Harvey v. Farmers Insurance Exchange

Citation: 983 P.2d 34Docket: 96CA2293, 97CA0996

Court: Colorado Court of Appeals; September 13, 1999; Colorado; State Appellate Court

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Jodi Lynn Harvey and Julie and Brett Slack appealed a judgment favoring Julie Slack for willful and wanton negligence and bad faith breach of an insurance contract, while also challenging the denial of their motion for treble exemplary damages. Farmers Insurance Exchange cross-appealed the judgment awarded to Brett Slack for loss of consortium related to his wife's claims. The court affirmed in part, reversed in part, and remanded the case. 

The facts established that after an automobile accident, Jodi Harvey was referred to a chiropractor chosen by Farmers Insurance from a list provided by Diversified Medical Resources for an independent medical examination. Harvey was sexually assaulted by the chiropractor, and when she reported this to Farmers, her claim for benefits was denied based on the chiropractor's report. Similarly, Julie Slack was later referred to the same chiropractor for another independent examination and was also assaulted. Despite her complaints and the chiropractor's subsequent license revocation, Farmers denied her claim based on the same grounds.

The plaintiffs filed claims against Farmers, the chiropractor, and Diversified, including breach of contract and various tort claims. The chiropractor settled and was dismissed from the suit, but the defendants later designated him as a non-party at fault. The jury ruled in favor of Diversified on all claims against it, and in favor of the defendant on Jodi Harvey's claims, while finding in favor of Julie Slack on her claims of willful and wanton negligence and bad faith breach of contract. The jury apportioned 60% fault to the chiropractor and 40% to Farmers Insurance on Julie Slack’s claims.

Defendant sought judgment notwithstanding the verdict, while the Slacks requested treble exemplary damages and attorney fees, but the court denied both motions. Following the judgments and the Slacks' notice of appeal, the court awarded costs to the defendant totaling $7,282.74 against Julie Slack and $5,659.30 against Jodi Harvey, based on the plaintiffs recovering less than the defendant's settlement offer as per 13-17-202, C.R.S.1998. A second appeal ensued.

The Slacks contended that the damage apportionment between the defendant and a non-party chiropractor in Julie Slack's claim was incorrect, arguing that the chiropractor owed no duty and that the defendant's duty of good faith was nondelegable. The court disagreed, emphasizing that Colorado's comparative fault statute (13-21-111.5, C.R.S.1998) allows for liability apportionment among defendants and designated non-parties. This statute permits a jury to assign fault to non-parties, although those non-parties are not liable for judgment amounts allocated to them and are not bound by subsequent liability determinations.

Additionally, the statute stipulates that a party may not have fault apportioned to them if they did not owe a duty to the plaintiff. The existence of duty is a legal question reviewed de novo. Colorado has also adopted a comparative negligence statute (13-21-111, C.R.S.1998), which modified the common law doctrine of contributory negligence, allowing a plaintiff's recovery to be barred if their negligence exceeds that of the defendant, with damages reduced by their proportional negligence otherwise. However, actions based on intentional misconduct by the defendant are not subject to the plaintiff's comparative negligence, as clarified by Colorado case law.

Apportionment of liability between negligent and intentional tortfeasors under Colorado's liability apportionment statute, § 13-21-111.5(1), raises a novel legal issue. The statute specifies that no defendant is liable for more than the degree of negligence or fault attributable to them regarding the claimed injury or damage. The interpretation of "fault" includes various meanings, such as negligence, wrongdoing, and potentially intentional misconduct, rendering it ambiguous. Legislative history reveals that the term "fault" was broadened to encompass actions beyond simple negligence, reflecting concerns over including gross negligence and product liability claims. Consequently, it is determined that "fault" includes a wide range of conduct, including intentional torts.

The statute is designed to apportion fault and liability among defendants and designated non-parties, even when negligent actions fail to prevent foreseeable harm from intentional torts. In a case involving claims of bad faith breach of insurance, intertwined with negligence claims, it is established that Colorado law recognizes a negligence cause of action when a defendant does not take necessary steps to prevent harm from others' intentional torts. The court concluded that the defendant had a duty to protect plaintiffs from foreseeable risks, which the jury found was breached in one instance but not in another, supported by evidence in the record.

If a defendant designates a non-party as at fault, the jury must assess damages attributable to both the defendant and the non-party, allocating damages according to their proportionate fault. The jury was correctly instructed to consider all relevant damages and apportion fault between the defendant and the non-party chiropractor. The court affirmed the jury's damage award to plaintiff Julie Slack for willful and wanton negligence, finding it supported by the record. 

The Slacks argued against apportioning damages for bad faith breach of an insurance contract between the defendant and the chiropractor, asserting that the insurer's duty of good faith is nondelegable, and damages from that breach should not involve the chiropractor. The court disagreed, noting that an insurance company has a duty of good faith and fair dealing with the insured. It would be illogical to apportion fault to a non-party medical examiner in a bad faith claim where the plaintiff seeks damages for the insurer's refusal to pay benefits.

The Slacks' bad faith claim was based on the defendant's negligent referral to the chiropractor, which the jury found did not involve a failure to pay contractual benefits. Therefore, the bad faith claim relied solely on the negligent referral. The jury was instructed to avoid duplicative damages for the same injuries across different claims. The court concluded that the jury awarded appropriate damages for the injuries stemming from both the defendant's negligence and the bad faith breach of contract, affirming the jury's verdict and damage award against the defendant.

The Slacks contended that the trial court erred in not awarding treble exemplary damages, a statutory provision allowing for such enhancement under specific conditions outlined in Section 13-21-102(3), C.R.S.1998. The court may enhance damages if the defendant's conduct is willful and wanton, either by continuing harmful behavior during the case or aggravating the plaintiff's damages knowingly. The appellate review acknowledges the trial court's discretion in evaluating conduct, and no abuse of discretion was found despite the Slacks’ claim of uncontroverted evidence of the defendant's recklessness.

The defendant further argued that the trial court should have reduced the compensatory damages awarded to plaintiff Brett Slack by apportioning fault, as a loss of consortium claim is derivative of the injured spouse's claims. The appellate court agreed, holding that the trial court erred by not instructing the jury to apportion damages according to the defendant's relative fault, concluding that Brett Slack's damages should be adjusted to $2,400, reflecting 40% of the total $6,000 awarded.

Finally, regarding Julie Slack's appeal on the award of costs to the defendant, the court found no error. The statute mandates that if a defendant offers a settlement that exceeds the plaintiff's recovery, the defendant is entitled to reasonable costs incurred post-offer. The determination of cost reasonableness lies within the trial court's discretion, which was not deemed abused in this case.

The trial court is required to conduct an evidentiary hearing when the reasonableness of a bill of costs is contested and must provide findings to justify its cost award. Allowable costs include discovery depositions deemed 'reasonably necessary' for case development. In the case at hand, the trial court held two evidentiary hearings and made findings based on documents and testimonies supporting the defendant's cost award against the plaintiffs. Both parties objected to these findings and the cost award; however, the reviewing court found the trial court's determination was supported by competent evidence and aligned with established legal standards.

The plaintiffs challenged the cost award under 13-16-122, C.R.S.1998, which specifies certain allowable costs, but the court determined that this statute is not exhaustive, allowing for the inclusion of all reasonable costs at the trial court’s discretion. The plaintiffs also argued that certain costs (photocopying, mileage, parking, delivery, and long-distance telephone expenses) were overhead and thus not recoverable. The court clarified that overhead refers to general business expenses not directly attributable to specific cases, and as long as costs are incurred solely for litigation purposes, they are not considered overhead and can be included.

The judgment for plaintiff Brett Slack was reversed and his compensatory damages reduced to $2,400, while affirming the judgment and cost award in all other respects. Judges Marquez and Davidson concurred.