F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
July 20, 2005
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
JAMES ANDERSON, on behalf of
himself and all others similarly
situated,
Plaintiff-Appellant,
No. 04-1291
v.
STATE FARM MUTUAL
AUTOMOBILE INSURANCE
COMPANY, an Illinois corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 02-F-382 (CBS))
Leif Garrison (Robert B. Carey, Julie Cliff, with him on the briefs), The Cary
Law Firm, Colorado Springs, Colorado, for Plaintiff-Appellant.
Michael S. Freeman (Michael S. McCarthy, Heather Carson Perkins, with him on
the brief), Faegre & Benson, LLP, Denver, Colorado, for Defendant-Appellee.
Before BRISCOE, McKAY, and MURPHY, Circuit Judges.
MURPHY, Circuit Judge.
I. INTRODUCTION
After suffering injuries in a motorcycle accident, Plaintiff-appellant James
Anderson brought a purported class action against State Farm Mutual Automobile
Insurance Co. asserting, inter alia, common law bad faith and violations of the
Colorado Consumer Protection Act (“CCPA”), Colo. Rev. Stat. § 6-1-105(1)(e),
(g), (u). Accepting the recommendation of the magistrate judge, the district court
dismissed Anderson’s complaint under Fed. R. Civ. P. 12(b)(6) and entered
judgment in favor of State Farm. Exercising jurisdiction pursuant to 28 U.S.C.
§ 1291, this court affirms.
II. BACKGROUND
While driving his motorcycle on July 23, 2001, Anderson was involved in
an accident in which he sustained severe injuries. At the time of the accident,
both Anderson’s motorcycle and his automobiles were insured by State Farm. 1
The motorcycle policy provided Uninsured Motorist (“UM”) and Underinsured
Motorist (“UIM”) coverage [hereinafter and collectively, “UM/UIM coverage”],
but did not provide Personal Injury Protection (“PIP”). The automobile policies
provided PIP coverage and UM/UIM coverage. After the accident, State Farm
determined the other driver, Mark Presley, also insured by State Farm, was at
1
Anderson asserts that he purchased these policies in June 1999.
-2-
fault and paid Anderson $100,000 under Presley’s policy. Anderson sought to
obtain PIP benefits under his automobile policies, but State Farm rejected his
request relying on the “owned but not insured” exclusion in the policy. 2
A few months prior to Anderson’s accident, the Colorado Supreme Court
held that “the UM/UIM statute requires that UM/UIM insurance apply to an
insured person who purchases such coverage when injured in an accident caused
by an underinsured motorist, irrespective of the vehicle the injured insured
occupies at the time of injury.” DeHerrera v. Sentry Ins. Co., 30 P.3d 167, 176
(Colo. 2001) (en banc). This ruling was a significant departure from the
preexisting common understanding of the law by the insurance industry. For
example, until DeHerrera, the “owned but not insured under this policy”
exclusion in a policy providing UM/UIM coverage was routinely enforced. See
Jaimes v. State Farm Mut. Auto. Ins. Co., 53 P.3d 743, 745 (Colo. Ct. App. 2002)
(collecting cases). Although the DeHerrera decision represented a dramatic shift
in the understanding of insurance law in Colorado, the Colorado Court of Appeals
held that DeHerrera applied retroactively because the Colorado Supreme Court
2
Under this exclusion, insurance benefits are not available “whenever an
insured is occupying a vehicle which is owned by the named insured but which is
not insured under the policy in question.” Arguello v. State Farm Mut. Auto. Ins.
Co., 599 P.2d 266, 268 (Colo. Ct. App. 1979).
-3-
was interpreting “an unambiguous statute of long standing.” Id. at 747 (involving
denial of coverage).
In response to the DeHerrera decision, State Farm distributed a mass
mailing in November 2001 explaining the impact of DeHerrera to its insureds. In
2002 Anderson filed this class action in state court and State Farm removed the
action pursuant to 28 U.S.C. §§ 1441 and 1446. Although Anderson’s original
complaint involved numerous claims related to State Farm’s denial of PIP
coverage, the only claims relevant to this appeal involve allegations of bad faith
and violations of the CCPA. Both of these claims are premised on State Farm’s
alleged failure to disclose and misrepresentations relating to the nature of
UM/UIM coverage.
In January 2004, State Farm moved to dismiss Anderson’s amended
complaint. After oral argument, the magistrate judge concluded that all remaining
claims 3 in Anderson’s complaint should be dismissed for failure to state a claim
and recommended that State Farm’s motion to dismiss be granted. Anderson
objected to the recommendations of the magistrate judge and State Farm filed a
response.
3
At argument and in his surreply filed after arguments, Anderson withdrew
several of his original claims.
-4-
The district court accepted and adopted the recommendations of the
magistrate judge, dismissed Anderson’s complaint under Fed. R. Civ. P. 12(b)(6),
and thereafter entered judgment in favor of State Farm. In relevant part, the
district court rejected Anderson’s common law bad faith claim because
Anderson’s assertions both that (1) State Farm failed to effectively explain the
effects of purchasing UM/UIM coverage after DeHerrera and (2) the mass mailer
distributed by State Farm post-DeHerrera “was so vague as to be useless” were
unsupported conclusory allegations insufficient to state a claim. Similarly, the
court refused to accept as true Anderson’s allegation that State Farm failed to
“effectively” disclose material information related to UM/UIM coverage after
DeHerrera because it was a legal conclusion rather than a factual allegation.
Accordingly, the court concluded Anderson did not adequately state a claim for an
unfair or deceptive trade practice under the CCPA. 4
Anderson filed a motion for reconsideration with the district court that was
opposed by State Farm. In the motion, Anderson argued that the district court
incorrectly believed the mass mailer was mailed out prior to the operative events
underlying his claim. Anderson asserted that his injury actually occurred at the
4
The district court also agreed with the magistrate judge that Anderson
failed to allege significant public impact required to bring a claim under the
CCPA. Our disposition of Anderson’s appeal makes it unnecessary to address
this issue.
-5-
moment he purchased his insurance coverage, long before the mailing was
distributed. Based on this alleged misunderstanding, Anderson claimed the court
erroneously rejected his claim that State Farm failed to inform its insureds of the
nature of UM/UIM coverage. Anderson further explained that the district court
improperly ignored the Jaimes decision, which, according to Anderson, held that
DeHerrera applied retroactively. Relying on Jaimes, Anderson argued that it is
clear State Farm violated Colorado law mandating that UM/UIM coverage is
personal rather than vehicle-specific when it sold Anderson his insurance policies.
The district court denied Anderson’s motion and declined to amend its
order. The court acknowledged that Anderson had alleged that State Farm did not
disclose the effects of purchasing UM/UIM coverage on multiple vehicles, thus he
was injured, if at all, the moment he purchased the duplicative coverages. The
court further explained it was aware that State Farm did not notify Anderson of
the DeHerrera ruling until after he purchased his coverage, noting that “State
Farm could not have notified Mr. Anderson of the DeHerrera decision when he
selected those coverages, because the Colorado Supreme Court had not yet
decided DeHerrera at the time he made his coverage decisions.” The district
court concluded that Anderson’s retroactivity argument was unavailing because
“State Farm’s conduct before the DeHerrera decision cannot be deemed bad faith
or a violation of the CCPA merely because it did not comport with a judicial
-6-
decision that had yet to be rendered.” The court also rejected Anderson’s
suggestion of injury during the time between the DeHerrera decision and State
Farm’s November 2001 mailing because Anderson never alleged that he
purchased or renewed his insurance policies during this time.
On appeal Anderson asserts that the district court erred in dismissing his
claims for common law bad faith and violations of the CCPA. Anderson argues
that State Farm violated Colorado law by selling him multiple insurance policies
providing UM/UIM coverage without disclosing that, because these policies are
personal, rather than vehicle-specific, insuring more than one vehicle is largely
duplicative. Anderson similarly asserts that State Farm falsely represented that
UM/UIM coverage was vehicle-specific. The focus of Anderson’s argument on
appeal is the Colorado Court of Appeals’ retroactivity ruling in Jaimes, 53 P.3d at
747. He contends that under Jaimes, Colorado law has always required UM/UIM
coverage to be personal and therefore State Farm’s failure to disclose this fact and
any misrepresentations to the contrary violate the CCPA and constitute bad faith.
In response, State Farm argues that Anderson’s position on appeal, based
on the retroactive application of the DeHerrera decision, is not properly before
this court because Anderson raised this theory for the first time in his motion for
reconsideration, the denial of which he is not appealing. In the alternative, State
Farm asserts that the district court correctly dismissed Anderson’s claims because,
-7-
as a matter of law, State Farm did not act in bad faith or violate the CCPA. State
Farm also argues that because Anderson’s claim is actually for refunds of
premiums paid, it is barred by the filed rate doctrine and he must seek relief
through the prescribed administrative remedies available under Colorado law.
III. STANDARD OF REVIEW
This court reviews a Rule 12(b)(6) dismissal de novo, accepting all well-
pleaded facts as true and in the light most favorable to the nonmoving party.
Sutton v. Utah State Sch. for Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999).
“A 12(b)(6) motion should not be granted unless it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim which would entitle him
to relief.” Id. (quotations omitted).
IV. DISCUSSION
While Anderson’s motion for reconsideration was pending, he filed a notice
of appeal with this court. Because Anderson never filed a notice of appeal related
to the denial of the motion for reconsideration or sought to amend his original
notice of appeal, this court only has jurisdiction over the appeal of the district
court’s order dated June 28, 2004. See Fed. R. App. P. 4(a)(4)(B)(ii); see also
Cunico v. Pueblo Sch. Dist. No. 60, 917 F.2d 431, 444 (10th Cir.1990) (“Our
appellate review is limited to final judgments or parts thereof that are designated
in the notice of appeal.”); Fed. R. App. P. 3(c). Although it is clear that the focus
-8-
of Anderson’s claims have shifted dramatically since the filing of his amended
complaint, a review of the record indicates that, contrary to State Farm’s
assertion, Anderson did argue his retroactivity theory before the magistrate judge.
See, e.g., Aplt.’s App. at 277-80. Thus, Anderson’s primary legal theory
regarding the retroactive application of DeHerrera was before the district court
when it dismissed Anderson’s complaint and is properly before this court on
appeal. See Jernigan v. Stuchell, 304 F.3d 1030, 1031-32 (10th Cir. 2002).
Anderson alleges that his injury occurred when he purchased his insurance
policies from State Farm, prior to the Colorado Supreme Court’s decision in
DeHerrera. Although the district court addressed the effectiveness of the mass
mailer distributed by State Farm in November 2001, on appeal Anderson
disclaims reliance on the contents of the mailer as the basis for his claims.
Accordingly, we analyze Anderson’s claims based on the alleged injury suffered
at the moment he purchased his insurance policies. It is not disputed that at that
time State Farm was acting in accordance with the generally accepted
understanding of insurance law in Colorado regarding the nature of UM/UIM
coverage.
To succeed upon a claim for common law bad faith, a plaintiff must show
that (1) the insurer’s conduct was unreasonable and (2) the insurer had knowledge
that the conduct was unreasonable or a reckless disregard for the fact that the
-9-
conduct was unreasonable. Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1275-76
(Colo. 1985) (en banc). For purposes of bad faith, the reasonableness of an
insurer’s conduct is evaluated under the circumstances that existed at the time.
See Pham v. State Farm Mut. Auto. Ins. Co., 70 P.3d 567, 572 (Colo. Ct. App.
2003) (“The determination of whether an insurer has in bad faith or willfully and
wantonly breached its duties to an insured is one of reasonableness under the
circumstances.”); Peiffer v. State Farm Mut. Auto. Ins. Co., 940 P.2d 967, 970
(Colo. Ct. App. 1996) (holding that insurer’s decision to deny benefits “must be
evaluated based on the information before the insurer at the time of that
decision”).
Actions taken in reasonable reliance on existing case law cannot constitute
bad faith because such conduct is not unreasonable. See Pham, 70 P.3d at 572-73
(rejecting bad faith claim when insurer’s denial of coverage was reasonably based
on existing case law). State Farm did not act unreasonably because, at the time of
Anderson’s alleged injury, State Farm was relying on clear case law upholding
owned-but-not-insured exclusions in insurance contracts providing UM/UIM
coverage. See Jaimes, 53 P.3d at 745 (describing pre-DeHerrera law); see also
Terranova v. State Farm Mut. Auto. Ins. Co., 800 P.2d 58, 61-62 (Colo. 1990) (en
banc) (upholding exclusion of vehicle insured under the liability terms of a policy
from UM/UIM coverage); Arguello v. State Farm Mut. Auto. Ins. Co., 599 P.2d
-10-
266, 268 (Colo. Ct. App. 1979) (same). Jaimes held that DeHerrera should be
applied retroactively to deny enforcement of a coverage exclusion void under
Colorado law. 53 P.3d at 747. A decision to award coverage benefits pursuant to
retroactive application of a judicial decision does not mean that the prior
disclosures and representations of the insurer based on the previously-understood
state of the law constitute bad faith. The reasonableness of an insurer’s conduct
is evaluated under the circumstances that existed at the time, including the state
of the law. See Pham, 70 P.3d at 572-73. State Farm’s explanation of UM/UIM
coverage was based upon a reasonable, albeit mistaken, belief that under the law
owned-but-not-insured exclusions in insurance policies providing UM/UIM
coverage were valid. See id. Because State Farm did not act unreasonably,
Anderson’s bad faith claim necessarily fails.
To bring a claim under the CCPA, a plaintiff is required to show:
(1) that the defendant engaged in an unfair or deceptive trade
practice; (2) that the challenged practice occurred in the course of
defendant’s business, vocation, or occupation; (3) that it significantly
impacts the public as actual or potential consumers of the
defendant’s goods, services, or property; (4) that the plaintiff
suffered injury in fact to a legally protected interest; and (5) that the
challenged practice caused the plaintiff’s injury.
Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142, 146-
47 (Colo. 2003) (en banc). The CCPA defines a deceptive trade practice as, inter
alia, (1) knowingly making “a false representation as to the characteristics,
-11-
ingredients, uses, benefits, alterations, or quantities of goods, food, services, or
property or a false representation as to the sponsorship, approval, status,
affiliation, or connection of a person therewith,” Colo. Rev. Stat. § 6-1-105(e);
(2) representing that “goods, food, services, or property are of a particular
standard, quality, or grade, or that goods are of a particular style or model, if he
knows or should know that they are of another,” id. § 6-1-105(g); or (3) failing to
“disclose material information concerning goods, services, or property which
information was known at the time of an advertisement or sale if such failure to
disclose such information was intended to induce the consumer to enter into a
transaction,” id. § 6-1-105(u). Because State Farm’s prior explanations of
UM/UIM coverage reflected a reasonable interpretation of the existing case law,
it did not either make any representations which it knew or should have known to
be false or act with reckless disregard. Furthermore, State Farm cannot be said to
have failed to disclose a fact that was not known at the time. Anderson has
therefore failed to state a claim for violations of the CCPA because, accepting all
facts alleged as true, State Farm did not engage in a deceptive trade practice.
-12-
V. CONCLUSION
For the reasons set out above, the district court’s dismissal of Anderson’s
complaint for failure to state a claim is AFFIRMED. 5
5
Our disposition of this case makes it unnecessary to address Anderson’s
other arguments or State Farm’s assertion that Anderson’s claims are barred by
the filed rate doctrine and a failure to exhaust administrative remedies.
-13-