Colony Insurance Co. v. Burke
698 F.3d 1222
| 10th Cir. | 2012Background
- Aurora Espinal-Cruz, a six-month-old, died of an untreated respiratory illness while in DHS foster care, triggering a wrongful death suit against Jones and DHS personnel.
- Oklahoma DHS liability policies with United and Colony insured Jones; each policy had a $300,000 limit.
- The Estate asserted contract, bad-faith, garnishment, and reformation claims against Colony after Colony denied coverage and settlement offers were made.
- The district court granted judgment on the pleadings against the Estate on contract and bad-faith claims, but allowed garnishment to proceed; the court did not certify a state-law question to Oklahoma Supreme Court.
- A private mediation yielded a 2009 settlement where Colony paid $4 million to Jones, with $300,000 as the policy limit and complex arrangements affecting the Estate’s recovery.
- Colony then moved for summary judgment on garnishment, arguing the Estate’s rights were extinguished by the Jones-Colony settlement; the court granted, and the Estate appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of foster children vs insurer | Estate contends Aurora had contractual or statutory standing to sue Colony. | Colony argues no contractual or statutory relationship, Estate is a stranger to the policy. | No standing; Estate not a third-party beneficiary and no statutory relationship. |
| Garnishment beyond policy limits | Estate seeks garnishment beyond policy limits based on bad-faith liability. | Colony lacks liability beyond policy limits absent a bad-faith finding. | Garnishment beyond policy limits not allowed; no bad faith finding supported. |
| Estate’s status as intervener impact | Estate, as intervenor, should influence rulings on motions | Intervenor status is irrelevant to merits because no duty to third parties existed. | Intervenor status did not affect the decisions; no reversible error. |
| Certification to Oklahoma Supreme Court | Question should be certified to resolve foster-child standing. | Question not sufficiently novel to warrant certification. | Motion to certify denied; district court’s ruling affirmed. |
| Seal of documents in appeal | Confidential settlements justify sealing materials. | Public access favored; settlements not sufficient to seal. | Motions to seal denied; public access preserved. |
Key Cases Cited
- McWhirter v. Fire Ins. Exch., 878 P.2d 1056 (Okla. 1994) (no duty to third parties in bad-faith actions absent relation)
- Townsend v. State Farm Mut. Auto. Ins. Co., 860 P.2d 236 (Okla. 1993) (statutory relationship for UM insurance standing)
- Roach v. Atlas Life Ins. Co., 769 P.2d 158 (Okla. 1989) (life-insurance beneficiary may sue insurer; first-party policy focus)
- Gianfillippo v. Northland Cas. Co., 861 P.2d 308 (Okla. 1993) (distinguishes Townsend; insureds against liability policies not with statutory standing)
- Anderson ex rel. Anderson v. Am. Int’l Specialty Lines Ins. Co., 38 P.3d 240 (Okla. Civ. App. 2001) (third-party standing requires explicit contract or statute for benefit)
- Sizemore v. Cont’l Cas. Co., 142 P.3d 47 (Okla. 2006) (workers’ compensation: contract and statutory beneficiary status)
- Keel v. Titan Const. Corp., 639 P.2d 1228 (Okla. 1981) (strictly requires express third-party beneficiary designation)