Arline v. American Family Mutual Insurance Co

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.

SUMMARY
May 31, 2018
2018COA82

No. 17CA1296, Arline v. American Family Mut. Ins. Co. —
Insurance — Motor Vehicles — Uninsured/Underinsured —
Settlement and Release Agreements

A division of the court of appeals considers whether the

supreme court’s decision in Calderon v. American Family Mut. Ins.

Co., 2016 CO 72, renders unenforceable a prior agreement to

release an insurer and settle a negotiated claim for UIM benefits

because the insurer reduced its offers of settlement by the amount

of MedPay benefits paid. The division concludes that Calderon does

not impact such settlement agreements and affirms the district

court judgment dismissing the plaintiff’s complaint as barred by the

valid release.
COLORADO COURT OF APPEALS 2018COA82

Court of Appeals No. 17CA1296
City and County of Denver District Court No. 16CV34390
Honorable Elizabeth A. Starrs, Judge

Anitra Arline,

Plaintiff-Appellant,

v.

American Family Mutual Insurance Company,

Defendant-Appellee.

JUDGMENT AFFIRMED

Division III
Opinion by JUDGE RICHMAN
Webb and Fox, JJ., concur

Announced May 31, 2018

Bradley A. Levin, Susan S. Minamizono, Denver, Colorado; Patricia Meester,
Keith R. Scranton, Aurora, Colorado, for Plaintiff-Appellant

Faegre Baker Daniels LLP, Michael S. McCarthy, Todd P. Walker, Matthew D.
Clark, Denver, Colorado, for Defendant-Appellee
¶1 Plaintiff, Anitra Arline, appeals a district court’s judgment

dismissing her complaint pursuant to C.R.C.P. 12(b)(1). Arline

sought class action certification and damages resulting from her

receipt of benefits under her uninsured motorist/underinsured

motorist (UM/UIM) policy and the allegedly unenforceable release

and trust agreement (Agreement) she concurrently entered into with

defendant, American Family Mutual Insurance Company

(American). We affirm.

I. Background

¶2 Arline’s complaint alleges that she was injured by an

underinsured motorist in November 2014. She submitted claims to

American under insurance policies which provided $5000 in

MedPay coverage and a total of $50,000 in individual UIM coverage.

American paid $5000 in MedPay benefits on Arline’s behalf to

medical providers. American negotiated Arline’s damages under her

UIM coverage to be $27,000 after subtracting the $5000 in MedPay

benefits already paid. Arline alleges that American confirmed the

subtraction of $5000 in a letter to Arline in June 2015.

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¶3 In November 2015, Arline, represented by counsel, accepted

the $27,000 payment and signed the Agreement stating, as relevant

here, as follows:

For the sole consideration of Twenty-Seven
Thousand Dollars . . . paid by [American], . . .
receipt of which is hereby acknowledged,
Anitra Arline hereby fully and forever release(s)
and discharge(s) [American] from all claims,
demands, actions and rights of action, of
whatever kind or nature which she now has or
may hereafter have against [American] under
[her UIM policy], on account of bodily injury
sustained [as a result of the November 2014
accident].

Anitra Arline understand(s) and agree(s) that
the sum paid as consideration for this Release
and Trust Agreement was agreed to as a
compromise to avoid expense and to terminate
all controversy or claims for benefits [under
the UIM policy for the November 2014
accident] and that her acceptance of such
payment shall be a complete bar to any causes
of action or claims against [American] now
existing or which may arise in the future . . . .

(Emphasis added.)

¶4 In November 2016, one year after Arline settled, the supreme

court held for the first time that section 10-4-609(1)(c), C.R.S. 2017,

prohibits insurers from reducing the UIM benefits paid on a claim

by the amount of MedPay benefits paid on that claim, which the

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court termed a “setoff.” See Calderon v. Am. Family Mut. Ins. Co.,

2016 CO 72, ¶ 16 (“To the extent that [the plaintiff’s] insurance

purports to allow the setoff in this case, it is contrary to the setoff

prohibition of section 10-4-609(1)(c) and is unenforceable.”); see

also § 10-4-609(1)(c) (“The amount of the coverage available

pursuant to this section shall not be reduced by a setoff from any

other coverage, including, but not limited to, . . . medical payments

coverage.”). Calderon’s counsel now represents Arline.

¶5 Shortly after the Calderon decision, Arline sued American on

her own behalf, asserting breach of contract based on the facts

described above, and seeking class certification based on the

assertion that American had unlawfully reduced UIM payments to

similarly situated class members using a MedPay setoff. American

responded that the Agreement was a complete bar to the cause of

action in simultaneous motions to dismiss for (1) lack of standing,

pursuant to C.R.C.P. 12(b)(1); and (2) failure to state a claim upon

which relief can be granted, pursuant to C.R.C.P. 12(b)(5).

¶6 Arline argued that the Agreement was unenforceable because

it was contrary to applicable law and public policy. However, the

district court found that Arline’s arguments were relevant only to

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the terms of her insurance policy and not to the Agreement.

Accordingly, the court found that the Agreement was enforceable,

granted American’s motion to dismiss for lack of standing, and did

not address the Rule 12(b)(5) motion because it was rendered moot

by the Rule 12(b)(1) dismissal.

¶7 We agree with the district court that the Agreement is

enforceable and that Arline’s claims are therefore barred.

II. The Issue on Appeal

¶8 Arline reiterates the arguments made to the district court,

contending that the court erred in dismissing her complaint

because American’s payment of $27,000 pursuant to the Agreement

caused her to suffer an injury-in-fact to a legally protected interest.

See Ainscough v. Owens, 90 P.3d 851, 855 (Colo. 2004) (identifying

two requirements for standing in Colorado: the plaintiff must have

suffered “(1) an injury-in-fact, (2) to a legally protected interest”).

¶9 American responds that the propriety of the dismissal rests on

whether the Agreement is enforceable. We agree with American.

III. Standard of Review and Applicable Law

¶ 10 We review de novo both (1) a trial court’s grant of a motion to

dismiss, Allen v. Steele, 252 P.3d 476, 481 (Colo. 2011); and (2)

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whether a contract provision is enforceable or void as against public

policy, Bailey v. Lincoln Gen. Ins. Co., 255 P.3d 1039, 1045 (Colo.

2011). Under Rule 12(b)(1), the plaintiff has the burden of proving

jurisdiction. Medina v. State, 35 P.3d 443, 452 (Colo. 2001).

¶ 11 “A release is the relinquishment of a vested right or claim to a

person against whom the claim is enforceable.” Neves v. Potter, 769

P.2d 1047, 1049 (Colo. 1989). An insured may agree to a term of

settlement and release as the insured sees fit, “so long as [the term]

does not violate statutory prohibitions or public policy.” Fox v. I-10,

Ltd., 957 P.2d 1018, 1022 (Colo. 1998). While a contract provision

is void if the interest in enforcing it is clearly outweighed by a

contrary public policy, we must be cognizant that court invalidation

of a contract provision infringes on the “essential freedoms of . . .

the right to bargain and contract.” Superior Oil Co. v. W. Slope Gas

Co., 549 F. Supp. 463, 468 (D. Colo. 1982), aff’d, 758 F.2d 500

(10th Cir. 1985).

¶ 12 If a release agreement is valid, dismissal of claims

encompassed by the agreement is proper. See Ireland v. Wynkoop,

36 Colo. App. 205, 220-21, 539 P.2d 1349, 1359 (1975); see also

C.R.C.P. 8(c) (a release is an affirmative defense to a complaint).

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IV. Discussion

¶ 13 We conclude that the Agreement is valid and enforceable

because even under Calderon’s construction of section

10-4-609(1)(c), the interest in enforcing the Agreement — which

Arline entered into voluntarily while represented by counsel who

was fully informed that certiorari had been granted in Calderon —

is neither clearly outweighed by a contrary public policy nor

contrary to law.

¶ 14 First, it is not clear to us that the Agreement is contrary to

public policy. Although a term of an insurance policy “is void and

unenforceable if it violates public policy by attempting to ‘dilute,

condition, or limit statutorily mandated coverage,’” we do not agree

with Arline that the same standard applies to a settlement and

release agreement entered into upon payment of insurance benefits

in a negotiated amount. Huizar v. Allstate Ins. Co., 952 P.2d 342,

345 (Colo. 1998) (citation omitted). Unlike the plaintiff in Calderon,

Arline is not challenging any provision of her policy.

¶ 15 We agree with Arline’s assertion that, in Colorado, the purpose

of UIM insurance is to place “an injured party having uninsured

motorist coverage in the same position as if the uninsured motorist

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had been insured.” Calderon, ¶ 11 (quoting Barnett v. Am. Family

Mut. Ins. Co., 843 P.2d 1302, 1308 (Colo. 1993) (collecting cases);

see State Farm Mut. Auto. Ins. Co. v. Brekke, 105 P.3d 177, 184

(Colo. 2004) (“Insured motorists have the right to recover

compensation for loss caused by an uninsured motorist in the same

manner that recovery would be permitted for a loss due to an

insured motorist.”). However, we conclude that the purpose of UIM

insurance was served here.

¶ 16 The amount of damages resulting from an injury to an insured

motorist is an issue of fact, to be negotiated by the parties or

resolved by a fact finder. In Calderon, the issue was resolved by a

jury, and the trial court, applying the terms of Calderon’s insurance

policy, reduced the jury award by $5000 to set off the MedPay

benefits the plaintiff had already received. The supreme court held

that policy provisions allowing such setoffs effectively penalize the

plaintiff for being injured by an uninsured motorist. Calderon,

¶ 11. Therefore, the policy provision that resulted in the setoff in

Calderon violated section 10-4-609(1)(c). Id. at ¶ 16.

¶ 17 Here, however, Arline negotiated her damages benefits and

agreed that the $27,000 UIM benefit amount paid compensated her

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sufficiently to warrant releasing American from any further claims.

The present settlement agreement does not concern the amount of

UM/UIM coverage available on her claim, but rather the amount of

money she was willing to accept to release her claim. See Archuleta

v. USAA Cas. Ins. Co., Civ. A. No. 17-cv-00191-RBJ, 2017 WL

3157947 at *1 (D. Colo. Jul. 25, 2017).

¶ 18 Arline now argues, for the first time on appeal, that she was

not compensated in the same manner as if she had been injured by

a fully insured motorist. But she does not allege facts to support

this argument. She alleges only that she did not receive “what she

was entitled to” because of the setoff provision in her UM/UIM

policy.

¶ 19 Moreover, Colorado public policy favors the settlement of

disputes when the settlement is fairly reached. Davis v. Flatiron

Materials Co., 182 Colo. 65, 71, 511 P.2d 28, 32 (1973). If releases

and settlements could be “lightly ignored,” insureds and insurers

would be discouraged from settling claims. Id. at 71-72, 511 P.2d

at 32. Although Arline argues for the first time in her appeal that

she was “forced” to sign the release, she alleges no facts to support

this argument either here or in the district court. The Agreement

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itself states that the sum paid was “agreed to as a compromise.”

Thus, we cannot conclude that the settlement was unfairly reached.

¶ 20 Second, we are not persuaded that the Agreement is

prohibited by statute. Though the supreme court held that section

10-4-609(1)(c) prohibits policy provisions allowing a setoff from any

other coverage, it did not hold that the statute extended to

settlement agreements. See Calderon, ¶ 16. We perceive no

indication that, in enacting section 10-4-609, the General Assembly

sought to regulate settlement negotiations between an insured and

her insurer.

¶ 21 Accordingly, we conclude that the Agreement is enforceable.

Our conclusion is consistent with that of three recent federal

district court cases resolving this issue. See Mischek v. State Farm

Mut. Auto. Ins. Co., Civ. A. Nos. 16-cv-03208-PAB-MLC, 17-cv-

00041-PAB-MLC, 2018 WL 1569754, at *6 (D. Colo. Mar. 30, 2018)

(granting summary judgment based on accord and satisfaction of

UIM claims; “[b]ecause plaintiffs were aware at the time of

settlement that [insurer] had reduced its initial settlement offers by

the amount of MedPay benefits previously remitted, plaintiffs are

not permitted to reopen their claims merely because there has been

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a favorable development in the law”); Zevallos v. Allstate Prop. &

Cas. Co., Civ. No. 17-cv-00189-RM-CBS, 2017 WL 3242231, at *6

(D. Colo. July 28, 2017) (recommending dismissal of the plaintiff’s

claims seeking additional UM/UIM benefits because the UM/UIM

settlement agreement between the plaintiff and insurer is

enforceable and a bar to her claims); Archuleta, 2017 WL 3157947,

at *1.1

¶ 22 We are not persuaded to the contrary by Arline’s reliance on

Kral v. American Hardware Mutual Insurance Co., 784 P.2d 759

(Colo. 1989). In Kral, the supreme court held that a release-trust

agreement executed pursuant to a subrogation provision in an

insurance contract was enforceable only to the extent that it did not

impair the insured’s ability to be made whole. Id. at 763. Kral

analyzed the enforceability of a term from the release agreement

itself. But Arline does not assert that any term of her Agreement is

prohibited by statute or public policy; she argues for voiding the

1 At oral argument, Arline’s counsel appeared to suggest that a
footnote in the Archuleta opinion might mandate a different result
here. See Archuleta v. USAA Cas. Ins. Co., Civ. A. No. 17-cv-00191-
RBJ, 2017 WL 3157947, at *2 n.2 (D. Colo. Jul. 25, 2017). We
disagree, because even if the footnote governed settlement
agreements reached after Calderon was decided, Arline settled her
claim with American one year before Calderon.

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Agreement based on the calculations underlying American’s net

settlement payment. And she does not allege that she was not

made whole or that she would have received more compensation if

the motorist who caused her injury had been sufficiently insured.

Kral does not hold that insured parties are required to accept

nothing less than full compensation for their losses.

¶ 23 Because Arline signed a valid release agreement which is not

void as against public policy or prohibited by statute, the district

court properly dismissed her claim.2 See Ireland, 36 Colo. App. at

220-21, 539 P.2d at 1359; see also Fort Collins-Loveland Water Dist.

v. City of Fort Collins, 174 Colo. 79, 84-85, 482 P.2d 986, 989

(1971) (holding that when a complaint does not state a claim upon

which relief can be granted, the court has no subject matter

jurisdiction and could grant a motion to dismiss on either ground).

V. Conclusion

The judgment is affirmed.

JUDGE WEBB and JUDGE FOX concur.

2 We decline to address the retroactivity issue raised for the first
time at oral argument.

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