Graham v. Progressive Casualty Insurance

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
OCT 28 2004
TENTH CIRCUIT
PATRICK FISHER
Clerk
GLENN R. GRAHAM,
Plaintiff - Appellant,
No. 03-1507
v. (D.C. No. 03-K-713 (BNB))
(D. Colo.)
PROGRESSIVE CASUALTY
INSURANCE COMPANY, an Ohio
corporation,
Defendant - Appellee.
ORDER AND JUDGMENT *
Before TACHA, Chief Judge, KELLY, and McCONNELL, Circuit Judges.
Plaintiff-Appellant Glenn R. Graham appeals from the district court’s order
dismissing his action against Defendant-Appellee insurer, Progressive Casualty
Insurance Company (“Progressive”). Our jurisdiction arises under 28 U.S.C. §
1291 and we affirm.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Background
On May 9, 2001, Mr. Graham was injured in an accident in Fremont
County, Colorado, while operating his motorcycle. At the time of the accident,
Mr. Graham was insured by Progressive under two motor vehicle policies; one
policy covered Mr. Graham’s automobiles, while the other covered his
motorcycle. Mr. Graham’s automobile policy provided personal injury protection
(“PIP”) coverage. His motorcycle policy provided no such coverage.
Following the accident, Mr. Graham submitted a claim for PIP benefits
under his automobile policy. Progressive initially sent him an application for PIP
benefits and paid a limited amount of benefits under the policy. Progressive
subsequently determined that, because he was operating his motorcycle at the time
of the accident, Mr. Graham was not entitled to PIP benefits under the policy.
Progressive advised Mr. Graham of its error and ceased paying PIP benefits.
On April 23, 2003, Mr. Graham filed this diversity suit against Progressive
seeking declaratory relief that his injuries were compensable under the PIP
coverage provided in his automobile insurance policy. In addition, Mr. Graham
sought damages arising from breach of contract and violation of Colorado’s
insurance laws, breach of the implied covenant of good faith and fair dealing,
statutory willful and wanton breach of contract, bad faith breach of contract, and
deceptive trade practice.
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On June 2, 2003, Progressive moved the district court to dismiss the suit
pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim
upon which relief could be granted. Progressive argued that it had no contractual
obligation to provide PIP benefits under the terms of the policy and that the
exclusion of PIP benefits to an insured involved in an accident while operating
his own street motorcycle was valid under Colorado law. Progressive urged that
Lamb v. GEICO General Insurance Co., 77 P.3d 748 (Colo. Ct. App. 2002), cert.
denied, 2003 WL 22331939 (Colo. Oct. 14, 2003), was dispositive of the issues
before the district court and mandated dismissal of Mr. Graham’s claims. The
district court agreed with Progressive.
On appeal Mr. Graham argues that: (1) the plain language of Progressive’s
automobile insurance policy extends PIP coverage under these circumstances; (2)
Progressive’s policy contains an unlawful restriction on PIP coverage; (3) the
Lamb decision is not controlling nor dispositive of the claims at issue.
Discussion
We review the district court’s grant of a motion to dismiss under Rule
12(b)(6) de novo, applying the same standards as the district court. Montgomery
v. City of Ardmore, 365 F.3d 926, 934-35 (10th Cir. 2004). We take all well-
pleaded factual allegations in the complaint as true and view them in the light
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most favorable to the non-movant. Id. at 935. Dismissal is appropriate only
where it is apparent that the plaintiff can prove no set of facts in support of his
claim. Id.A. The Plain Language of the Policy
Mr. Graham first asserts that the plain language of Progressive’s
automobile insurance policy extends PIP coverage under the circumstances of the
instant case. Interpretation of an insurance policy is governed by traditional
principles of contract law. Essex Ins. Co. v. Vincent, 52 F.3d 894, 896 (10th Cir.
1995). “‘Unambiguous provisions of an insurance contract must be construed to
give effect to their plain meaning.’” Id. (quoting Am. Family Mut. Ins. Co. v.
Johnson, 816 P.2d 952, 953 (Colo. 1991)).
At the time of his accident, Mr. Graham’s automobile insurance policy
contained the following provision:
PART II(A) - PERSONAL INJURY PROTECTION COVERAGE
INSURING AGREEMENT
Subject to our Limits of Liability, we will pay, in accordance with
the Colorado Auto Accident Reparations Act, covered expenses
incurred because of bodily injury:
1. caused by an accident;
2. sustained by an eligible injured person; and
3. arising out of the use or operation of a motor vehicle.
Aplt. App. at 73. Relevant here, the policy contained the following definition of
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the term “eligible injured person” referenced in Part II(A)2:
“Eligible injured person” or “eligible injured persons” means:
a. you or any relative sustaining bodily injury in an accident
involving any motor vehicle; and
....
When used in subsection “a” above, the term “motor vehicle” means
any motor vehicle required to be registered and licensed for operation
on the public highways of the State of Colorado or any other
jurisdiction.
Id. at 74. Finally, in the context of Part II(A)3, the policy defines “motor
vehicle” as
any vehicle of a type required to be registered and licensed under the
laws of the State of Colorado and which is designed to be propelled
by an engine or motor. It does not include a motorcycle,
motorscooter, minibike, snowmobile, bicycle with a motor or engine
attached, or any vehicle designed primarily for use off the road or on
rails.
Id. at 74.
Under the terms of Part II(A) of the policy, Mr. Graham is eligible for PIP
coverage only if his injuries resulted from an accident, he was an eligible person
at the time of injury, and the accident arose from the use or operation of a motor
vehicle. Neither party disputes that Mr. Graham satisfies the coverage
requirements in Parts II(A)1 and 2. Mr. Graham asserts that, because the other
vehicle involved in the accident was indisputably a motor vehicle, he is entitled to
PIP coverage for his expenses related to the accident. Aplt. Br. at 9. This despite
the fact that the definition of “motor vehicle” in Part II(A)3 apparently functions
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to deny coverage for injuries arising from the use or operation of a motorcycle.
We disagree with Mr. Graham’s construction. The plain language of Part
II(A) and its related definitions clearly negate PIP coverage to insureds injured
while operating motorcycles. Were we to accept Mr. Graham’s construction of
Part II(A), we would be forced to conclude that the language in Part II(A)3 is
superfluous or redundant. Satisfaction of the requirement in Part II(A)2 is
premised on an accident involving any motor vehicle, including a motorcycle,
required to be licensed or registered. Under these terms, Part II(A)2 would fairly
encompass the construction Mr. Graham ascribes to Part II(A)3. As a result, to
give Part II(A)3 meaning, we must conclude that through its definition of “motor
vehicle” the provision operates to deny PIP coverage under the circumstances
present here. Mr. Graham’s injuries indeed arose, at least in part, from his “use
or operation” of a motorcycle, a vehicle not encompassed by the terms of Part
II(A)3. As such, Mr. Graham’s claims fall outside the policy coverage. Having
reached this determination, we need not address the parties’ arguments with
respect to any operative contract exclusion.
B. Validity Under Colorado Law
Having determined that the plain language of the automobile insurance
policy indeed denies PIP coverage to insureds whose injuries arise from the use or
operation of a motorcycle, we next consider whether this exclusion is valid under
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Colorado law. Even where, as here, a policy term is unambiguous, a court may
render it unenforceable “if it violates public policy by attempting to ‘dilute,
condition, or limit statutorily mandated coverage.’” Terranova v. State Farm Mut.
Auto. Ins. Co., 800 P.2d 58, 60 (Colo. 1990) (quoting Meyer v. State Farm Mut.
Auto. Ins. Co., 689 P.2d 585, 589 (Colo. 1984)).
When exercising diversity jurisdiction, a federal court must apply the law
of the forum state as promulgated by that state’s highest court. See Cooper v.
Cent. & Southwest Servs., 271 F.3d 1247, 1251 (10th Cir. 2001). Absent a
decision by the forum state’s highest court, “we must ‘predict the course that
body would take if confronted with the issue.’” Vanover v. Cook, 260 F.3d 1182,
1186 (10th Cir. 2001)(quoting Stauth v. Nat’l Union Fire Ins. Co. of Pittsburgh,
236 F.3d 1260, 1267 (10th Cir. 2001)). Decisions by intermediate courts in the
forum state are not considered controlling. See Rancho Lobo, Ltd. v. Devargas,
303 F.3d 1195, 1202 n.2 (10th Cir. 2002). We have explained, however, that
“‘[w]here an intermediate appellate state court rests its considered judgment upon
the rule of law which it announces, that is a datum for ascertaining state law
which is not to be disregarded by a federal court unless it is convinced by other
persuasive data that the highest court of the state would decide otherwise.’”
Webco Indus., Inc. v. Thermatool Corp., 278 F.3d 1120, 1132 (10th Cir.
2002)(quoting Hicks ex rel. Feiock v. Feiock, 485 U.S. 624, 630 n.3 (1988)).
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The Colorado Supreme Court has not resolved the issue arising in the
instant case, i.e., whether an exclusion of PIP coverage in an automobile policy
for insureds whose injuries arise from the use or operation of a street motorcycle
is valid under Colorado law. Mr. Graham asserts that Progressive’s exclusion of
motorcycles from the definition of “motor vehicles” under Part II(A) of the policy
impermissibly narrows the coverage in violation of Colorado law. In contrast,
Progressive urges that the Colorado Court of Appeals’ decision in Lamb v. Geico
General Insurance Co., 77 P.3d 748 (Colo. Ct. App. 2003), cert. denied, 2003 WL
22331939 (Colo. Oct. 14, 2003), is dispositive of the statutory issues raised by the
parties in the instant case. We agree.
In Lamb, the Colorado Court of Appeals was confronted with precisely this
issue. Similar to the circumstances here, the plaintiff in Lamb was insured under
both an automobile and a motorcycle policy by the defendant. 77 P.3d at 748.
She was injured when the motorcycle she was operating collided with an
automobile. Id. Only her automobile policy, however, contained PIP coverage.
Id. at 748-49. The automobile policy “expressly excluded coverage for bodily
injury resulting from the use or operation of a motor vehicle owned by the insured
person but not insured under the policy.” Id. at 749. Relying on the Colorado
Supreme Court’s decision in DeHerrera v. Sentry Insurance Co., 30 P.3d 167(Colo. 2001), the trial court held that despite the exclusion the plaintiff was
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entitled to PIP coverage under her automobile insurance policy. Lamb, 77 P.3d at
749. On appeal, the defendant argued that Colorado’s No-Fault Act did not
require PIP coverage for operators of street motorcycles and that the trial court
erred in relying on DeHerrera. Id.The Lamb court began by construing the terms of Colorado’s No-Fault Act.
The No-Fault Act required insurers to extend PIP coverage for
[a]ccidental bodily injury sustained by the named insured when
injured in an accident involving any motor vehicle, regardless of
whether the accident occurs in this state or in any other jurisdiction,
except where the injury is the result of the use or operation of the
named insured’s own motor vehicle not actually covered under the
terms of [the No-Fault Act].
Colo. Rev. Stat. § 10-4-707(1)(a) (repealed 2003) (emphasis added). Motorcycles
are generally excluded from the definition of “motor vehicles” under other
provisions of the No-Fault Act. See id. § 10-4-703(7) (repealed 2003). However,
the Lamb court found that they were included within the context of section 10-4-
707(1)(a). 77 P.3d at 749 (citing Colo. Rev. Stat. § 10-4-707(2) (repealed 2003)
(“For purposes of [§ 10-4-707(1)(a)], ‘motor vehicle’ means any motor vehicle
required to be registered and licensed for operation on the public highways of this
state or any other jurisdiction.”)). Because motorcycles were elsewhere not
included under the definition of “motor vehicle” for purposes of applying the No-
Fault Act’s mandatory PIP coverage, the Lamb court found the exclusion in
section 10-4-707(1)(a) operative on the facts before it. Id. at 750. Thus, the
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insurer was not required to extend PIP coverage when the insured’s injuries arose
from her own use of a street motorcycle. Id.
In so deciding, the Lamb court rejected the plaintiff’s argument, identical
to Mr. Graham’s in the instant case, that the Colorado Supreme Court’s decision
in DeHerrera was controlling on the issue. In DeHerrera, the court considered a
claim for PIP coverage for injuries suffered by the son of the named insured who
was involved in an accident with a truck while riding his own off-road
motorcycle. 30 P.3d at 168. A provision in the policy limited the PIP coverage to
circumstances where the insured occupied a car at the time of injury, thus
excluding persons riding a motorcycle. Id. at 170. The court of appeals validated
the provision, holding that the No-Fault Act did not require PIP coverage for
persons operating off-road motorcycles at the time of injury. Id. at 171.
In reversing the court of appeals, the Colorado Supreme Court held that
“under the plain language of the [No-Fault Act], subject to some statutory
exclusions, PIP coverage for relatives of named insureds is mandatory
irrespective of a person’s occupancy in a vehicle, as long as any vehicle involved
in the accident qualifies as a motor vehicle.” Id. at 172 (emphasis in original;
underscoring added). The court refused to express an opinion whether the
exclusion found in sections 10-4-707(1)(a) and 10-4-707(1)(b) (applying to
relatives of the named insured) applied in the case before it in that the insurer had
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not argued its applicability and had admitted that it did not apply before the trial
court. Id. at 172 nn.6, 7.
The Lamb court relied upon this reservation, emphasizing that the
motorcycle involved in DeHerrera was an off-road vehicle. 77 P.3d at 751.
Because off-road vehicles were not required to be registered in Colorado, the
motorcycle in DeHerrera was not encompassed by the statutory definition of
“motor vehicle” operative in section 10-4-707(1)(a). Thus, the Lamb court held
that DeHerrera did not require PIP coverage for injuries arising from the
operation of an insured’s street motorcycle under an automobile insurance policy.
Id.The decision in Lamb effectively forecloses Mr. Graham’s claims.
Although the Colorado Court of Appeals’ decision does not bind us, we find that
court’s reasoning persuasive and do not believe the Colorado Supreme Court
would reach a different conclusion. As such, we hold that the policy provisions at
issue in the instant case did not contain an unlawful restriction on PIP coverage
and were valid under Colorado law as it existed at the time of accident.
C. Mr. Graham’s Remaining Claims
Because we hold that the policy in the instant case excludes PIP coverage
for insureds injured while operating or using a motorcycle, and further that such
an exclusion is valid under Colorado law, Mr. Graham’s remaining claims must
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fail. Despite assertions to the contrary, Mr. Graham’s claims for declaratory
relief, breach of contract, breach of the implied covenant of good faith and fair
dealing, and deceptive trade practice necessarily depend on the existence and
validity of the policy terms at the core of this dispute. Our answer to the issues
presented above is dispositive of these claims. Part II(A) of the policy, including
the definition of “motor vehicle” contained therein, is enforceable as written.
Thus, Progressive breached neither the contract nor an implied covenant when it
denied Mr. Graham’s claim for PIP benefits. Moreover, in that Progressive’s
policy is entirely in keeping with the mandates of the No-Fault Act as it existed at
the time of the accident, there is no evidence that the insurer engaged in an unfair
trade practice.
AFFIRMED.
Entered for the Court
Paul J. Kelly, Jr.
Circuit Judge
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