Peden v. State Farm Mutual Automobile Insurance Co.
2016 U.S. App. LEXIS 20463
| 10th Cir. | 2016Background
- Terrill Graf drove a van while intoxicated with four passengers, including Wendy Peden; he crashed and Peden suffered serious injuries.
- State Farm insured both Graf (liability via his fiancée’s policy) and Peden (underinsured-motorist coverage). Graf’s liability policy limit was $500,000; State Farm allocated that among four passengers, paying Peden $210,000 plus $30,000 in medical payments.
- Peden claimed total damages well above the liability allocation and demanded $350,000 in underinsured-motorist (UIM) benefits ($250,000 from the vehicle owner’s UIM and $100,000 from her own policy).
- State Farm initially denied/discounted the UIM claim (valuing Peden’s claim at ~$272,475 and applying a 15% reduction for assumed risk), then later, after litigation began and more information emerged, paid the $350,000 policy limits.
- Peden sued under Colorado common law and statute alleging unreasonable denial/delay of payment; the district court granted summary judgment for State Farm, but the Tenth Circuit reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether State Farm unreasonably denied or delayed UIM benefits | Peden: insurer failed to reasonably investigate and therefore unreasonably denied/delayed payment | State Farm: its investigation and decision were reasonable; later payment cures any defect; compliance with regulations supports reasonableness | Reversed district court: a reasonable fact-finder could conclude State Farm acted unreasonably; summary judgment for insurer improper |
| Adequacy of investigation into assumption of risk (did Peden know Graf would drive/intoxication) | Peden: insurer relied on equivocal questionnaire and Graf’s account without interviewing other passengers or Peden, so investigation was insufficient | State Farm: had statements and some police report material supporting assumption of risk finding | Court: reasonable juror could infer investigation was deficient and that insurer should have sought passenger interviews before discounting claim |
| Adequacy of investigation/valuation of damages available against Graf | Peden: State Farm undervalued potential damages (noneconomic, future wage loss, prejudgment interest) despite medical records, transcript, and other evidence | State Farm: its valuation was reasonable given information it relied on | Court: genuine dispute exists — insurer did not seek medical exam, expert opinions, or meaningfully assess future noneconomic/wage losses, so summary judgment inappropriate |
| Estoppel defense and regulatory compliance | Peden: not applicable; insurer still had duty to investigate reasonably | State Farm: argues Peden’s counsel authorized reliance on provided materials (estoppel); compliance with 60-day decision regulation shows reasonableness | Court: estoppel argument waived (not pleaded); regulatory compliance does not preclude finding of unreasonable conduct |
Key Cases Cited
- Goodson v. American Standard Insurance Co. of Wisconsin, 89 P.3d 409 (Colo. 2004) (recognizes implied duty of good faith and standards for first‑party insurance claims)
- Sunahara v. State Farm Mutual Automobile Ins. Co., 280 P.3d 649 (Colo. 2012) (uninsured/underinsured claims are first‑party actions against insurer)
- State Farm Mutual Automobile Ins. Co. v. Brekke, 105 P.3d 177 (Colo. 2004) (insurer must reasonably investigate claim)
- American Family Mutual Ins. Co. v. Allen, 102 P.3d 333 (Colo. 2004) (statutory and industry standards inform investigation reasonableness)
- Etherton v. Owners Ins. Co., 829 F.3d 1209 (10th Cir. 2016) (apply state substantive law in diversity cases; regulatory compliance does not necessarily establish reasonableness)
- Birch v. Polaris Indus., Inc., 812 F.3d 1238 (10th Cir. 2015) (summary judgment / de novo review principles)
- USAA v. Parker, 200 P.3d 350 (Colo. 2009) (prejudgment interest may be an element of damages in comparable insurance contexts)