Colorado Supreme Court Round-Up (10/9/07)


Today’s only opinion is Brodeur v. American Home Assurance Co. (pdf, 50 pages). Beyond settling a number of legal questions, the case illustrates just how savage workers’ compensation insurers can be. The timeline:

12/97 – Long haul trucker injured on the job, files a comp claim for medical bills.

Early 1998 – AIG Claim Services, the third-party administrator for American Home Assurance (the comp carrier for the injured guy’s employer), denies the claim, questioning whether the injury was work related.

12/98 – An administrative law judge for the workers’ comp bureau orders AHA to pay.

5/99 – Doctor says injured guy needs back surgery.

6/99 – AIG approves the surgery.

8/5/99 – Doctor discovers that injured guy’s blood platelet count is too low for surgery; hematologist advises AHA and the employer that injured guy needs drug treatment to boost his platelet count.

8/20/99 – After the applicable deadline, counsel for the employer sends a letter to injured guy’s doctor denying coverage for the drug treatment because the platelet count issue is unrelated to the work injury. Injured guy’s lawyer demands another hearing.

11/1/99 – Injured guy’s lawyer writes to employer’s lawyer, saying inter alia that the insurer “is handling this claim in bad faith.”

2/00 – ALJ conducts another hearing and orders the insurer to pay for both the platelet treatment and the back surgery. ALJ denies injured guy’s request for statutory penalties.

6/15/00 – Injured guy dies in a car crash. He never got the drug treatment or the back surgery.

2000 to 2002 – Injured guy’s widow pursues an appeal of the ALJ’s decision not to impose statutory penalties on the insurer.

6/21/02 – Following remand by the Colorado Court of Appeals, the ALJ imposes a $75 per-day penalty based on the insurer’s wrongful denial of the blood platelet treatment.

8/23/02 – Widow files suit against AHA and AIG in district court, alleging causes of action for: (1) bad faith; (2) breach of fiduciary duty; (3) fraud; and (4) violations of the Colorado Consumer Protection Act (“CCPA”).

The Supreme Court held that the bad faith claim was time barred. Such claims must be brought within two years after the cause of action accrues. Here, the claim accrued no later than 11/1/99, when the claimant’s counsel wrote that the insurer was handling the claim in bad faith. The fact that administrative and appellate proceedings on the comp claim remained pending until mid-2002 did not toll the limitations period.

The breach of fiduciary duty claim failed as a matter of law because there’s no fiduciary or quasi-fiduciary relationship between a workers’ comp claimant and his employer’s comp insurance carrier.

The fraud claim failed because statements in the letter denying coverage for the platelet treatment — the basis of the fraud claims — were “opinions of law” rather than actionable misrepresentations of fact.

The CCPA claim required proof that: (1) the insurer committed an unfair or deceptive trade practice proscribed by the statute; (2) the practice was part of the insurer’s business; (3) the practice significantly impacts the public as actual or potential consumers of the insurer’s services; (4) the claimant suffered injuryto a legally protected interest; and (5) the practice caused the injury. The only issue before the Court was whether the plaintiff met the “public impact” requirement.

In an argument that can most charitably be described as risky, the plaintiff argued that the public nature of the workers’ comp system was sufficient to meet the CCPA’s public impact requirement all by itself. The Court disagreed. Prior case law established that the public impact element focuses on the practice, not simply on the public nature of the business. Thus, you need case-specific proof that the deceptive practice at issue had or can have a significant impact on consumers. The Court bailed out plaintiff’s counsel by remanding the case to the trial court for discovery.

Chief Justice Mullarkey and Justice Hobbs dissented in part. They would have remanded the fraud claim for further proceedings as well because:

Denial of authorization on the grounds that the blood condition was not related to Brodeur’s industrial injury did not require an interpretation of the applicability of existing workers’ compensation law. The letter was false because the treatment had already been automatically authorized pursuant to the applicable regulation. The plain language of the statements themselves constitutes a misrepresentation of fact.

Cert Petitions:

36 denied, 1 granted. The Supreme Court will address the following issues in Yaekle v. Andrews, No. 07SC420:

Whether the Dispute Resolution Act, sections 13-22-301 to 13-22-313, C.R.S. (2007), requires that a settlement agreement reached through mediation be in writing and signed by all parties in order to be enforceable.

Whether the Dispute Resolution Act controls the enforceability of a settlement agreement formed by the parties’ actions subsequent to mediation or whether courts can rely on common law contract formation principles to enforce such an agreement.

The answer to the first question is a clear and unequivocal “yes” based on the plain terms of the statute. As for the second issue, I suspect that common law contract principles govern settlement agreements formed outside the mediation process. The pertinent section of Act, by its own terms, applies only to settlements reached during mediation. I don’t see anything in the statute purporting to abrogate the tried and true common law rules governing enforcement of settlements reached by other means, and courts generally aren’t fond of abrogation-by-implication arguments.

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