Pace v. Travelers Home and Marine Insurance Company, The
1:20-cv-01507
| D. Colo. | Nov 2, 2020Background:
- Jan 29, 2014: Pace injured in an auto accident; he was insured under Travelers with UIM coverage.
- Apr 10, 2018: Pace received $99,000 in settlement from the at-fault driver; parties dispute whether that fully compensated him.
- Mar 16, 2020: Pace sued Travelers in Colorado state court for breach of contract (UIM benefits); suit was removed to federal court.
- Mar 30, 2020: Pace sent Travelers his incident-related medical records and bills; Travelers learned tortfeasor’s counsel believed the $99,000 fully compensated Pace.
- May 6, 2020: Pace was served; May 15, 2020: Pace amended his complaint to add a statutory bad faith claim under Colo. Rev. Stat. § 10-3-1115.
- Travelers moved for partial judgment on the pleadings; the court granted the motion and dismissed Pace’s statutory bad faith claim with prejudice, finding the insurer’s duty to negotiate/settle/pay was suspended by the pre-amendment litigation and a genuine dispute over the claim amount.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Travelers’ duty to negotiate/settle/pay was suspended by initiation of litigation | Pace argues Travelers unreasonably delayed/denied his UIM claim and thus violated § 10-3-1115 | Travelers argues Pace filed suit before alleging statutory bad faith, so the adversarial proceeding and a genuine dispute over claim amount suspended any duty to negotiate/settle/pay | Held for Travelers: duty suspended because Pace initiated suit before asserting bad faith and a genuine dispute over the claim amount existed |
| Whether Pace pleaded that Travelers acted unreasonably before litigation (course of conduct claim) | Pace contends Travelers’ conduct (including alleged failure to review/adjust/pay) supports a statutory bad faith claim covering pre- and post-litigation conduct | Travelers disputes that post-filing conduct alone can support bad faith when duty was suspended and disputes the factual assertions | Held: Pace’s amended claim was based on post‑filing conduct (records sent after suit); no viable course‑of‑conduct showing of pre‑litigation bad faith was pleaded, so claim fails |
Key Cases Cited
- Colony Ins. Co. v. Burke, 698 F.3d 1222 (10th Cir. 2012) (Rule 12(c) standard requires no material fact dispute and entitlement to judgment as a matter of law)
- Rabin v. Fid. Nat. Prop. & Cas. Ins. Co., 863 F. Supp. 2d 1107 (D. Colo. 2012) (initiation of litigation can constitute an adversarial proceeding that suspends insurer’s duty to negotiate)
- Bucholtz v. Safeco Ins. Co. of Am., 773 P.2d 590 (Colo. App. 1988) (foundation for suspension of settlement duty after litigation begins)
- Baker v. Allied Prop. & Cas. Ins. Co., 939 F. Supp. 2d 1091 (D. Colo. 2013) (insurer’s duty continues generally but may be cut off by litigation and genuine dispute)
- Peden v. State Farm Mut. Auto. Ins. Co., 841 F.3d 887 (10th Cir. 2016) (industry standards or expert proof govern reasonableness for statutory bad faith)
- Sandoval v. Unum Life Ins. Co. of Am., 952 F.3d 1233 (10th Cir. 2020) (unreasonableness under § 10-3-1115 does not require knowing or reckless conduct)
- Guarantee Tr. Life Ins. Co. v. Estate of Casper, 418 P.3d 1163 (Colo. 2018) (remedies for violation of § 10-3-1115 include fees, costs, and double covered benefits)
- L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419 (2d Cir. 2011) (on Rule 12(c), court may consider documents attached to the pleadings)