Sanderson v. Allstate Insurance

738 F. Supp. 432, 1990 U.S. Dist. LEXIS 6735, 1990 WL 72690
CourtDistrict Court, D. Colorado
DecidedMay 29, 1990
DocketNo. 89-C-1023
StatusPublished
Cited by2 cases

This text of 738 F. Supp. 432 (Sanderson v. Allstate Insurance) is published on Counsel Stack Legal Research, covering District Court, D. Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sanderson v. Allstate Insurance, 738 F. Supp. 432, 1990 U.S. Dist. LEXIS 6735, 1990 WL 72690 (D. Colo. 1990).

Opinion

ORDER

CARRIGAN, District Judge.

Plaintiffs James Sanderson and Musa Ann Sanderson commenced this action on behalf of themselves and their children, Denise Ann Sanderson and Stephanie Dee Sanderson (“the Sandersons”), for breach of contract seeking treble damages (First and Second Claims); for outrageous conduct (Third Claim); and for bad faith seeking punitive damages (Fourth, Fifth, and Seventh Claims). Defendant is Allstate Insurance Company, (“Allstate”), an Illinois corporation. Currently pending is the defendant’s motion to dismiss.1

The parties have fully briefed the issues and oral argument would not materially [434]*434assist the decision process. Jurisdiction is founded on diversity of citizenship under 28 U.S.C. § 1332(a).

Plaintiffs allege the following in their amended complaint: On December 31, 1987, the Sandersons were involved in a car accident near Union, Mississippi. Plaintiffs sustained a variety of physical injuries, including neck and back injuries requiring extensive medical treatment. At the time of the accident, the Sanderson vehicle was insured by the defendant under a “complying policy” pursuant to the Colorado Motor Vehicle Insurance Act, Colo.Rev.Stat. § 10-4-701 et seq. (1987) (“the Act”).

Plaintiffs allege that Allstate has refused to pay personal injury protection (“PIP”) benefits due under the Act totaling over $70,000 in unpaid hospital and chiropractic care bills. In addition, the plaintiffs allege that the defendant’s refusal to pay was in bad faith and constituted outrageous conduct that resulted in severe emotional and mental distress on the part of the entire Sanderson family. Plaintiffs request treble damages under the Act and punitive damages pursuant to their common law claims of bad faith and outrageous conduct.

In its motion to dismiss, the defendant contends that the Act confers exclusive remedies and thus precludes the plaintiffs’ common law tort claims. Defendant submits that allowing the plaintiffs to recover both treble damages under the Act and common law punitive damages would be duplicative and in violation of the Excessive Fines and Penalties Clauses of the Colorado and United States Constitutions. Lastly, the defendant claims that the Act’s unilateral grant of attorneys fees to successful plaintiffs violates the Fourteenth Amendment's Equal Protection Clause and the Colorado Constitution’s Due Process Clause (Colo. Const., Art. 2, Sec. 25) by unlawfully distinguishing between the classes of successful insureds and successful insurers.

Preclusion of Common Law Claims

Williams v. Farmers Insurance Group, Inc., 781 P.2d 156 (Colo.App.1989), held that the Act does not preclude the common law claim of bad faith breach of insurance contract against an insurer that fails to pay PIP benefits.2 The court stated:

“[ajbolition of a common law remedy by statute is usually not accomplished unless the ... statute so states ... [T]he Act is explicit in defining ... the tort recovery which is precluded by the Act. No mention is made within [the Act] ... of the tort of bad faith breach of contract. Further, analysis of the Act as a whole fails to reveal any implication of legislative intent to preclude other supplementary remedies. This is particularly true where, as here, the injury of bad faith arose not out of the injuries justifying PIP recovery, but rather out of the subsequent conduct of the defendants in ... [denying] coverage.” Id. at 158-59.

The Williams opinion went on to emphasize that the plaintiffs’ common law claim of bad faith had vested prior to the Act’s passage. Id. at 159. Focusing on the Act’s purpose of maximizing insurance coverage for injured insureds, the court upheld a $350,000 jury verdict on two plaintiffs’ bad faith tort claims. Id.

Defendant Allstate seeks to dismiss the plaintiffs’ bad faith claims solely on the basis that the Act precludes those claims. In this diversity action I am bound by the Colorado courts' interpretation of Colorado law. Therefore, the defendant’s motion to dismiss the plaintiffs’ bad faith claims must be denied.3

[435]*435Allstate also asserts that the Act precludes the plaintiffs’ common law outrageous conduct claim. Although Williams did not specifically address whether the Act preempts the outrageous conduct claim, the Williams rationale in upholding the bad faith breach of insurance contract claim applies with equal force to the outrageous conduct claim. As Williams pointed out, “PIP claims are contractual in nature and entirely independent of tort liability.” Id. at 159. “The injury of bad faith arose not out of the injuries justifying PIP recovery, but rather out of the subsequent conduct of the defendants in the manner in which they denied coverage.” Id.

For these reasons, I hold that the Act does not bar outrageous conduct claims against an insurer that fails to pay PIP benefits. Therefore, the defendant’s motion to dismiss the plaintiffs’ outrageous conduct claim is denied.

Damages

Allstate contends that the plaintiff cannot recover both statutory treble damages under the Act and punitive damages under Colo.Rev.Stat. § 13-21-102, arguing that such relief would constitute double recovery violating the Excessive Fines and Penalties Clauses of the Colorado and United States Constitutions.

A plaintiff is entitled to only one recovery for a single injury. Rusch v. Lincoln-Devore Testing Laboratory, 698 P.2d 832, 834 (Colo.App.1984). Double recovery for the same injury violates principles of basic fairness. But where a plaintiff seeks recovery under independent claims based on allegations of separate injuries, such relief would not be unjust.

As stated, Williams v. Farmers Insurance Group, Inc, 781 P.2d 156 (Colo. App.1989), held that contract actions for recovery of PIP benefits are entirely independent of tort claims against insurers for bad faith breach of insurance contracts. Id. at 159. The court there emphasized that “damages resulting from bad faith in handling an insurance claim arise from tort and are not restricted to the enumerated [PIP] benefits but include consequential damages and emotional distress,” Id. (emphasis added). The court concluded, “thus, recovery under the Act and under a claim for bad faith breach of insurance contract differs both as to the bases for the recovery and as to the damages recoverable.” Id.

For these reasons, and because the plaintiffs allege in their complaint separate injuries pursuant to their contractual and tort claims, I conclude that it would not constitute double recovery to allow a jury to consider both treble damages pursuant to the Act and punitive damages pursuant to the common law tort claims. Should a jury award exemplary or punitive damages under more than one claim, the court has adequate power to prevent double recovery through offsets or other post verdict adjustment of the awards before judgment is entered.

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Bluebook (online)
738 F. Supp. 432, 1990 U.S. Dist. LEXIS 6735, 1990 WL 72690, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sanderson-v-allstate-insurance-cod-1990.