Kipling v. State Farm Mutual Automobile Insurance , 774 F.3d 1306 ( 2014 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS December 29, 2014
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
KATHRYN KIPLING,
Plaintiff - Appellee,
v. No. 13-1389
STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY, d/b/a Minnesota Division of
State Farm Mutual Automobile Insurance
Company,
Defendant - Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
(D.C. No. 1:11-CV-01948-BNB-CBS)
Franklin D. Patterson of Frank Patterson & Associates, P.C., Greenwood Village,
Colorado, for Defendant - Appellant.
Bradley A. Levin (Kerri J. Atencio with him on the brief), of Roberts Levin Rosenberg
PC, Denver, Colorado, for Plaintiff - Appellee.
Before BRISCOE, Chief Judge, HARTZ and HOLMES, Circuit Judges.
HARTZ, Circuit Judge.
I. INTRODUCTION
The question before us is one of conflict of laws. Plaintiff Kathryn Kipling sued
State Farm Automobile Insurance Company in Colorado federal district court for breach
of contract because it did not pay her benefits under four insurance policies issued in
Minnesota. The court determined that she would be entitled to benefits under Colorado
law but not under Minnesota law. It then applied tort conflict-of-laws principles to rule
that Colorado law governed. We hold that the court erred by not applying contract
conflict-of-laws principles. With appellate jurisdiction under 28 U.S.C. § 1291, we
reverse the judgment below and remand for further consideration.
II. BACKGROUND
Plaintiff and her husband Christopher Kipling resided in Colorado. On July 27,
2009, she was injured and he was killed in a motor-vehicle collision in Colorado. Their
vehicle was a 2005 Chevy Suburban provided by Mr. Kipling’s employer, Quicksilver
Express Courier, Inc. (Quicksilver), for his business and personal use. Quicksilver is
incorporated in Minnesota but has a wholly owned subsidiary in Colorado, Quicksilver
Express Courier of Colorado, Inc. (Quicksilver Colorado).
The sole cause of the accident was the negligence of the driver of the vehicle that
collided with the Suburban. But the driver of that vehicle had inadequate liability
insurance to cover the Kiplings’ damages. Plaintiff therefore sought underinsured
motorist (UIM) benefits under several State Farm policies. The obvious policy to collect
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on was the policy on the Suburban issued in Colorado to Quicksilver (although the
address on the policy was that of Quicksilver Colorado). State Farm paid the UIM
benefits available under that policy and also under a separate policy issued in Colorado
by State Farm to Quicksilver on a 2005 Ford pickup.
The dispute in this case concerns Plaintiff’s request for additional UIM benefits
under four State Farm policies issued in Minnesota to Quicksilver (the Minnesota
Policies). The address for Quicksilver on the policies was in Minnesota. The policies
insured four vehicles provided to four Minnesota employees of Quicksilver. They were
obtained through an insurance agent in Minnesota but executed by State Farm in Illinois.
Neither Plaintiff nor her husband was a named insured on any policy, and the vehicles
were never driven in Colorado. Each of the policies describes the covered vehicle on the
declaration page as “YOUR CAR,” Aplee. Supp. App. at 107, 113, 119, 125, and the
UIM coverage provision defines insured to mean “any person while occupying: (a) your
car; (b) a newly acquired car; or (c) a temporary substitute car,” id. at 110, 116, 122, 128(emphasis omitted). Under this provision the Kiplings would not be eligible for UIM
coverage under any of the Minnesota policies because they were not occupying any of the
insured vehicles when they were injured. State Farm denied the claims.
On July 27, 2011, Plaintiff filed in the United States District Court for the District
of Colorado a breach-of-contract claim against State Farm, invoking diversity
jurisdiction, 28 U.S.C. § 1332, and seeking payment of UIM benefits. State Farm filed a
motion for summary judgment arguing that Minnesota law applied and prohibited
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stacking of UIM policies (that is, obtaining UIM benefits under more than one policy)
and that the Kiplings did not meet the definition of insured under the language of the
policies. Plaintiff argued that Colorado law applied, permitted stacking, and prohibited a
policy from limiting UIM coverage to those occupying the covered vehicle at the time of
the accident, as in the Minnesota policies. The parties did not dispute that if Minnesota
law applied, Plaintiff was not entitled to coverage. The district court denied the
summary-judgment motion, agreeing with Plaintiff that Colorado law applied.
After denying a motion for reconsideration by State Farm, the district court
conducted a jury trial to determine damages and entered judgment on the verdict. State
Farm filed a motion to alter or amend the judgment under Fed. R. Civ. P. 59(e), arguing
that even under Colorado law it would not have to pay UIM benefits because Colorado
law did not prohibit the policy from tying UIM coverage to occupancy of the insured
vehicle. The district court denied the motion as “an improper attempt to advance a new
argument which could and should have been raised prior to trial and the entry of
judgment.” Aplt. App., Vol. 2 at 311. It further stated that even if the motion had been
appropriate, the court did not agree that Colorado law required altering the judgment.
State Farm raises two arguments on appeal: (1) even under Colorado law the
Minnesota Policies would not provide UIM benefits to Plaintiff because Colorado law
does not prohibit tying UIM coverage to occupancy of the insured vehicle and (2) the
district court erred in applying tort conflict-of-laws principles in resolving which state’s
substantive law governed Plaintiff’s claim. We reject the first argument because it was
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not timely raised below. But we agree with the second and therefore reverse and remand
for the district court to apply contract conflict-of-laws principles to determine whether
Minnesota or Colorado substantive law governs.
III. DISCUSSION
A. Coverage Under Colorado Law
State Farm contends on appeal that the district court erred in concluding that
Colorado law prohibits tying UIM coverage to occupancy of the insured vehicle. It
argues that “the policy provisions which define an insured as a person occupying the
business named insured’s vehicle as shown on the declaration page are valid and not
contrary to the [Colorado UIM] statute nor public policy in Colorado.” Aplt. Br. at 18. It
recognizes that DeHerrera v. Sentry Insurance Co., 30 P.3d 167 (Colo. 2001), said that
the UIM statute “require[s] an insurer to provide [UIM] benefits . . . without regard to the
vehicle occupied by the insured at the time of injury,” id. at 169, so that the insurer in that
case could not decline UIM benefits to the son of a named insured on the ground that the
son, who was injured while riding a motorcycle, did not occupy the insured automobile
when he was injured. But State Farm asserts that Farmers Insurance Exchange v.
Anderson, 260 P.3d 68, 79 (Colo. App. 2010), interpreted DeHerrera as permitting
policies to define insured based on occupancy in the insured vehicle so long as the person
seeking coverage is not the named insured or a resident relative.
The argument is a respectable one, perhaps even correct. But we do not address it.
When State Farm raised it in its Rule 59(e) motion, one of the grounds on which the
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district court rejected it was that it was untimely. We review a denial of a Rule 59(e)
motion for abuse of discretion. See Butler v. Kempthorne, 532 F.3d 1108, 1110 (10th
Cir. 2008). And we hold that the district court did not abuse its discretion in ruling the
motion untimely.
State Farm does not dispute that a motion for reconsideration under Rule 59(e) “is
not appropriate to . . . advance arguments that could have been raised in prior briefing.”
Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000). But it contends that
it had presented the argument before its motion. The district court did not think so. And
the record supports the court.
Our review of the record indicates, as the district court found, that State Farm had
never previously raised the argument in its Rule 59(e) motion that Colorado law
permitted its policy provision limiting UIM coverage to persons occupying the insured
vehicle when injured. In its motion for summary judgment, State Farm advanced three
arguments: (1) Minnesota law applied and prohibited stacking of UIM policies; (2) the
Suburban was not a covered vehicle under the language of the Minnesota Policies; and
(3) the Kiplings did not meet the definition of insured under the language of the
Minnesota Policies. None of State Farm’s arguments addressed Colorado law; they
assumed that Minnesota law applied. The opening paragraph of the motion’s Conclusion
section makes this clear:
Both under the effective choice of law provision in the Minnesota
policy contracts, and applying the most substantial relationship test,
Minnesota law would apply to this question of contract interpretation and
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Plaintiff would not be allowed to stack the UIM coverages of the four
vehicles and would be exclusively limited in her recovery to the UIM
coverage for the vehicle she was occupying at the time of the accident—the
2005 Chevrolet Suburban.
Aplt. App., Vol. 1 at 43.
In response, Plaintiff expressly advanced the opposite of what State Farm now
asserts, saying that “State Farm’s attempt to tie Mr. Kipling’s entitlement to UIM benefits
to the car he was occupying at the time of the accident is prohibited under Colorado law.”
Id. at 98. State Farm’s reply brief did not challenge this assertion of Colorado law but
merely reiterated its view that “Minnesota law applies, and it permits the language in the
policy.” Id. at 126.
Likewise, at the hearing on summary judgment State Farm did not respond to
Plaintiff’s contention that under Colorado law, coverage is “person oriented rather than
vehicle oriented.” Id. at 173. Indeed, when the court asked whether, if Colorado law
governed, it would matter “whether Mr. Kipling was in your car as the insurance policies
define that because Colorado law would prohibit tying coverage to a particular
automobile,” id. at 150, State Farm responded that “if he qualifies as an insured under a
Minnesota policy and Colorado law applies then it doesn’t matter what vehicle that
insured might be in under Colorado law,” id. at 150–51. And after Plaintiff agreed “that
if Minnesota law applies then under the anti-stacking rules the plaintiffs have received
everything to which they’re entitled,” id. at 151, State Farm acknowledged that the only
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issue was which state’s law applied. It later responded to the Court, “Generally, what the
Court’s asking is does—which law applies and I agree that that’s the issue.” Id. at 153.
State Farm’s pretrial motion for reconsideration of the summary-judgment ruling
went no further. It argued only that the district court erred in its conflict-of-laws analysis
and reiterated that “the central dispute in the matter” was “whether Colorado or
Minnesota law” applied. Id., Vol. 2 at 202 (internal quotation marks omitted). And State
Farm’s reply in support of the motion stated Colorado law on UIM coverage in
conformity with Plaintiff’s views and argued that applying Colorado law to the
Minnesota Policies would produce unacceptable results. In its order on the motion for
reconsideration, the court naturally stated that “it is undisputed that under Colorado law
State Farm is not allowed to tie its underinsured motorist coverage to occupancy in a
particular automobile.” Id. at 241 (citing DeHerrera, 30 P.3d 167).
State Farm points to its motion for a directed verdict at trial. But that motion only
renewed State Farm’s previous arguments made in its motions for summary judgment
and reconsideration. Also, we reject State Farm’s assertion that Plaintiff conceded in her
response to the Rule 59(e) motion that it had raised this issue of Colorado law.
Because the district court properly determined that State Farm had failed to raise
its Colorado-law argument before its Rule 59(e) motion, we conclude that the court did
not abuse its discretion in denying the motion as untimely.
B. Conflict of Laws
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We review conflict-of-laws determinations de novo. See Mitchell v. State Farm
Fire & Cas. Co., 902 F.2d 790, 792 (10th Cir. 1990). In a diversity action we apply the
conflict-of-laws rules of the forum state. See TPLC, Inc. v. United Nat’l Ins. Co., 44 F.3d
1484, 1490 (10th Cir. 1995). Accordingly, we apply the conflict-of-laws rules of
Colorado.
Colorado follows the Restatement (Second) of Conflict of Laws (1971) (the
Restatement) for both contract and tort actions. See Wood Bros. Homes, Inc. v. Walker
Adjustment Bureau, 601 P.2d 1369, 1372 (Colo. 1979) (contract actions); First Nat’l
Bank v. Rostek, 514 P.2d 314, 448‒49 (Colo. 1973) (tort actions); see also AE, Inc. v.
Goodyear Tire & Rubber Co., 168 P.3d 507 (Colo. 2007) (following Restatement § 171
with regard to prejudgment interest); Ficor, Inc. v. McHugh, 639 P.2d 385, 391 (Colo.
1982) (following Restatement § 299 with regard to dissolution of corporation); Dworak v.
Olson Constr. Co., 551 P.2d 198, 199 (Colo. 1976) (following Restatement § 170 in
applying tort conflict principles to covenant not to sue joint tortfeasors).
The general approach of the Restatement is set forth in § 6. It states that, absent a
statute governing the choice of law, the relevant factors for selecting which state’s
substantive law to apply include:
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests
of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
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(g) ease in the determination and application of the law to be applied.
Restatement § 6.
The Restatement provides further guidance with respect to particular causes of
action. For tort actions the Restatement provides:
(1) The rights and liabilities of the parties with respect to an issue in tort are
determined by the local law of the state which, with respect to that issue,
has the most significant relationship to the occurrence and the parties under
the principles stated in § 6.
(2) Contacts to be taken into account in applying the principles of § 6 to
determine the law applicable to an issue include:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury occurred,
(c) the domicil, residence, nationality, place of incorporation and place
of business of the parties, and
(d) the place where the relationship, if any, between the parties is
centered.
Id. § 145.
And for contract actions, in the absence of a contractual agreement on the choice
of law (which is governed by § 187), it states:
(1) The rights and duties of the parties with respect to an issue in contract
are determined by the local law of the state which, with respect to that
issue, has the most significant relationship to the transaction and the parties
under the principles stated in § 6.
(2) In the absence of an effective choice of law by the parties (see § 187),
the contacts to be taken into account in applying the principles of § 6 to
determine the law applicable to an issue include:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
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(d) the location of the subject matter of the contract, and
(e) the domicil, residence, nationality, place of incorporation and place
of business of the parties.
Id. § 188.
The Restatement specifically addresses “Contracts of Fire, Surety or Casualty
Insurance” in § 193. The term casualty insurance includes “theft insurance, liability
insurance, collision insurance, workmen’s compensation insurance and fidelity
insurance.” Id. § 193 cmt. a. The rule stated in the section is:
The validity of a contract of fire, surety or casualty insurance and the rights
created thereby are determined by the local law of the state which the
parties understood was to be the principal location of the insured risk
during the term of the policy, unless with respect to the particular issue,
some other state has a more significant relationship under the principles
stated in § 6 to the transaction and the parties, in which event the local law
of the other state will be applied.
Id. § 193.
The claim in the case before us is one for breach of contract—in particular, the
breach of an insurance contract. Therefore, we readily conclude that Colorado would
apply contract conflict-of-laws principles. Contract principles are “applicable to all
contracts and to all issues in contract.” Id. § 186 cmt. a.
The district court thought that the Colorado Court of Appeals decision in Ranger
v. Fortune Ins. Co., 881 P.2d 394, 395 (Colo. App. 1994), requires otherwise. We
respectfully disagree. In Ranger the plaintiff sought punitive and treble damages from an
automobile-liability insurer for bad-faith refusal to pay personal-injury-protection (PIP)
benefits. See id. at 394. The insurer argued that under Florida law it was not required to
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pay the benefits. See id. at 395. The trial court agreed and the plaintiff appealed, arguing
that the trial court should have applied Colorado law. See id. The Court of Appeals
applied Colorado law and reversed. It held that tort conflict-of-law principles governed
the dispute, and that Colorado “had the most significant relationship with the occurrence
and the parties.” Id. The court relied on comment (c) to Restatement § 145 to support
the proposition that “the state where the injury occurred, which is often where the
plaintiff resides, may have the greater interest in the controversy,” id.; and it noted that
the purpose behind the PIP statute was “to avoid inadequate compensation to victims of
automobile accidents,” id.
But there is a critical difference between Ranger and this case. A bad-faith claim
against an insurer, as in Ranger, sounds in tort. See Farmers Grp., Inc. v. Williams, 805
P.2d 419, 421 (Colo. 1991). The distinction between a claim on an insurance contract
and a bad-faith claim against an insurer was recognized in a diversity case arising in
Colorado that came before this court. In TPLC, 44 F.3d 1484, the plaintiff sued its
insurer for both breach of contract and bad-faith breach of an insurance contract.
Applying Colorado conflict-of-laws principles, we employed the tort principles of
Restatement § 145 to determine that Pennsylvania law governed the bad-faith claim, see
id. at 1495–96, and the contract principles of Restatement § 188 to determine that
Colorado law applied to the breach-of-contract claim, see id. at 1490–91.
Plaintiff relies on the policy reasons behind Colorado’s UIM statute as requiring
that state’s law to govern here. But the forum state’s public policy, which is always a
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consideration under the Restatement, see § 6(b), is not a factor in deciding which conflict-
of-laws principles—those for tort, contract, or otherwise—govern. It is simply one
element to be considered along with others once the set of governing principles has been
chosen.
We are fortified in our view by the apparently uniform practice of those courts
following the Restatement to apply contract conflict-of-laws principles to claims for
benefits under automobile-insurance contracts. See, e.g., Miller v. State Farm Mut. Auto
Ins. Co., 87 F.3d 822, 824‒25 (6th Cir. 1996) (uninsured-motorist coverage); Walker v.
State Farm Mut. Auto Ins. Co., 973 F.2d 634, 636‒37 (8th Cir. 1992) (uninsured-motorist
coverage); Nichols v. Anderson, 788 F.2d 1140, 1142 (5th Cir. 1986) (“starting point for .
. . inquiry [under Mississippi law] is § 193 of the Second Restatement”) (emphasis
omitted); Reliance Ins. Co. v. Calderon, 685 F. Supp. 72, 75 (S.D.N.Y. 1988); Nat’l
Union Fire Ins. Co. v. Binker, 665 F. Supp. 35, 40 (D.D.C. 1987); Am. States Ins. Co. v.
Allstate Ins. Co., 922 A.2d 1043, 1047 (Conn. 2007) (“choice of law determination in
[automobile-insurance] case involves an interplay among §§ 193, 188, and 6”); Johnson
v. U.S. Fid. & Guar. Co., 696 N.W.2d 431, 441 (Neb. 2005) (“[underinsured-motorist]
coverage . . . is governed by the Restatement’s conflict-of-law provisions for contract”);
Ohayon v. Safeco Ins. Co., 747 N.E.2d 206, 211 (Ohio 2001) (“an action by an insured
against his or her insurance carrier for payment of UIM benefits is a cause of action
sounding in contract, rather than tort, even though it is tortious conduct that triggers
applicable contractual provisions”); Dairyland Ins. Co. v. State Farm Mut. Auto. Ins. Co.,
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701 P.2d 806, 808‒09 (Wash. Ct. App. 1985); see also Sotirakis v. United Serv. Auto.
Ass’n, 787 P.2d 788, 791 (Nev. 1990) (citing §§ 188 and 193 with approval). As these
cases illustrate, contract conflict-of-laws principles apply even though tort liability
underlies any liability-insurance or UIM-insurance claim, and even though the court must
consider statutes that override contract provisions on public-policy grounds.
Accordingly, we hold that contract conflict-of-laws principles apply to Plaintiff’s
breach-of-contract claim seeking UIM benefits under State Farm’s insurance policies.
Because the district court did not apply the conflict-of-laws principles applicable to
contract actions, we remand to the court to apply those principles in the first instance.
IV. CONCLUSION
We REVERSE the decision of the district court and REMAND for further
proceedings, including reconsideration of what state’s substantive law governs this
dispute.
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