Rabin v. Fidelity National Property & Casualty Insurance
2012 U.S. Dist. LEXIS 71557
| D. Colo. | 2012Background
- Rabin, insured by Fidelity, filed a homeowners claim after a February 19, 2009 fire; Fidelity paid portions totaling $34,403.89 and denied other parts.
- Two appraisers later valued Rabin’s personal property loss at $52,376.74 (the Award), with Fidelity deducting prior payments before paying the remainder.
- Rabin sued (June 11, 2010) asserting breach of contract, bad faith, and Colo. Rev. Stat. § 10-3-1116 claims; Fidelity removed to federal court.
- Rabin sought treble damages under § 1116 for benefits allegedly unreasonably delayed or denied; Fidelity argued Rabin could not stack payments and § 1116 damages.
- Fidelity sought to suppress evidence of post-suit conduct and sought to reclassify its setoff defense as recoupment; the court addressed these motions in stages.
- The court ultimately denied some aspects, granted others, and redesigned Fidelity’s setoff defense as recoupment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 10-3-1116 allows two times the benefits even if paid earlier | Rabin seeks two times benefits; prior payments do not bar this claim | Rabin would be improperly duplicating benefits already paid | Yes; Rabin may recover two times the unreasonably delayed/denied benefits |
| Whether filing suit suspends Fidelity's good faith duty to negotiate | Rabin argues duty persists through litigation | Authorities hold duty can be suspended by genuine damages dispute | Duty to negotiate suspended by filing suit and genuine damages dispute |
| Admissibility of Fidelity’s conduct after suit to prove bad faith/1116 | Evidence of post-suit conduct bears on bad faith | Such evidence should be excluded as conduct after litigation begins | Conduct evidence admissible as pattern, not sole basis for claims; admissibility allowed |
| Whether Fidelity’s counterclaims can support bad faith/1116 claims | Counterclaims show bad faith | Counterclaims are not probative and could confuse jurors | Counterclaims inadmissible for proving bad faith/1116; judgement on those claims granted in part |
| Whether setoff should be redesignated as recoupment | Setoff and recoupment are distinct but related defenses | Setoff is a separate defense; no change warranted | Setoff redesignated as recoupment; consistent with substance over labels |
Key Cases Cited
- Bucholtz v. Safeco Ins. Co. of America, 773 P.2d 590 (Colo.App.1988) (suspends duty to negotiate when genuine damages dispute exists)
- Sanderson v. American Family Mut. Ins. Co., 251 P.3d 1213 (Colo.App.2010) (duty to negotiate continues but may suspend during litigation)
- Vaccaro v. American Family Ins. Group, 275 P.3d 750 (Colo.App.2012) (insurer not obligated to settle when damages debatable)
- Dale v. Guaranty Nat. Ins. Co., 948 P.2d 545 (Colo.1997) (bad faith evidence may include post-litigation conduct)
- Parsons ex rel. Parsons v. Allstate Ins. Co., 165 P.3d 809 (Colo.App.2006) (litigation conduct of insurer attorney considered under balancing test)
- Timberlake Constr. Co. v. U.S. Fidelity & Guaranty, 71 F.3d 335 (10th Cir.1995) (attorney conduct evidence generally inadmissible to prove bad faith)
- Southerland v. Argonaut Ins. Co., 794 P.2d 1102 (Colo.App.1990) (evidence of ongoing conduct admissible as evidence of bad faith pattern)