On July 18, 1996, an automobile insured by State Farm Mutual Automobile Insurance Company (“State Farm”) struck Ricky Eugene Clark, a pedestrian. Mr. Clark filed a class-action suit against State Farm to collect extended personal injury protection (“PIP”) benefits under the Colorado Auto Accident Reparations Act (“CAARA”).
See
Colo.Rev.Stat. §§ l(Mr-701 to 10-4-726 (2002).
1
He alleged that the driver’s Pedestrian Limitation policy from State Farm did not conform to CAARA and that
Brennan v. Farmers Alliance Mutual Insurance Co.,
On appeal, we reversed the district court’s decision and concluded that
Brennan
required reformation of State Farm’s policy to provide extended PIP benefits for injured pedestrians like Mr. Clark.
Clark v. State Farm Mut. Auto. Ins. Co.,
*706 State Farm and Mr. Clark now appeal the district court’s Clark II order. State Farm challenges the level of PIP benefits to which Mr. Clark should be entitled after reformation of its policy. Mr. Clark appeals (1) the effective date of reformation, (2) the district court’s application of an aggregate cap to the policy, and (3) the district court’s limitation of the policy reformation to pedestrians instead of all eligible insured persons. We exercise jurisdiction under 28 U.S.C. § 1291 because the district court certified its judgment as final. See Fed.R.Civ.P. 54(b). For the reasons stated below, we affirm the district court.
I. BACKGROUND
The district court presented a thorough factual and procedural background, and we only briefly summarize the relevant facts here.
See Clark
II,
Under the Madrid policy, Mr. Clark received PIP payments for $48,617 in medical expenses, $3,377 in essential services, and $15,730 for 52 weeks of wage-loss benefits. After timely paying wage-loss benefits for one year, State Farm discontinued those payments pursuant to PI coverage limits. Only Mr. Clark’s wage-loss benefits are at issue on appeal. He remains unable to work in any capacity and now seeks wage-loss benefits for an indefinite period of time.
The Madrid policy contains a distended Pedestrian Limitation that limits PIP benefits to the lowest level, PI, for pedestrians:
The most we pay for each insured who sustains bodily injury and the period of time from the date of the accident in which the services must be furnished or the loss of income incurred shall not exceed:
1. the amount and period of time shown in the Schedule applicable to each benefit under coverage symbol PI if the insured is a pedestrian. This does not apply to you, your spouse, or any relative.
2. the amount and period of time shown in the Schedule applicable to each benefit under your coverage symbol for any other insured.
Id. at 17 (emphasis in original).
Hortencia Madrid’s son, Roger, first purchased automobile liability insurance from State Farm in 1985 and chose extended PIP benefits coverage at the P3 level. See id. at 18 (detailing the higher allowance for medical expenses and a higher death compensation under P3 coverage). The next year, he reduced coverage from P3 to PI, basic coverage at the lowest level. Mr. Madrid purchased a second policy in 1991, also at the PI level. In 1994, the Madrids changed the named in *707 sured on their insurance policy to Hortencia Madrid, with Monica Madrid as the primary driver. At that time, State Farm did not offer Hortencia Madrid the option to purchase extended PIP benefits that included extended pedestrian coverage.
A. Colorado Auto Accident Reparation Act
In 1973, the Colorado legislature passed the Colorado Auto Accident Reparations Act. In Clark I, we discussed the relevant statutory framework of CAARA:
The stated statutory purpose of CAARA is to “avoid inadequate compensation to victims of automobile accidents.” § 702. Colorado courts construe CAARA liberally to further its remedial and beneficial purposes. CAARA requires that a policy include a minimum level of PIP benefits. Specifically, [subjection 706(1) requires a carrier to provide, without regard to fault, payments for medical expenses, rehabilitation expenses, and lost wages. Section 706 sets dollar and time limits for each category of expense. Section 707 defines the categories of people who receive coverage under section 706 to include “1) the named insured, 2) resident relatives of the named insured, 3) passengers occupying the insured’s vehicle with the consent of the insured, and 4) pedestrians who are injured by the covered vehicle.” Brennan,961 P.2d at 553 . CAARA also requires every insurer to offer the named insured extended PIP benefits in exchange for higher premiums. These extended PIP benefits do not place time or dollar limitations on medical expense claims and offer the possibility of greater wage loss reimbursements. 3 The version of section 710 effective at the time of [Mr.] Clark’s accident, which applie[s] to policies issued on or after July 1, 1992, does not list or refer to persons eligible for extended coverage. Moreover, section 707, which sets out the four categories of PIP benefits recipients, refers only to the minimum PIP benefits available under section 706 and does not reference the enhanced benefits set out in section 710.
B. Brennan v. Farmers Alliance Mutual Insurance Co.
Subsequent to CAARA’s passage, the Colorado Court of Appeals decided Brennan. In Clark I, we summarized the relevant holding of Brennan:
Approximately nineteen months after [Mr.] Clark’s accident, the Colorado Court of Appeals decided Brennan,961 P.2d at 550 . In Brennan, a pedestrian injured in a car accident sued Farmers Alliance, seeking enhanced PIP benefits under section 710. Farmers Alliance did not offer extended PIP benefits to cover pedestrians. The trial court re *708 formed the policy to incorporate the extended benefits.
[In agreeing with the trial court,] the Colorado Court of Appeals explained that although section 710(2)(a) does not specify the persons entitled to extended benefits, CAARA’s statutory scheme indicated that section 710 “describes an option to purchase coverage, but at higher limits, for the same persons and under the same conditions applicable to mandatory basic PIP coverage [outlined in section 706].” Id. [at 552.] The court also relied on the fact that section 710 covers “injured person[s]” and not merely “insured[s],” which suggests that section 710 covered pedestrians. See id. at 554. Because Farmers Alliance did not offer extended PIP benefits to cover pedestrians in conformity with CAARA, the court read the additional coverage into the policy and affirmed the reformation of the policy. The court also affirmed the trial court’s judgment in favor of the plaintiffs for the difference between the minimum PIP benefit levels and the maximum' PIP aggregate amount provided under the policy.
The Colorado Court of Appeals proceeded, however, to affirm the dismissal of the plaintiffs’ breach of contract, breach of the duty of good faith and fair dealing, fraudulent misrepresentation, and willful and wanton breach of contract claims. In addressing the breach of contract claim, the Brennan court concluded that “until the contract was reformed, there was no policy in existence which granted plaintiffs rights for additional PIP benefits.” Id. at 556.
Clark I,
C. Clark I
In August 2000, Mr. Clark brought a class-action suit in federal district court on behalf of all injured persons, covered under a State Farm policy, who were not paid extended benefits under CAARA. He maintained that reformation of the Madrid policy should include extended PIP benefits under section 710. Mr. Clark brought additional claims for (1) breach of contract for failure to pay extended PIP benefits, (2) breach of the duty of good faith and fair dealing, (3) willful and wanton breach of contract, and (4) deceptive trade practices. The district court reasoned that Brennan could not be applied retroactively and granted State Farm’s motion to dismiss all claims.
On appeal, this court reversed, concluding that the district court erred in its prospective-only interpretation of Brennan. Id. at 1241. We applied the state’s retroactivity standards to conclude that the Colorado Court of Appeals did not announce a new principle of law “[b]ecause Brennan involved the interpretation of a statute enacted prior to the time the Madrid policy was issued.” Id. at 1242. On remand, we ordered the district court to “determine, through the exercise of its equitable powers, the effective date of reformation” and “the amount of extended PIP benefits, if any, to which Clark is entitled.” Id. at 1241-43. Finally, we affirmed the dismissal of Mr. Clark’s claim of deceptive trade practice and recognized that the remaining contract, tort, and statutory claims would remain viable only if the district court’s effective date of reformation preceded its order of reformation.
D. Clark II
On remand, the district court held that (1) the effective date of reformation of the Madrid policy was the date on which the order was entered, December 19, 2003; (2) Mr. Clark was entitled to the P4 level of extended PIP benefits; (3) the Madrid policy is subject to a $200,000 aggregate limit in benefits coverage; and (4) Mr.
*709
Clark’s remaining claims of breach of contract, breach of the duty of good faith and fair dealing, and willful and wanton breach of contract were not viable in light of the effective date of reformation.
Clark II,
On appeal, State Farm and Mr. Clark present four issues. State Farm argues that the district court erred when it reformed the Madrid policy to provide Mr. Clark with P4 benefits. Mr. Clark contends that the district court erred when it (1) applied a $200,000 aggregate cap to the Madrid policy; (2) selected the date of the district court’s order as the policy’s effective reformation date; and (3) reformed the Madrid policy to include only pedestrians and not all eligible insured persons under P4 coverage. We affirm the district court’s order.
II. DISCUSSION
We first address the standard of review for challenges to the terms of the Madrid policy’s reformation and then proceed to the merits of each claim.
A. Standard of review
We review the district court’s exercise of its equitable powers for abuse of discretion.
Davoll v. Webb,
This court applies the substantive law of the forum state when, as here, we exercise diversity jurisdiction.
See Blanke v. Alexander,
B. Reformation to provide extended PIP benefits at the P4 level
The district court concluded that in light of our decision in
Clark I,
Mr. Clark “was entitled to extended PIP benefits beginning on the day of reformation.”
State Farm now contends that the district court erred in its reading of Clark I. The insurer argues that the proper reformation remedy is simply to strike the Pedestrian Limitation from the Madrid policy and permit Mr. Clark to receive the same level of coverage, PI, that the Madrids purchased for themselves.
*710
“Generally, the purpose of reformation of an insurance contract is to make the policy express the true intent of the parties. However, when a policy is violative of a statute, reformation is also required to assure that coverage will meet the statutory mínimums.”
Thompson v. Budget Rent-A-Car Sys., Inc.,
The district court’s decision comports with our decision in
Clark I
and the Colorado law regarding reformation of insurance policies. The district court noted that it is “undisputed that State Farm did not offer Mrs. Madrid the option of purchasing extended PIP benefits which included extended coverage for pedestrians.”
Clark II,
Further, as the district court noted,
Brennan
and
Thompson
reformed those insurance policies to include extended pedestrian coverage that insurers should have offered under section 710. “When an insurance policy is reformed to conform to a statutory minimum, such term is deemed to be incorporated by reference into the policy.”
Brennan,
C. Application of a $200,000 aggregate cap
The district court referenced State Farm’s policy coverage chart and found that, like the policy in
Brennan,
the Madrid policy includes a $200,000 limit.
Clark II,
Subsection 710(2)(b) of CAARA states that “[a] complying policy may” include a $200,000 aggregate limit for all benefits set forth in subsections 706(l)(b) to (l)(e) “on account of injury to or death of any one person” from a vehicle accident. The policy in
Brennan
included an endorsement specifically providing an aggregate limit for medical expenses, rehabilitation expenses, work loss, essential services, and death compensation.
The parties agree that the Madrid policy’s declarations page indicates selection of PI coverage. Aplt’s App. vol. II, doc. 20, at 6. Mr. Clark disputes application of the $200,000 aggregate cap to PI coverage and contends that such a cap applies only to coverage options that the Madrids did not select. He further maintains that State Farm expressly chose not to include an aggregate cap for PI coverage even though it easily could have. According to State Farm, it would be meaningless to note such an explicit limit to PI coverage because PI benefits can never exceed $200,000. State Farm maintains that the Madrid policy evidences an intent to include the aggregate limit to its fullest possible extent by capping all levels of PIP coverage that could exceed $200,000.
The Madrid policy’s schedule does not list an aggregate limit for coverage at the PI level. Other coverage symbols provide higher wage-loss benefits and explicitly specify a $200,000 aggregate limit. See id. at 18. We agree with State Farm that PI coverage, however, could never reach a $200,000 aggregate cap given its respective payment limits for (1) medical expenses ($50,000), (2) rehabilitation expenses ($50,-000), (3) wage-loss benefits (52 weeks of payments, up to a weekly rate of $400, for a maximum of $20,800), (4) essential services (364 days, up to a daily rate of $25, for a maximum of $9,100), and (5) death compensation ($1,000). PI coverage can only pay up to $130,900 in benefits.
Furthermore, the Madrid
policy
clearly caps all coverage levels that could exceed $200,000.
See
Aplt’s App. vol II, doc. 20, at 18 (providing a cap of $200,000 for PIP benefits payable at the P4, P8, P9, and P10 levels). On its policy schedule, State Farm need not specifically include a $200,000 aggregate limit under the PI coverage symbol when such basic coverage cannot possibly provide PIP benefits exceeding that amount.
See Breaux v. Am. Family Mut. Ins. Co.,
D. Selection of the reformation date
Mr. Clark contends that the district court abused its discretion when selecting the date of its order as the reformation date of the Madrid policy. “[T]he determination of the effective date of reformation affects the viability of a plaintiffs contract, tort, and statutory claims, but not the reformation of the policy, which was mandated by
Brennan.” Clark I,
Our circuit recognized in Clark I that the reformation date “is an equitable decision to be determined by the trial court based on the particular circumstances of each case.” Id. at 1243. We noted possible effective dates of reformation as (1) the date the Madrid policy was issued; (2) the date the Brennan trial court reformed the policy; (3) the date of the Brennan decision by the Colorado Court of Appeals; and (4) the date the district court on remand reformed the Madrid policy. Id. In selecting an effective date of reformation, we instructed the district court to
consider all appropriate factors, including the following: (1) the degree to which reformation from a particular ef *712 fective date would upset past practices on which the parties may have relied and whether State Farm anticipated the rule in Brennan; (2) how reformation from a particular effective date would further or retard the purpose of the rule in Brennan; and (3) the degree of injustice or hardship reformation from a particular effective date would cause the parties.
Id.
1. Clark II
The district court “conclude[d] that the reformation of the Madrid policy should apply prospectively only” and chose the date of its order — December 19, 2003 — as the effective reformation date.
Clark II,
For the second Clark I factor, the district court recognized that Brennan’s purpose arguably favors reformation beginning when Mrs. Madrid first signed her policy, but it also acknowledged that Brennan’s rule “must be counterbalanced by the insurer’s ability to pay claims on an actuarially sound basis.” Id. at 1266. This second factor, according to the district court, partially favors a pr e-Brennan reformation date and partially favors a date after Clark I. Id. at 1266-67. As to the third factor, the district court determined that a pr e-Clark I reformation date would create an inequitable result for State Farm, as the insurer would be liable “for coverage it could not foresee during a time it reasonably did not know of such exposure.” Id. at 1267. On balance, the district court concluded that the most equitable reformation date was the date of its order.
2. Discussion
Mr. Clark maintains that the reformation date cannot be later than the date on which State Farm learned of Brennan. As to the first factor, Mr. Clark asserts that State Farm rather than pedestrian claimants should bear the consequences of the insurer’s errant interpretation about Brennan’s retroactivity. Regarding the second Clark I factor, he argues that the district court erred when it concluded that an early reformation date must be counterbalanced by State Farm’s ability to determine insurance premiums on an actuarially sound basis. Mr. Clark maintains that the district court disregarded Clark I’s ruling that Brennan applied retroactively by considering the unfairness of imposing liability on State Farm for thousands of pedestrian injuries for which it could not predict coverage risk and collect premiums. As to the third factor, Mr. Clark complains that the district court did not fully examine his possible hardships.
After examining the record and the district court’s thorough equity analysis, we cannot conclude that the district court’s effective date of reformation was “arbitrary, capricious, whimsical, or manifestly unreasonable.”
Ralston v. Smith &
*713
Nephew Richards, Inc.,
Moreover, we find especially relevant the third factor noted in Clark I: “the degree of injustice or hardship reformation from a particular date would cause the parties.” Id. at 1243. The district court appropriately recognized the magnitude of State Farm’s exposure to liability if every plaintiff like Mr. Clark could proceed with breach of contract and tort claims under an earlier reformation date. Admittedly, the district court did not explicitly discuss the countervailing hardships of Mr. Clark from particular reformation dates. However, “based on the particular circumstances,” the district court did not abuse its discretion when it selected the date of its order as the Madrid policy’s effective date of reformation. Id.
E. Reformation only as to pedestrians
Finally, Mr. Clark maintains that the district court erred because it reformed the Madrid policy only to include extended PIP benefits for pedestrians. He contends that reformation instead should have applied to all categories of eligible insured persons under subsection 707(1), including the named insureds, resident relatives, passengers occupying the vehicle with the insured’s consent, and pedestrians injured by the covered vehicle. Mr. Clark offers this argument as he intends to bring a class action on behalf of additional groups of claimants.
In
Clark I,
our remand concerned the benefits sought by Mr. Clark as a pedestrian. We instructed the district court to “determine the amount of extended PIP benefits, if any, to which
Clark
is entitled.”
Significantly, the Colorado Court of Appeals reasoned in
Brennan
that an insurer must offer extended PIP coverage not only to pedestrians but to all categories of persons listed in subsection 707(1).
Therefore, the district court did not abuse its discretion when it limited reformation of the Madrid policy to pedestrians.
III. CONCLUSION
Accordingly, we AFFIRM the district court’s December 2003 order that (1) reformed the Madrid policy to provide Mr. Clark with P4 benefits; (2) applied a $200,000 aggregate cap to the policy; (3) selected the date of the district court’s order as the policy’s effective reformation date; and (4) reformed the Madrid policy to include only pedestrians under P4 coverage. We also GRANT Mr. Clark’s motion to file a supplemental appendix and DENY his application for reimbursement.
Notes
. Unless otherwise noted, all references to statutes in this opinion are to Colo.Rev.Stat. §§ 10-4-701 to 10-4-726 (2002). Though CAARA was repealed effective July 1, 2003, the parties agree that we apply its provisions to Mr. Clark's 1996 accident.
. In a separate appeal, No. 04-1315, Mr. Clark challenges the district court's denial of his motion for attorney fees. His appeal as to attorney fees was orally argued in conjunction with the appeal at issue. After careful consideration of the relevant statute and case law, we have certified an unanswered question of state law to the Colorado Supreme Court that may be determinative to Mr. Clark's claim for attorney fees. See Clark v. State Farm Mut. Auto. Ins. Co., Nó. 04-1315.
. Subsection 710(2)(a) provides in pertinent part:
Every insurer shall offer for inclusion in a complying policy, in addition to the coverages described in section 10-4-706, at the option of the named insured:
(I) Compensation of all expenses of the type described in section 10-4-706(l)(b) without dollar or time limitation; or
(II) Compensation of all expenses of the type described in section 10-4-706(l)(b) without dollar or time limitations and payment of benefits equivalent to eighty-five percent of loss of gross income per week from work the injured person would have performed had such injured person not been injured during the period commencing on the day after the date of the accident without dollar or time limitations.
§ 710(2)(a). The insurer, however, may cap the total limit on all PIP benefits set forth in section 706(l)(b) to (l)(e) at $200,000 for any person per accident. See id. § 710(2)(b).