Opinion
No. 05CA1404.
December 14, 2006.
Appeal from the El Paso County District Court, Rebecca S. Bromley, J.
Ron Robinson, P.C., Ron J. Robinson, Colorado Springs, Colorado, for Plaintiffs-Appellants.
Fisher, Sweetbaum Levin, P.C., Jon F. Sands, Kimberle E. O'Brien, Denver, Colorado, for Defendant-Appellee.
In this insurance bad faith case, plaintiffs, Macario Camus and Kristen Camus, appeal the summary judgment for defendant, State Farm Mutual Automobile Insurance Company, on the basis of claim preclusion. We reverse and remand for further proceedings.
I. Facts
The summary judgment record is sparse, consisting primarily of briefs in which the parties argue various inferences from and legal conclusions based on allegations of the complaint, but without presenting evidence as to the underlying facts. In granting summary judgment, the trial court took judicial notice of the file in the underlying personal injury action, but that file is not part of the record on appeal. Nevertheless, the parties do not dispute the following factual allegations of the complaint.
In 1999, plaintiffs were injured in an automobile accident caused by the negligence of another driver. Plaintiffs' insurance policy with State Farm provided underinsured motorist (UIM) coverage of $100,000 per person for bodily injuries caused by a third party. They timely notified State Farm of their claims against the driver and the fact that he might be underinsured.
In 2001, plaintiffs filed a personal injury action against the driver, who had insurance coverage with a $25,000 per person policy limit. Under a policy provision obligating plaintiffs to obtain a judgment against the underinsured driver, State Farm intervened in the personal injury action in November 2002. State Farm's complaint in intervention requested "a jury determination as to all issues including liability, causation, and damages as a result of the automobile accident in which plaintiffs were involved." However, the complaint did not seek to determine State Farm's UIM obligations to plaintiffs or assert any claims against plaintiffs. Plaintiffs did not file any supplemental pleading stating claims against State Farm.
Plaintiffs obtained State Farm's consent and settled with the driver for his policy limits. The personal injury action continued to trial, however, to determine the issues asserted in State Farm's complaint in intervention. The jury returned verdicts in favor of plaintiffs, awarding $135,963 to Macario Camus and $344,895 to Kristen Camus for injuries caused by the driver. The court applied the terms of the policy, and State Farm paid plaintiffs the UIM coverage limits, less its previous payments to them and the settlement with the driver.
Plaintiffs subsequently filed this action against State Farm alleging bad faith breach of insurance contract, negligent or intentional misrepresentation in the sale of insurance policy, outrageous conduct, and bad faith violation of the Colorado Consumer Protection Act. According to plaintiffs, State Farm acted in bad faith by (1) unreasonably failing to investigate their UIM claim, (2) unreasonably refusing to arbitrate this claim, (3) improperly delaying consent to settlement with the driver, (4) obtaining continuances for contrived reasons, (5) unnecessarily forcing them to litigate the extent of their injuries even after it had approved their settlement with the driver, and (6) wrongfully refusing to pay medical and rehabilitation expenses as personal injury protection (PIP) benefits, both during and after the personal injury action.
The record before the trial court when it considered State Farm's motion for summary judgment did not establish when several of State Farm's alleged acts of bad faith occurred, such as: (1) its refusal to arbitrate plaintiffs' claim under the policy; (2) its failure to have a doctor determine the severity of plaintiffs' injuries; and (3) its failure to have plaintiffs' claim evaluated by an independent claims examiner. State Farm did not dispute the allegations concerning its nonpayment of PIP benefits.
Nevertheless, State Farm sought summary judgment, arguing that plaintiffs' claims were barred by the doctrine of claim preclusion because they arose either before or during the persona] injury action, and plaintiffs were therefore required to bring them in that action to recover thereon. The trial court entered summary judgment on that basis, without otherwise analyzing the viability of the claims.
II. Law A. Standard of Review
Summary judgment may be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." C.R.C.P. 56(c). It is a drastic remedy, however, that may not be entered when differing material factual inferences can be drawn from even undisputed evidence. Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 613 (Colo. 1999); Sewell v. Public Service Co., 832 P.2d 994, 998 (Colo.App. 1991). Once the movant shows an absence of genuine factual issues, the burden shifts, and unless the nonmovant shows that a material factual dispute exists, summary judgment is appropriate, so long as the moving party is entitled to judgment as a matter of law. Smith v. Boyett, 908 P.2d 508, 516 (Colo. 1995).
We review a summary judgment on the basis of claim preclusion de novo. Argus Real Estate, Inc. v. E-470 Pub. Highway Auth, 109 P.3d 604, 608 (Colo. 2005).
B. Claim Preclusion
The doctrine of claim preclusion "bars relitigation not only of all claims actually decided, but of all claims that might have been decided if the claims are tied by the same injury." Argus, supra, 109 P.3d at 609. To preclude a second claim there must be "(1) finality of the first judgment, (2) identity of subject matter, (3) identity of claims for relief, and (4) identity or privity between parties to the actions." Argus, supra, 109 P.3d at 608; see also Cruz v. Benine, 984 P.2d 1173, 1176 (Colo. 1999).
In this case, the essential questions are whether the subject matter and the claims for relief in the personal injury action and the bad faith case are identical.
In Argus, the court explained that the question in this context is whether, in the second action, the plaintiff is seeking a remedy against the defendant "`with respect to all or any part of the transaction, or series of connected transactions, out of which the [first] action arose.'" Argus, supra, 109 P.3d at 609 (quoting Restatement (Second) of Judgments § 24 (1982)). The focus under this transactional test is not on the specific cause of action asserted or its label. Gavrilis v. Gavrilis, 116 P.3d 1272, 1273-74 (Colo.App. 2005). Rather, "the `same claim or cause of action requirement is bounded by the injury for which relief is demanded. . . .'" Argus, supra, 109 P.3d at 609 (quoting Farmers High Line Canal Reservoir Co. v. City of Golden, 975 P.2d 189, 199 (Colo. 1999)).
Whether a claim arises from the same transaction is determined pragmatically, giving weight to "whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations." Salazar v. State Farm Mut. Auto. Ins. Co., 148 P.3d 278, 281 (Colo.App. 2006) (quoting Restatement (Second) of Judgments § 24).
III. Application
Before State Farm intervened in plaintiffs' 2001 lawsuit against the other driver, the subject matter of plaintiffs' suit was the 1999 car accident. Plaintiffs' claim was that the driver was negligent, that his negligence caused plaintiffs' personal injuries, and that the driver was liable to plaintiffs for damages. When State Farm intervened in 2002 it did not assert any claims against plaintiffs. It merely presented evidence and argument related to plaintiffs' damages for the injuries they suffered in the accident. Plaintiffs were not required to and did not submit a responsive pleading. After State Farm intervened, the subject matter and claim for relief did not change, even though State Farm sought to minimize plaintiffs' injuries.
Plaintiffs' suit against State Farm is based upon the insurance policy and State Farm's conduct in processing their claims under that policy. Although the pleadings do not allege the exact times of State Farm's purported bad faith conduct, it is alleged to have occurred when the policy was issued and after State Farm intervened in the personal injury suit. No bad faith conduct is alleged to have occurred at the time or place of the car accident.
Nevertheless, State Farm argues that because both the personal injury action and the bad faith action share the common element of proving the amount of damages caused by the underinsured driver, they arise from the same transaction within the meaning of Argus. We are not persuaded.
State Farm relies principally on Salazar, supra, and Porn v. National Grange Mut. Ins. Co., 93 F.3d 31 (1st Cir.1996), as support for its position that plaintiffs were required to bring their bad faith claims in the personal injury action. Both cases, however, are clearly distinguishable.
In Salazar, the insurer intervened in the personal injury action "to resolve the common issues of fault and damages that have arisen under [Salazar's] claim for underinsured motorist benefits so that State Farm and [Salazar] can avoid relitigating the same issue in an alternative forum." Salazar, supra, 148 P.3d at 279. "In its order granting State Farm's motion [to intervene], the trial court directed Salazar to notify State Farm of its alleged liability." Salazar, supra, 148 P.3d at 279. The opinion implies, but does not state, that the trial court ordered the insured to file suit against the insurer, or to amend its complaint to state coverage claims. However, whether the trial court did or could properly order the insured to do so was not an issue in the case. The insured later added coverage claims, thereby expanding the scope of the personal injury case, and at trial, the insured claimed that the insurer's offer of settlement under the UIM policy was too low.
Applying the "related in time, space, origin, or motivation" test, the Salazar division first observed that "both the bad faith claims and the UIM benefits claim derived from the same occurrence: State Farm's refusal to compensate Salazar more than $100 under Salazar's [$50,000] UIM policy," after Salazar had made a policy limits settlement with the tortfeasor for $25,000. Salazar, supra, 148 P.3d at 281. The division then concluded that the two actions "sought redress for essentially the same wrong" because "Salazar's UIM benefits action sought to determine the amount of damages State Farm should pay under the policy, while her bad faith claims sought redress for State Farm's allegedly unreasonable refusal to pay the benefits." Salazar, supra, 148 P.3d at 281.
The division in Salazar was presented with the question whether the insured's coverage claim in the first case against the insurer and his bad faith claim in the second case against the insurer were identical. The division was not presented with the question in this case — whether an insured's personal injury claim against the motorist and his bad faith claim against the insurer are identical.
In Porn, the policyholder sued the insurance company for coverage under the policy, and then sued the other motorist for negligence. Thereafter, he sued the insurance company for bad faith. As in Salazar, the court compared the coverage claim and the bad faith claim and, applying the transactional analysis, concluded that they derived from the same occurrence, the same basic wrong, and similar factual bases — namely, the insurer's conduct in refusing to pay its insured under the policy.
In this case there was no coverage claim asserted in the personal injury action. Hence, Porn is distinguishable for the same reason Salazar is distinguishable.
In sum, because neither the terms of the policy nor State Farm's refusal to pay the UIM claim was at issue in the personal injury action, we conclude that action is not related "in time, space, origin, or motivation" to this bad faith action. Accordingly, this action is not barred by claim preclusion, and the trial court erred in ruling otherwise.
IV. Conclusion
We conclude that the trial court erred in entering summary judgment on the basis that this bad faith action was barred by claim preclusion. Having so concluded, we need not address plaintiffs' other contentions, which are unlikely to arise again on remand.
The judgment is reversed, and the case is remanded for further proceedings consistent with this opinion.
Judge CARPARELLI concurs.
Judge WEBB specially concurs.