Oertli v. Auto-Owners Insurance Company

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 25-cv-01815-PAB-STV
MARY CECILE OERTLI,
Plaintiff,
v.
OWNERS INSURANCE COMPANY,
Defendant.
______________________________________________________________________
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
______________________________________________________________________
Magistrate Judge Scott T. Varholak
This matter comes before the Court on Defendant’s Partial Motion to Dismiss
Pursuant to Fed. R. Civ. P. 12(b)(6) (the “Motion”). [#31] The Motion has been referred
to this Court. [#35] This Court has carefully considered the Motion and related briefing,
the entire case file and the applicable case law, and has determined that oral argument
would not materially assist in the disposition of the Motion. For the following reasons, the
Court respectfully RECOMMENDS that the Motion be GRANTED and that the exemplary
damages request for relief be DISMISSED WITHOUT PREJUDICE.
Case No. 1:25-cv-01815-PAB-STV Document 37 filed 12/18/25 USDC Colorado
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I. 	FACTUAL BACKGROUND1
This case arises out of a dispute related to a homeowner’s insurance policy (the
“Policy”) that Plaintiff purchased from Defendant. 	[#25 at ¶ 1] 	Plaintiff paid additional
premiums under the Policy to obtain coverage exceeding the standard coverages and
limits. [Id. at ¶ 2] Specifically, Plaintiff purchased additional coverages for: (1) Water and
Sewer Backup (the “Water Backup Coverage”) with a deductible of $2,500 and a limit of
$5,000; (2) Ordinance or Law Coverage with a limit of $28,050; and (3) Property Coverage
for Fungi Wet Rot, Dry Rot and Bacteria (the “Wet Rot Coverage”) with a limit of $28,050.2
[#25 at ¶ 2] 	The Policy and the additional coverages were in effect on May 11, 2023,
when Plaintiff’s basement flooded. [Id. at ¶ 3] Plaintiff filed claims pursuant to the Policy
on May 13, 2023. [Id.]
Plaintiff’s 	personal belongings, 	carpet, 	and paneling 	were damaged 	by 	the
flooding. [Id.] Plaintiff engaged in various efforts to mitigate the damage, such as paying
vendors $25,000 to remove debris from Plaintiff’s basement. 	[Id. at ¶ 9] 	Prior to this
payment, contractors discovered that the back of the paneling on Plaintiff’s home had
“high toxicity glue” attaching it to the plywood behind it. 	[Id. at ¶ 8] 	Because Plaintiff’s
home was located in Jefferson County, the contractors could not legally remove the toxic
material without a permit and remediation process. [Id.]
1 The facts are drawn from the allegations in Plaintiff’s Amended Complaint (the
“Complaint”) [#25], which the Court accepts as true at this early stage of the proceedings.
See Wilson v. Montano, 715 F.3d 847, 850 n.1 (10th Cir. 2013) (citing Brown v. Montoya,
662 F.3d 1152, 1162 (10th Cir. 2011)).
2 When ruling on a motion to dismiss, “courts must consider the complaint in its entirety,
as well as . . . documents incorporated into the complaint by reference.” Tellabs, Inc. v.
Makor Issues & Rts., Ltd., 551 U.S. 308, 322 (2007). 	Though Plaintiff does not specify
the limit on the Wet Rot Coverage in her Complaint, she incorporates by reference a copy
of the Policy which identifies this limit. [#9-1 at 1]
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Plaintiff attempted on various occasions to contact Defendant’s agent and adjuster
about the flooding. 	[Id. at ¶ 11] 	On May 21, 2023, Defendant’s adjuster reviewed
Plaintiff’s home with contractors. 	[Id.] 	Defendant’s agent agreed that the wet carpet,
plywood, and debris needed to be removed. 	[Id.] 	On May 31, 2023, Defendant
reimbursed Plaintiff $5,000 under the Water Backup Coverage. [Id. at ¶ 4]
Plaintiff filed a Sworn Proof of Claim on June 23, 2023. [Id. at ¶ 12] Defendant’s
adjuster informed Plaintiff on July 10, 2023 that Defendant would not cover the additional
damages under the Ordinance or Law Coverage or the Wet Rot Coverage. [Id.] Plaintiff
had already contracted to have the debris removed at this time. 	[Id.] 	Plaintiff was not
informed, when she purchased the additional coverages, that by using the Water Backup
Coverage, the other coverages would no longer apply. [Id. at ¶ 21]
Defendant was not authorized to do business in Colorado from January 31, 2024,
through June 24, 2024. 	[Id. at ¶ 22] 	Its parent company was not authorized to do
business in Colorado from August 1, 2020, through June 24, 2024. [Id.] Plaintiff claims
that this constitutes outrageous conduct. [Id.]
On September 16, 2025, Plaintiff filed an Amended Complaint asserting two
causes of action: (1) an unreasonable denial of coverage claim pursuant to Colo. Rev.
Stat. § 10-3-1115 and Colo. Rev. Stat. § 10-3-1116 [Id. at ¶¶ 15-20] and (2) a common
law bad faith breach of contract claim [id. at ¶¶ 21-36]. 	Plaintiff requests an award of
compensatory damages and exemplary damages, among other things. [Id. at 16]
Defendant filed this Partial Motion to Dismiss on October 1, 2025. [#31] Plaintiff
responded [#34] and Defendant replied [#36]. This matter is thus ripe for disposition.
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II. 	STANDARD OF REVIEW
A. 	Federal Rule of Civil Procedure 12(b)(6)
Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint
for “failure to state a claim upon which relief can be granted.” In deciding a motion under
Rule 12(b)(6), a court must “accept as true all well-pleaded factual allegations . . . and
view these allegations in the light most favorable to the plaintiff.” Cassanova v. Ulibarri,
595 F.3d 1120, 1124 (10th Cir. 2010) (quoting Smith v. United States, 561 F.3d 1090,
1098 (10th Cir. 2009)). 	Nonetheless, a plaintiff may not rely on mere labels or
conclusions, “and a formulaic recitation of the elements of a cause of action will not do.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Plausibility refers “to the
scope of the allegations in a complaint: if they are so general that they encompass a wide
swath of conduct, much of it innocent, then the plaintiffs ‘have not nudged their claims
across the line from conceivable to plausible.’” 	Robbins v. Oklahoma, 519 F.3d 1242,
1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 570). “The burden is on the plaintiff
to frame a ‘complaint with enough factual matter (taken as true) to suggest’ that he or she
is entitled to relief.” Id. (quoting Twombly, 550 U.S. at 556). The ultimate duty of the court
is to “determine whether the complaint sufficiently alleges facts supporting all the
elements necessary to establish an entitlement to relief under the legal theory proposed.”
Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007).
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B. 	Pro Se Litigants
“A pro se litigant’s pleadings are to be construed liberally and held to a less
stringent standard than formal pleadings drafted by lawyers.” Hall v. Bellmon, 935 F.2d
1106, 1110 (10th Cir. 1991) (citing Haines v. Kerner, 404 U.S. 519, 520–21 (1972)). “The
Haines rule applies to all proceedings involving a pro se litigant.” 	Id. at 1110 n.3. 	The
Court, however, cannot be a pro se litigant’s advocate. See Yang v. Archuleta, 525 F.3d
925, 927 n.1 (10th Cir. 2008). 	Moreover, pro se parties must “follow the same rules of
procedure that govern other litigants.” Nielsen v. Price, 17 F.3d 1276, 1277 (10th Cir.
1994) (quoting Green v. Dorrell, 969 F.2d 915, 917 (10th Cir. 1992)).
III. 	ANALYSIS
The Motion only seeks dismissal of Plaintiff’s claim for exemplary damages. [#31]
Defendant argues that Plaintiff’s request for exemplary damages is premature, as initial
disclosures had not been exchanged at the time Plaintiff filed her Amended Complaint,
and Plaintiff has not established a prima facie case for exemplary damages. [Id. at 4-5]
The Court agrees.
Colorado law provides:
A claim for exemplary damages . . . may not be included in any initial claim
for relief. 	A claim for exemplary damages . . . may be allowed by an
amendment to the pleadings only after the exchange of initial disclosures
pursuant to rule 26 of the Colorado rules of civil procedure and the plaintiff
establishes prima facie proof of a triable issue. After the plaintiff establishes
the existence of a triable issue of exemplary damages, the court may, in its
discretion, allow additional discovery on the issue of exemplary damages
as the court deems appropriate.
Colo. Rev. Stat. § 13-21-102(1.5)(a). A claim for exemplary damages is permitted where
“the injury complained of is attended by circumstances of fraud, malice, or willful and
wanton conduct.” Id. at § 13-21-102(1)(a). “‘Willful and wanton conduct’ means conduct
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purposefully committed which the actor must have recognized as dangerous, done
heedlessly and recklessly, without regard to consequences, or of the rights and safety of
others, particularly the plaintiff.” 	Id. at § 13-21-102(1)(b). 	“Exemplary damages are
intended to punish the defendant and deter the defendant or others from committing
similar offenses in the future.” McGreevy v. Jenkins, No. 21CA1249, 2023 WL 12056749,
at *9 (Colo. App. Feb. 9, 2023) (citing Mince v. Butters, 616 P.2d 127, 129 (Colo. 1980)).
“The question of whether the plaintiff has established sufficient proof to add a claim
for exemplary damages lies within the sound discretion of the trial court.” 	Harris v.
Stallings, No. 24CA1543, 2025 WL 2079975, at *7 (Colo. App. July 24, 2025) (quoting
Stamp v. Vail Corp., 172 P.3d 437, 449 (Colo. 2007)). “Prima facie proof of a triable issue
of exemplary damages is established by ‘a showing of a reasonable likelihood that the
issue will ultimately be submitted to the jury for resolution.’” Id. (quoting Stamp, 172 P.3d
at 449). “Such proof may be established through discovery, by evidentiary means, or by
an offer of proof.” Id. (quoting Stamp, 172 P.3d at 449). “Prima facie evidence is evidence
that, unless rebutted, is sufficient to establish a fact.” 	Id. (quoting Stamp, 172 P.3d at
449). 	“Conduct that is merely negligent cannot serve as the basis for exemplary
damages.” 	Louisiana Purchase Condo. Ass’n, Inc. v. Am. Fam. Mut. Ins. Co., No.
17CA2369, 2019 WL 13574801, at *5 (Colo. App. Feb. 14, 2019) (citing Tri-Aspen Constr.
Co. v. Johnson, 714 P.2d 484, 487 (Colo. 1986)).
Plaintiff’s Motion to Amend that led to the currently operative Complaint described
a request to “name the correct party as Defendant and to make other revisions to the
complaint as needed to fully set forth the facts regarding the demand for exemplary
damages.” 	[#13 at 2] 	Plaintiff did not explain the nature of the facts or evidence
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supporting her claim for exemplary damages within the Motion to Amend. The Motion to
Amend was granted after a status conference. [#14] In both the original Complaint and
the Amended Complaint, Plaintiff requested exemplary damages. [#3 at 6; #25 at 16]
To date, Plaintiff has not identified any evidence amounting to prima facie proof of
a triable issue on exemplary damages. 	Plaintiff argues that prima facie proof exists
because she alleges that Defendant lacked good standing in the State of Colorado in
2024, she needed to pay vendors through refinancing her home, she still cannot use her
basement, and her former spouse was entering hospice at the time of the events which
comprise this Complaint. [#34 at 2] Regardless of the truth or relevance of any of these
assertions, Plaintiff never provided the Court with any prima facie proof of a triable issue
prior to adding a request for exemplary damages to the Amended Complaint. And Plaintiff
has not established that a triable issue exists through discovery, by evidentiary means,
or by an offer of proof. Additionally, Plaintiff does not appear to refute that she filed the
Amended Complaint prior to completing an exchange of initial disclosures pursuant to
Rule 26 of the Colorado Rules of Civil Procedure.
Accordingly, Plaintiff has not complied with Colo. Rev. Stat. § 13-21-102(1.5)(a).
Because Plaintiff has not complied with the rules required to amend a complaint to add a
claim for exemplary damages, the Court recommends that the exemplary damages
request be DISMISSED WITHOUT PREJUDICE. 	See Oxendine v. Kaplan, 241 F.3d
1272, 1275 (10th Cir. 2001); Reynoldson v. Shillinger, 907 F.2d 124, 127 (10th Cir. 1990).
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IV. 	CONCLUSION
For the foregoing reasons, the Court respectfully RECOMMENDS that the Motion
[#31] be GRANTED and that the exemplary damages request for relief be DISMISSED
WITHOUT PREJUDICE.3
DATED: December 18, 2025 	BY THE COURT:
s/Scott T. Varholak
United States Magistrate Judge
3 Within fourteen days after service of a copy of this Recommendation, any party may
serve and file written objections to the magistrate judge’s proposed findings of fact, legal
conclusions, and recommendations with the Clerk of the United States District Court for
the District of Colorado. 	28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b); Griego v. Padilla
(In re Griego), 64 F.3d 580, 583 (10th Cir. 1995). A general objection that does not put
the district court on notice of the basis for the objection will not preserve the objection for
de 	novo 	review. 	“[A] 	party’s 	objections 	to 	the 	magistrate 	judge’s 	report 	and
recommendation must be both timely and specific to preserve an issue for de novo review
by the district court or for appellate review.” United States v. 2121 East 30th Street, 73
F.3d 1057, 1060 (10th Cir. 1996). 	Failure to make timely objections may bar de novo
review by the district judge of the magistrate judge’s proposed findings of fact, legal
conclusions, and recommendations and will result in a waiver of the right to appeal from
a judgment of the district court based on the proposed findings of fact, legal conclusions,
and recommendations of the magistrate judge. See Vega v. Suthers, 195 F.3d 573, 579-
80 (10th Cir. 1999) (holding that the district court’s decision to review magistrate judge’s
recommendation de novo despite lack of an objection does not preclude application of
“firm waiver rule”); Int’l Surplus Lines Ins. Co. v. Wyo. Coal Refin. Sys., Inc., 52 F.3d 901,
904 (10th Cir. 1995) (finding that cross-claimant waived right to appeal certain portions of
magistrate judge’s order by failing to object to those portions); Ayala v. United States, 980
F.2d 1342, 1352 (10th Cir. 1992) (finding that plaintiffs waived their right to appeal the
magistrate judge’s ruling by failing to file objections). But see, Morales-Fernandez v. INS,
418 F.3d 1116, 1122 (10th Cir. 2005) (holding that firm waiver rule does not apply when
the interests of justice require review).
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