The Hall & Evans Rocky Mountain Litigation Reporter is a periodic online newsletter directed to a select group of individuals and organizations. In this edition, we summarize five recent decisions from the Colorado Court of Appeals and one from the Colorado Supreme Court.
Topics in This Issue
Third Party Administrator Who Does Not Bear Some of the Insurer’s Financial Risk of Loss Does Not Owe the Insured a Duty of Good Faith and Fair Dealing
Premises Liability Act Not Limited to Activities or Circumstances that are “Directly or Inherently Related to the Land”
Medicaid Benefits Constitute a Collateral Source
Governmental Entity Need Not Produce Documents in Possession of Third Party, and Plaintiff Must Pay Fee for CORA Request
Workers’ Compensation Insurer Cannot Assert Subrogation Rights Against Interest Earned on Third-Party Settlement Award
Injured Worker Cannot Recover in Tort Against his Statutory Employer
Wild Fire Task Force Report
New Offices
Third-Party Administrator Who Does Not Bear Some of the Insurer’s Financial Risk of Loss Does Not Owe the Insured a Duty of Good Faith and Fair Dealing
Ashley Duran (age 16) was severely injured in a one-car automobile accident after illegally consuming alcohol. Her parents (Kirsten and Brian Riccatone) were plan participants under a health insurance plan for teachers administered by Gallagher Benefit Services (GBS). CNIC Health Solutions (CNIC) and Colorado Choice Health Plans (Choice) acted as third-party administrators (TPAs) under the plan.
Ashley’s parents made a demand for benefits under the plan. Acting on the advice of GBS, CNIC and Choice rejected the Riccatone’s demand on the grounds of an alcohol exclusion in the plan. The Riccatones then sued the plan for breach of contract and bad faith breach of insurance contract. They also sued GBS, CNIC and Choice for bad faith breach of insurance contract and statutory bad faith under C.R.S. § 10-3-116(1). The plan settled with the Riccatones and paid benefits to Ashley. GBS, CNIC and Choice filed motions for summary judgment, arguing that TPAs (or general administrators, in the case of GBS) who bear none of the insurer’s financial risk of loss do not owe the insured a duty of good faith and fair dealing and are not involved in the “business of insurance” (as required for statutory liability). The district court accepted these arguments and granted summary judgments for GBS, Choice and CNIC.
The Riccatones appealed, arguing that TPAs and general administrators who perform all of the administrative functions of an insurance company owe the insured a duty of good faith and fair dealing, even if they do not bear any of the financial risk of loss. The Colorado Court of Appeals rejected this argument and affirmed the rulings of the district court. The Court of Appeals noted that the Colorado Supreme Court in Carey v. United of Omaha, 68 P.3d 462 (Colo. 2003) held that a TPA who performs all of the administrative functions of an insurer and bears some of the financial risk of loss owes the insured a duty of good faith and fair dealing. The Court of Appeals reasoned that a TPA who does not bear some of the financial risk of loss does not owe the insured a duty of good faith and fair dealing and therefore cannot be liable for bad faith breach of insurance contract, even if the TPA performs all of the administrative functions of an insurance company. The Court also affirmed the district court’s dismissal of the claims for statutory bad faith, holding that a TPA who carries no financial risk of loss is not engaged in the “business of insurance.”
Full text of opinion . . . Riccatone v. Colorado Choice Health Plans, 2013 COA 133 (Colo. App. 2013). Kevin O’Brien and Cristin Mack, members of Hall & Evans, LLC, represented Colorado Choice Health Plans both in the district court and on appeal. Malcolm Mead, Special Counsel at Hall & Evans, assisted in the representation of Colorado Choice on appeal.
Premises Liability Act Not Limited to Activities or Circumstances that are “Directly or Inherently Related to the Land”
Gary Larrieu drove his pickup truck to a Best Buy warehouse to pick up a freezer he had purchased. To facilitate placing the freezer in the back of his truck, Larrieu and a Best Buy employee first removed the tailgate from his truck. As Larrieu was walking backwards while carrying one end of the gate, the Best Buy employee was walking forward while carrying the other end. Larrieu tripped over a curb and was injured when the tailgate fell on him.
Larrieu sued Best Buy in state court under Colorado’s Premises Liability Act for the injuries he received in the accident. Best Buy removed the case to federal court and filed a motion for summary judgment, arguing that the Premises Liability Act is limited to injuries arising out of activities that are directly or inherently related to the land, and that carrying a truck’s tailgate while walking backwards is not an activity directly or inherently related to the land. The federal district court accepted this argument and granted Best Buy’s motion for summary judgment.
Larrieu appealed to the Tenth Circuit Court of Appeals, and that Court certified a question to the Colorado Supreme Court, ultimately phrased as follows: whether Colorado’s Premises Liability Act applies as a matter of law only to those activities and circumstances that are directly or inherently related to the land. The Colorado Supreme Court answered the certified question in the negative, holding that the Premises Liability Act is not, as a matter of law, restricted solely to activities and circumstances that are directly or inherently related to the land.
A key provision in Colorado’s Premises Liability Act provides: “In any civil action brought against a landowner by a person who alleges injury occurring while on the real property of another and by reason of the condition of such property, or activities conducted or circumstances existing on such property, the landowner shall be liable only as provided” in the statute. C.R.S. § 13-21-115(2). The Colorado Supreme Court noted that the certified question focused on the meaning of the phrase “activities conducted or circumstances existing on such property.” Turning to accepted principles of statutory construction, the Colorado Supreme Court held that because the statute is not expressly restricted to activities that are “directly or inherently related to the land,” the Court could not read such limitation into it. Nonetheless, the Court also rejected Larrieu’s position which would extend application of the statute to any tort that happens to occur on real property. Instead, the Court concluded that the Premises Liability Act applies to conditions, activities and circumstances on real property for which the landowner is liable in his legal capacity as landowner. The Court explained that this analysis will necessitate a fact-specific, case-by-case inquiry into (a) whether the plaintiff’s injury occurred while on the landowner’s real property, and (b) whether the injury occurred by reason of the property’s condition or as a result of activities conducted or circumstances existing on the property. Full text of opinion . . . Larrieu v. Best Buy Stores, 303 P.3d 558 (Colo. 2013).
Medicaid Benefits Constitute a Collateral Source
James Smith was injured in a car accident caused by Alan Kinningham. After the accident, Medicaid paid for medical treatment provided to Smith as a result of injuries received in the accident. Smith then sued Kinningham for negligence to recover damages for his injuries. Before trial, the court ruled that Kinningham could not present evidence of Smith’s receipt of Medicaid benefits, as this evidence would be barred by the pre-verdict evidentiary component of Colorado’s collateral source rule, codified at C.R.S. § 10-1-135(10)(a).
A collateral source benefit is a benefit received by the plaintiff from a source wholly independent of – or collateral to – the defendant tortfeasor. Colorado’s original common law collateral source rule had two distinct components. Under the pre-verdict evidentiary component, evidence of benefits received by the plaintiff from a collateral source was not admissible at trial. The post-verdict component barred a trial court from reducing the jury’s award of damages by the amount of benefits plaintiff received from a collateral source.
Kinningham appealed the judgment entered in favor of Smith, arguing that the trial court should not have excluded evidence of Smith’s receipt of Medicaid benefits. Resolving an issue of first impression, the Colorado Court of Appeals held that Medicaid constitutes a collateral source and therefore that C.R.S. § 10-1-135(10)(a) bars evidence of plaintiff’s receipt of Medicaid benefits at trial. This ruling is consistent with other Colorado decisions on Social Security Disability Benefits and Medicare benefits. In reaching its decision, the Court of Appeals also held that § 10-1-135(10)(a) abrogated the “gratuitous government benefits exception” to the collateral source rule. Full text of opinion . . .Smith v. Kinningham, 2013 Colo. App. LEXIS 1089 (Colo. App. 2013).
Governmental Entity Need Not Produce Documents in Possession of Third Party, and Plaintiff Must Pay Fee for CORA Request
The Parker Jordan Metropolitan District (the “District”) is a quasi-municipal government entity. The District has no offices or employees, and its daily affairs are handled by CliftonLarsonAllen LLP (“CLA”), a management company. The plaintiffs entered into an agreement with the District for the sale and improvement of certain property. The plaintiffs later submitted a request pursuant to the Colorado Open Records Act (“CORA”) for correspondence relating to the improvement project between the District and various other entities, including CLA. The District demanded that plaintiffs pay a fee to cover the cost of retrieving the documents and reviewing them for privilege. When plaintiffs declined to pay the fee and the District failed to produce the documents, the plaintiffs filed suit.
The Court of Appeals rejected the plaintiffs’ assertion that all documents maintained by CLA were in the District’s custody and control and were therefore subject to CORA. The Court of Appeals required the District to produce only those documents concerning the project that were sent to or received by the District through CLA. The Court of Appeals declined to require production of communications between a third party consultant and other public entities that were not received by CLA on behalf of the District, but were only copied or forwarded to CLA by the other entities.
The Court of Appeals also upheld the District’s requirement that plaintiffs pay a $25 per hour fee for the time needed to retrieve and research the public records, and payment of a deposit prior to producing the documents, even though the District did not have in place a formal policy to this effect. The Court of Appeals acknowledged that prior cases approving payment of fees in connection with CORA requests involved pre-existing policies, but found that neither the statute nor prior case law required that the policy be promulgated before the request was received. On cross-appeal, the Court of Appeals agreed with the District that the $25 per hour fee could be assessed for time spent identifying and segregating privileged material and preparing a privilege log. Full text of opinion …Mountain-Plains Investment Corp. v. Parker Jordan Metropolitan Dist., 2013 Colo. App. LEXIS 1289 (Colo. App. 2013).
Workers’ Compensation Insurer Cannot Assert Subrogation Rights Against Interest Earned on Third-Party Settlement Award
Robert Rodriguez (“Claimant”) injured his finger while working for Hertz Corporation. While being treated for the injury, he suffered a series of medical malpractice incidents which culminated in cardiac arrest and brain injury. Claimant later recovered a total of $4,224,616.48 in four separate malpractice suits. In relevant part, Claimant’s conservator placed the funds from two lump-sum awards in interest-bearing accounts, and a third award was structured into a periodic payment plan.
Claimant also received a workers’ compensation award from his employer, Hertz, through its insurer Colorado Insurance Guaranty Association (“CIGA”). The award included payment for Claimant’s ongoing medical care as well as permanent total disability indemnity benefits. Claimant first elected to use the funds awarded in his civil suits to pay for his maintenance and medical care. However, Claimant later requested that his workers’ compensation benefits be reinstated, claiming he had exhausted his settlement awards.
Pursuant to the Workers’ Compensation Act, an insurer may offset its liability for future benefits owed to a claimant against “the amount of the [third-party tortfeasor settlement] recovery actually collected” (emphasis added). Thus, CIGA was entitled to offset the amount it owed Claimant in future medical and indemnity benefits by the amount Claimant received from his settlements with the physicians and hospital. At issue was whether CIGA could assert its subrogation rights against interest accruing both on the annuitized periodic payment plan and on the two lump-sum accounts as part of its offset.
CIGA argued it was entitled to interest from the annuitized payments because allowing Claimant to retain the interest from the annuities would result in a double recovery prohibited by statute. The Court of Appeals disagreed, reasoning that any interest earned as part of an annuity is “not the equivalent of the economic and medical benefits recovered from the tortfeasor or owed by the workers’ compensation provider,” but is instead compensation for the loss of use of the funds during the accrual period. The court reasoned that this interest was not additional principal to be treated as part of the initial award, but was intended only to facilitate the long-term operation of the annuitized payment.
The court likewise held that CIGA was not entitled to an offset against the interest accrued from Claimant’s lump-sum accounts. The court cited the statute’s emphasis on an insurer’s subrogation right to recover from settlement proceeds “actually collected.” The court interpreted the phrase “actually collected” to include only the initial amount of the lump-sum settlement, and not any interest accruing on it. The court explained that allowing subrogation against both the principal and the interest would require an inquiry into the “adequacy and reasonableness of the claimant’s investments.” The court therefore held that CIGA was not entitled to an offset against the interest earned either from Claimant’s annuity payments or from Claimant’s lump-sum accounts, because the interest from the annuity payments was not intended to be money recoverable by an insurer, and because the interest from the lump-sum accounts did not qualify as money “actually collected” under the statute. Full text of opinion…Hertz Corporation v. Industrial Claim Appeals Office, 2012 Colo. App. LEXIS 1486 (Colo. App. 2012).
Injured Worker Cannot Recover in Tort Against His Statutory Employer
Stanislaw Krol (“Claimant”) worked for SK’s Industrial Management (“SKIM”), a company that provides training in maintaining and inspecting cranes. In January 2007, CF&I Steel contracted SKIM to train some of its employees at a rail mill CF&I owned in Pueblo, Colorado. Claimant began training CF&I employees at the mill and was injured when he fell off the top of a crane. Claimant received workers’ compensation benefits from SKIM’s workers’ compensation insurance policy, and also sued CF&I in tort, alleging various theories of liability.
CF&I moved for summary judgment, arguing that, because Claimant was on CF&I’s property when he was injured, CF&I was Claimant’s “statutory employer” under the Workers’ Compensation Act, and that Claimant was barred from seeking additional compensation as a matter of law. The district court granted CF&I’s motion. The Act provides that an employee is barred from recovering workers’ compensation benefits twice for the same injury. Since Claimant had already recovered workers’ compensation benefits from his employer, SKIM, he could not also recover from CF&I, if CF&I was found to be his statutory employer. According to the Act, “any person, company, or corporation owning any real property or improvements thereon and contracting out any work done on and to said property…shall be deemed an employer…” (emphasis added).
CF&I argued that Claimant was “on” its property, and that it was therefore Claimant’s employer as defined by the statute. Claimant argued that, while he was “on” the property, he was not contracting or making improvements “to” the property, and so CF&I was not his employer. After a long discussion on statutory construction, the Court of Appeals interpreted the phrase “on and to” to mean that the injured worker must be both physically on the property when he is injured and also must be doing work or performing improvements to the property, for the owner of the property to be considered the statutory employer of the injured worker
The court reasoned that requiring only that the injured worker be “on” the property would provide too broad an immunity for entities that might not otherwise be considered statutory employers and would thus shield third-party tortfeasors from negligence liability. Rather, the court concluded that the injured worker must also be doing work “to” the property, because applying such a limitation was consistent with the overall scheme of the Act, namely, to provide an injured employee with compensation from his employer while protecting the employer from common-law negligence liability. The Court of Appeals remanded the case to the lower court to make a factual determination of whether Claimant’s work in training CF&I employees constituted “doing work or performing improvements” to CF&I’s property. Full text of opinion…Krol v. CF&I Steel, 2013 Colo. App. LEXIS 348 (2013 Colo. App. 2013).
Wild Fire Task Force Report
On January 30, 2013, Governor John Hickenlooper signed Executive Order B 2013-002 creating the Wildfire Insurance and Forest Health Task Force. The Task Force was asked to “identify and reach agreement on ways to encourage activities, practices and policies that would reduce the risk of loss [from wildfire] in wildland-urban interface areas, and provide greater customer choice and knowledge of insurance options.” On September 30, 2013, Barbara Kelley, Executive Director of the Department of Regulatory Agencies, released the “Final Report of the Wildfire Insurance and Forest Health Task Force.” This Report contains several recommendations of interest to the homeowners insurance industry, including a recommendation that insurers develop and implement a “Wildfire Mitigation Audit” program for high risk properties in wildland-urban interface areas; and a recommendation that government and insurers disseminate information regarding HB-1225, the Homeowners Insurance Reform Act, which was enacted in 2013 with the intent of ensuring that homeowners “have enough time and adequate insurance benefits to recover from a devastating total loss of home and property.” The full report can be found here.
New Offices
To accommodate its steady growth over the past several years, Hall & Evans, LLC, has moved into new offices at 1001 Seventeenth Street, Suite 300, Denver, 80202. The new offices were open for business on November 4, 2013. Come see our new space! Telephone numbers and email addresses will remain the same as before the transition.
CONTRIBUTING AUTHORS AND EDITORS
Andrew D. Ringel, Esq. at 303-628-3453 or by e-mail at ringela@hallevans.com
Robert M. Ferm, Esq. at 303-628-3380 or by email at fermr@hallevans.com
Malcolm Mead, Esq. at 303-628-3301 or by email at meadm@hallevans.com
Gillian Dale, Esq. at 303-628-3328 or by email at daleg@hallevans.com
Rachel Yeates, Esq. at 303-628-3376 or by email at yeatesr@hallevans.com
INQUIRIES OR COMMENTS
If you do not wish to receive the Hall & Evans Rocky Mountain Litigation Reporter please email newsletter@hallevans.com. If you have inquiries or comments, please contact Robert Ferm at 303-628-3380 or by email at fermr@hallevans.com; or Malcolm Mead at 303-628-3301 or by e-mail at meadm@hallevans.com. Hall & Evans, LLC is located at 1001 Seventeenth Street, Suite 300, Denver, Colorado 80202, and our general office number is 303-628-3300.
DISCLAIMER
The Hall & Evans Rocky Mountain Litigation Reporter is for informational purposes only and not for the purpose of offering legal advice or a legal opinion on any matter. No reader should act or refrain from acting on the basis of any statement in the Hall & Evans Rocky Mountain Litigation Reporter without seeking advice from qualified legal counsel on the particular facts and circumstances involved. Links to full text of opinions are provided by the Colorado Bar Association (http://www.cobar.org).