2021 COA 15
Colo. Ct. App.2021Background
- State Farm insured Gary Griggs with $25,000 per-person / $50,000 per-accident BI limits. A multi-vehicle crash on Nov. 30, 2013 injured Susan Goddard.
- Goddard retained the Azar firm on contingency and demanded the $25,000 policy limit on March 5, 2014, with an April 4 expiration. State Farm offered $5,000 on April 4 based on records then available.
- Additional medical records arrived later; State Farm later offered the remaining $18,500 of the per-accident limit; Goddard did not accept and sued Griggs (Nov. 2014).
- In June 2016 Griggs and Goddard executed a Nunn-style assignment agreement: Griggs admitted liability, submitted damages to binding arbitration, assigned any claims against State Farm to Goddard, and Goddard covenanted not to execute on any resulting judgment. Arbitration produced an $837,193.36 award and judgment against Griggs.
- State Farm sued Griggs seeking a declaration that Griggs breached the policy by entering the assignment/agreement and asserted defenses including collusion; Goddard (as assignee) counterclaimed for bad faith. A jury found State Farm proved breach of contract and found Goddard failed to prove bad faith; the jury did not reach collusion.
Issues
| Issue | State Farm's Argument | Goddard's Argument | Held |
|---|---|---|---|
| Whether the district court erred denying directed verdict on breach of contract | Factual disputes existed; whether entering a Nunn-type agreement breached is a fact question for the jury | Griggs’s conduct was authorized by Nunn and thus could not breach as a matter of law | Denial affirmed; breach is a question of fact and reasonable jury could find breach |
| Whether Nunn immunizes an insured as a matter of law from breach for entering a stipulated-judgment/assignment agreement | Nunn does not create blanket immunity; insured justified only if insurer appeared to act unreasonably | Nunn authorized the conduct and therefore Griggs cannot breach the policy as a matter of law | Nunn does not grant blanket immunity; insured may avoid breach only when it appears insurer acted unreasonably; appearance of unreasonableness is a factual question |
| Whether directed verdict should have been granted on State Farm’s collusion affirmative defense | Evidence (assignment terms, arbitrator relationship) supported submitting collusion to jury | Evidence insufficient to show collusion; directed verdict required | Any error in submitting collusion was harmless because jury found no bad-faith counterclaim and never reached collusion |
| Admissibility of Azar fee agreement and evidence of other Nunn agreements | Fee agreement and other-case agreements were relevant to causation and collusion; admissible | Agreements and extrinsic evidence were irrelevant and unfairly prejudicial | Admission of the Azar fee agreement was not an abuse; evidence concerning other Nunn agreements either was not admitted or not preserved and any error was harmless |
Key Cases Cited
- Nunn v. Mid-Century Ins. Co., 244 P.3d 116 (Colo. 2010) (approves insured’s use of stipulated judgment and assignment to protect against excess liability when insurer acted unreasonably; permits bad-faith damages)
- Goodson v. American Standard Ins. Co., 89 P.3d 409 (Colo. 2004) (describes insurer’s duty and third-party bad-faith principles)
- Farmers Group, Inc. v. Trimble, 691 P.2d 1138 (Colo. 1984) (reasonableness standard for insurer’s denial of claim and relevant inquiry for bad faith)
- Lake Durango Water Co. v. Public Utils. Comm’n, 67 P.3d 12 (Colo. 2003) (contract interpretation is law but breach is a question of fact)
- Burgess v. Mid-Century Ins. Co., 841 P.2d 325 (Colo. App. 1992) (directed verdict standard reaffirmed)