District of Colorado: Insurer Entitled To Summary Judgment on Bad Faith Claim Where Insured Repeatedly Failed To Provide Requested Information Necessary To Resolve Claim

by Saul Ewing Arnstein & Lehr LLP

Keeney v. Auto-Owners Ins. Co., No. 13-CV-00796-RPM, 2014 WL 622509 (D. Colo. Feb. 18, 2014)

District Court in Colorado grants defendant Insurer’s Motion for Summary Judgment where Insured’s failure to provide requested information to Insurer caused delay in ultimate denial of claim.

In 2010, Michael Day Keeney, while test driving a 1998 Harley Davidson motorcycle from the repair shop he owned, was struck from behind by a Jeep Grand Cherokee driven by an uninsured motorist.  The impact caused Keeney to be thrown from the motorcycle. He was transported by ambulance to a hospital where he received treatment for his injuries.  Keeney claimed that he suffered permanent physical impairment from the accident.  The uninsured driver of the Jeep was found to be at fault for the accident.

The motorcycle was insured under an automobile insurance policy issued by State Farm, and included UM coverage with limits of $200,000.  Keeney was also an insured under a garage liability policy issued by Auto-Owners Insurance, which included UM benefits with limits of $750,000.  The Auto-Owners policy, in exclusion 3.e, excluded from coverage injuries sustained by a person operating or occupying an auto without a reasonable belief that he was entitled to do so or by a person whose driver’s license had been suspended or revoked.  The Auto–Owners policy also contained a cooperation provision, requiring provision of requested documents. 

State Farm determined that its policy was primary with respect to uninsured/underinsured motorist benefits.  In November 2012, Keeney reached a policy limits settlement with State Farm.  On November 28, 2012, Auto–Owners received notice from State Farm that it had settled Keeney's claim by paying the UM limits of the State Farm policy.  On January 30 and 31, 2013, an Auto–Owners claims representative sent letters to Keeney’s counsel requesting certain documents, including pre- and post-accident medical records and tax and employment records pertinent to Keeney's claim of lost wages.  Auto–Owners made three more written requests for information on March 1, 19, and 28, 2013 – in those communications, the Auto-Owners representative informed Keeney’s counsel that Auto–Owners needed the additional information before it could make an offer of settlement.  Keeney did not provide the requested documents.

On March 28, 2013, Keeney filed an action seeking payment of UM benefits and damages for breach of contract, bad faith breach of insurance contract, and unreasonable delay/denial of payment of insurance benefits in violation of the state statute, C.R.S. §§ 10–3–1115(1) & 10–3–1116(1).  At that time, Auto-Owners was continuing to investigate Keeney's UM claim and, in late June 2013, it obtained a copy of Keeney's motor vehicle records from the Colorado Department of Motor Vehicles.  Those records showed that Keeney’s driver's license had been suspended on the date of the loss, triggering the exclusion stated in paragraph 3.e of the UM Coverage Form.  Auto-Owners informed Keeney that if he had been operating the motorcycle with a suspended license, coverage would be denied, and it requested clarification about Keeney’s position on that issue.  Auto-Owners also repeated its request that Keeney provide medical records and other information.  Having not received clarification on the license issue or other requested information, Auto-Owners denied Keeney’s claim for coverage on October 3, 2013 and filed a motion for summary judgment on all of Keeney’s claims in the lawsuit.

In response, Keeney provided an affidavit claiming that he had a “reasonable belief” that he was entitled to operate a motor vehicle on the date of the accident.  At a hearing on the motion, Keeney’s attorney suggested that the DMV had erred by failing to reinstate Keeney’s license before the date of the accident, but did not provide any supporting evidence.  The court held that Keeney’s response was not sufficient to overcome his burden on summary judgment.  Plaintiff’s “subjective understanding” about his license was irrelevant, because “the plain language of the exclusion” provides that UM benefits are not available to an injured person who was driving without a valid driver's license.  Therefore, Keeney’s affidavit did not create a triable issue of fact, and he did not submit any other evidence that would create a genuine factual dispute about the status of his license on the date of the accident.

Further, the court held that the statutory and common law bad faith claims for unreasonable delay both failed.  The court held that the insurer did not unreasonably delay Plaintiff’s claim.  First, the claim was only triggered after the exhaustion of the primary UM coverage.  Second, Keeney did not provide evidence to justify his lack of responsiveness to Auto-Owners’ requests for information about his medical history and earnings.  Because the record showed that Plaintiff failed to respond to Auto-Owner’s repeated requests for information, both before and after the discovery that Keeney was driving on a suspended license, Keeney’s bad faith claims failed, regardless of the fact that the denial letter was issued over three years after the accident.

Written by:

Saul Ewing Arnstein & Lehr LLP

Saul Ewing Arnstein & Lehr LLP on:

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