-8000 Attorneys for Plaintiff

CERTIFICATE OF SERVICE (CM/ECF) I hereby certify that on this 27th day of October, 2006, I 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] [email protected] [email protected] s/Robert B. Carey Robert B. Carey Leif Garrison The Carey Law Firm 2301 East Pikes Peak Colorado Springs, CO 80909 Telephone: (719) 635-0377

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