F IL E D
United States Court of Appeals
Tenth Circuit
PUBLISH
March 6, 2007
U N IT E D ST A T E S C O U R T O F A PP E A L S
Elisabeth A. Shumaker
Clerk of Court
T E N T H C IR C U IT
KUN AL PADH IAR ,
Plaintiff - Appellant ,
v. No. 06-1121
STA TE FA RM M U TU A L
AUTOM OBILE INSURANCE
COM PA NY, an Illinois corporation ,
Defendant - Appellee .
A PPE A L FR O M T H E U N IT ED ST A T ES D IST R IC T C O U R T
FO R T H E D IST R IC T O F C O L O R A D O
(D .C . N O . 03-C V -1969-C A B-O ES)
Robert B. Carey (L. Dan Rector and Julie Cliff with him on the brief), The Carey
Law Firm, Colorado Springs, Colorado, for A ppellant .
Sheryl L. Anderson (Suanne M . Dell and Jennifer S. Koran with her on the brief),
W ells Anderson & Race, LLC, Denver, Colorado, for Appellee.
Before H E N R Y , A N D ER SO N , and H O L M E S , Circuit Judges.
A N D ER SO N , Circuit Judge.
Plaintiff and appellant Kunal Padhiar appeals the denial of his motion for
summary judgment and the grant of defendant State Farm Automobile Insurance
Company’s motion for summary judgment in this action seeking reformation of an
automobile insurance contract. W e affirm. 1
BACKGROUND
The Colorado legislature enacted the Colorado Auto Accident Reparations
Act (“CAARA” or “No-Fault Act”) in 1973. Among other things, the No-Fault
Act “require[d] that a complying [automobile insurance] policy include mandatory
[personal injury protection or “PIP”] benefits.” Brennan v. Farmers Alliance
M ut. Ins. Co., 961 P.2d 550, 552 (Colo. Ct. App. 1998). M ore specifically, Colo.
Rev. Stat. § 10-4-706(1) 2 required an insurance company to provide:
(b)(I) C ompensation without regard to fault, up to a limit of fifty
thousand dollars per person for any one accident, for payment of all
reasonable and necessary expenses for medical . . . and nonmedical
remedial care and treatment . . . performed within five years after the
accident for bodily injury arising out of the use or operation of a
motor vehicle. . . .
(c)(I) C ompensation without regard to fault up to a limit of fifty
thousand dollars per person for any one accident within ten years
after such accident for payment of the cost of rehabilitation
procedures or treatment and rehabilitative occupational training
1
Simultaneously with this opinion, we are filing another case involving
similar, but not identical, issues. See Hill v. Allstate Ins. Co., No. 06-1134, ___
W L ____ (M arch 6, 2007).
2
The No-Fault Act was repealed in 2003.
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necessary because of bodily injury arising out of the use or operation
of a motor vehicle.
Furthermore, pursuant to § 10-4-706(4)(a), “[a]n insurer issuing policies
providing coverages as set forth in this section shall provide written explanations
of all available coverages prior to issuing any policy to an insured.”
Section 10-4-707 delineates the categories of people who must receive
coverage under § 706 as including “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.
The No-Fault Act also required every insurance company to offer optional
extended PIP benefits to its insureds, in exchange for higher premiums. Thus,
§ 10-4-710(2)(a) provided that:
Every insurer shall offer the following enhanced benefits for
inclusion in a complying policy, in addition to the basic 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(1)(b) without dollar or time limitation;
(II) Compensation of all expenses of the type described in section
10-4-706(1)(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.
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Colo. Rev. Stat. § 10-4-710(2)(a). Although § 710 does not specify to whom the
extended coverages it provides applies, Brennan held that they apply to the same
four categories of individuals to w hom § 706 coverage applies.
The Colorado Court of Appeals held in Brennan that “when . . . an insurer
fails to offer the insured optional coverage that satisfies [CAARA], additional
coverage in conformity with the offer mandated by statute will be incorporated
into the policy.” B rennan, 961 P.2d at 554; see also Thompson v. Budget Rent-A -
Car Sys., Inc., 940 P.2d 987, 990 (Colo. Ct. App. 1996) (“[W ]hen a policy is
violative of a statute, reformation is also required to assure that coverage will
meet the statutory minimums.”). Thus, in Brennan, because the insurance policy
at issue failed to offer extended PIP benefits for injured pedestrians and the court
determined that the No-Fault Act mandated coverage for such pedestrians, the
court ordered the policy reformed to include such coverage. See Clark v. State
Farm M ut. Auto. Ins. Co., 433 F.3d 703, 710 (10th Cir. 2005) (Clark III)
(“Brennan and Thompson reformed those insurance policies to include extended
pedestrian coverage that insurers should have offered under section 710.”). 3
Kunal Padhiar’s father, Prabhat Padhiar, first purchased automobile
insurance from State Farm in 1967. His first State Farm agent was B ill Smith, Jr.
3
Brennan alerted all automobile insurance carriers that extended PIP
benefits for pedestrians must be offered under § 710.
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and, after Smith’s death, Padhiar conducted business with Gary W ilcox’s State
Farm insurance agency.
On February 1, 2001, Kunal Padhiar was involved in an automobile
accident which caused him serious injuries. He was in a car, a 1993 Infinity, for
which his father had applied for insurance in November 1993. The application
form contains a section for the applicant to select one of several available PIP
coverages. Prabhat Padhiar had checked the box for P1 PIP coverage, which was
the mandatory minimum PIP coverage required by Colorado law. Based on
Prabhat’s application, State Farm issued the Padhiars an insurance policy
numbered 345-8967-E03-06 covering their 1993 Infinity. That policy was
amended by endorsements in October 1998, 1999 and 2000 and was thereafter
assigned policy number 345-8967-E03-06A. At all times the policy contained P1
PIP coverage.
W hen the policy was initially sent to the Padhiars, a policy form
accompanied it w hich contained, inter alia, a schedule of all available PIP
coverages and a side-by-side comparison of the benefits and costs of each one.
State Farm also sent to the Padhiars Auto Renewal Notices, which allowed them
to renew their policy for the subsequent six-month period. Beginning in October
1994, State Farm sent a summary disclosure form to all of its policyholders,
including the Padhiars, with each Auto Renewal Notice. In M arch 1995, State
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Farm sent to the Padhiars a revised, but substantially similar, summary disclosure
form which described all major available coverages, including PIP coverages.
After describing the mandatory minimum PIP coverage, the form expressly stated
“O ptional personal injury protection coverages also are available.” A ppellant’s
App. Vol. II at 414.
In April 1998, State Farm sent to the Padhiars an Auto Renewal Notice
containing the following:
H IG H ER PE R SO N A L IN JU R Y PR O T E C TIO N C O V ER A G E
L IM IT S A R E A V A IL A B L E
You can purchase higher Personal Injury Protection coverage limits
with no deductible.
Coverage P4 semi-annual premium=$146.40
Coverage P8 semi-annual premium=$142.08
See the enclosed N ews and N otes article for an explanation of these
coverages.
Id. at 443. The enclosed “News and Notes” newsletter referenced in the above
notice provided the following further description of the enhanced PIP coverages
which were available:
H igher PIP coverage lim its are available.
Colorado auto insurance law requires that you purchase at least the
minimum level of personal injury protection (PIP or no-fault)
coverage. This coverage is called “P1” on your premium notice. It
includes mandatory minimum coverage limits for medical and
rehabilitation expenses, loss of income, essential services, and death
resulting in injuries sustained in a motor vehicle accident.
Policyholders have the option to choose higher levels of PIP
coverage–two of which are P8 and P4 coverages–for an additional
premium.
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P8 coverage – P8 coverage has an aggregate limit of $200,000. This
limit is the most we will pay for all no-fault benefits combined
(medical and rehabilitation expenses, loss of income, essential
services and death compensation).
The medical expenses benefit does not have a time limitation (unlike
P1, which is limited to five years), and you can recover up to
$200,000 for medical expenses (unless part of your aggregate limit
was used for other no-fault benefits). The other no-fault benefit
provisions have limitations, in addition to being subject to the
aggregate limit.
P4 coverage – This coverage provides the same benefits as P8,
except that it provides broader loss of income benefits. It pays 100%
loss of income up to $125 a week, and up to 85% of loss of income
over $125. This benefit is subject to the aggregate limit of $200,000.
In contrast, P8 and P1 coverages limit loss of income benefits to
$400 per week, up to a maximum of 52 w eeks.
Your enclosed renewal notice quotes the premium for P4 and P8
coverages with no deductible. If you are interested in purchasing
either of these coverages, please contact your State Farm agent.
Id. at 450. In February 1998 and August 1998, State Farm sent substantially
similar materials to the Padhiars in connection with their insurance for their 1993
Honda.
In M arch 1999, State Farm sent to the Padhiars a policyholder notice called
“Important Notice About No-Fault Coverage Changes.” It included Endorsement
6850AJ, which, in response to the Colorado Court of Appeals’ decision in
Brennan, immediately removed any limitation on recovery of enhanced PIP
benefits by injured pedestrians. The notice also indicated that certain no-fault
coverages would change when Endorsement 6850AJ took effect, including the
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elimination of P6, P9 and P10 PIP coverages and the extension of time for the
recovery of PIP rehabilitation expenses under P1 PIP coverage. The Endorsement
further included a schedule listing all PIP coverages and providing side-by-side
comparisons of the benefits and limits of each type of coverage.
In M arch 2000, State Farm sent to the Padhiars a policyholder notice called
“Important Notice Regarding Your No-Fault Coverage.” It included Endorsement
6906, which expressly stated that, unless the Padhiars purchased P4 or P8
enhanced PIP coverages, any PIP medical benefits available to the Padhiars under
their policy would be limited to five years. In late September or early October
2000, State Farm sent to the Padhiars yet another policyholder notice called
“Important Notice Regarding Changes to Your Policy,” along with Endorsement
6906.1. This Endorsement again explained the limits to coverage unless enhanced
(P4 and P8) PIP coverages were purchased. The Padhiars continued to renew
their policy with the minimum P1 PIP coverage.
As indicated, Kunal Padhiar was in an accident involving the 1993 Infinity
in February 2001. He received and exhausted all P1 PIP benefits provided by the
insurance policy as written. After exhausting all available P1 PIP coverage,
Padhiar demanded reformation of the insurance contract to provide him with
higher PIP benefits. He argued that reformation was necessary because State
Farm had violated CAARA by failing to offer the Padhiars enhanced PIP benefits
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as required by Colo. Rev. Stat. § 10-4-710. Padhiar also asserted claims for
breach of contract and bad faith, based upon State Farm’s refusal to provide PIP
benefits in excess of the P1 PIP coverage contained in his parents’ policy.
The district court bifurcated the issue of reformation from the issue of
damages and stayed discovery regarding damages until it determined the threshold
reformation claim. State Farm then filed a motion for summary judgment, and
Padhiar filed a motion for partial summary judgment. The district court
ultimately granted State Farm’s motion and denied Padhiar’s motion. The district
court held that the writing requirements of Colo. Rev. Stat. § 10-4-706(4)(a) do
not apply to § 10-4-710 and, further, that, even if the writing requirements did
apply to § 710, State Farm complied with them by providing adequate written
notification of the availability of enhanced PIP benefits. Further, the court held
that State Farm had made a legally sufficient offer of enhanced PIP coverages
under § 710.
Padhiar appeals, arguing: (1) the district court erred in finding that the
writing requirements of § 706 did not apply to offers of enhanced PIP benefits
under § 710 and, even if those requirements did apply, that State Farm complied
with those requirements; and (2) the district court erred in holding that State Farm
had made a legally sufficient offer of enhanced PIP benefits under § 710.
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D ISC U SSIO N
In diversity cases like this one, the substantive law of the forum state
governs the analysis of the underlying claims, “but we are governed by federal
law in determining the propriety of the district court’s grant of summary
judgment.” Eck v. Parke, Davis & Co., 256 F.3d 1013, 1016 (10th Cir. 2001).
Accordingly, “[w]e review the grant of summary judgment de novo, applying the
same standard as the district court pursuant to Rule 56(c) of the Federal Rules of
Civil Procedure.” Gwinn v. Awmiller, 354 F.3d 1211, 1215 (10th Cir. 2004).
“Summary judgment is appropriate if ‘the pleadings, depositions, answ ers to
interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.’” Id. (quoting Fed. R. Civ. P. 56(c)).
W e examine the record in the light most favorable to the non-moving party.
I. W ritten requirem ent
As indicated, under Colo. Rev. Stat. § 10-4-706(4)(a) “[a]n insurer issuing
policies providing coverages as set forth in this section shall provide written
explanations of all available coverages prior to issuing any policy to an insured.”
Section 706 involves the mandatory minimum PIP coverages. Section 710,
involving the optional extended PIP coverages, states that “[e]very insurer shall
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offer for inclusion” the optional coverages. Padhiar argues that the explicit
“written explanation” requirement in § 706 applies equally to the offer of optional
extended PIP coverages under § 710. The district court held it did not. It noted
that the statute states that companies issuing policies “providing coverages as set
forth in this section” must provide written explanations, and the only coverages
detailed in § 706 are the minimum PIP coverages. “By its own terms, section
10-4-706 limits the w ritten explanation requirement to minimum PIP coverages,
not coverages set forth in different sections of the A ct.” O rder at 8, Appellant’s
App. Vol. II at 682. 4 The district court further held, however, that even if a
written requirement did apply, State Farm complied with it because it “did
provide written notice of enhanced PIP coverages that were available to the
Padhiars.” Id.
W e need not resolve whether insurance companies must provide written
explanations of optional enhanced PIP coverages because we agree with the
district court that, whether or not written notice was required, State Farm in fact
provided written notice that enhanced PIP coverages were available and
explanations of the basic optional enhanced coverages available. As our factual
4
At least three other district courts have agreed that § 706’s written
explanation requirement has no application to § 710. See Stickley v. State Farm
M ut. Auto. Ins. Co., 402 F. Supp. 2d 1226 (D. Colo. 2005); M ay v. Travelers
Prop. Cas. Co., 2006 W L 2784864 (D. Colo. Sept. 26, 2006); Breaux v. American
M ut. Ins. Co., 387 F. Supp. 2d 1154 (D. Colo. 2005).
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recitation indicates above, State Farm sent the Padhiars multiple documents,
notices and other mailings which specifically notified them of the availability of
enhanced PIP benefits. The Padhiars do not claim they did not receive all of
these mailings. W e accordingly affirm the district court’s conclusion “as a matter
of law[] that State Farm did provide written notice of enhanced PIP coverages
that were available to the Padhiars.” Id. at 686.
II. Sufficiency of evidence of offer
As indicated, § 710 states that an insurer “shall offer” enhanced PIP
benefits for inclusion in a complying insurance policy. The statute does not
define “offer.” In Brennan, the Colorado Court of Appeals stated that “all that is
required is that the insurer offer these extended benefits.” Brennan, 961 P.2d at
554. In Fazio v. State Farm M ut. Auto. Ins. Co., 55 P.3d 229, 231 (Colo. Ct.
App. 2002), the court stated that “[t]he plain meaning of this language is that a
named insured who has minimum PIP coverage under § 10-4-706 must be offered
an opportunity to purchase certain types of enhanced PIP coverage.”
In an unpublished decision, our court, in determining whether the insurer
had fulfilled its duty to offer optional extended PIP coverage under § 710, applied
the test set out by the Colorado Supreme Court in Allstate Ins. Co. v. Parfrey, 830
P.2d 905, 913 (Colo. 1992). Johnson v. State Farm M ut. Auto. Ins. Co., 158 Fed.
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Appx. 119 (10th Cir. 2005) (unpublished). Parfrey involved the requirement
imposed on insurance companies by Colo. Rev. Stat. § 10-4-609(b)(2) to offer
higher than the statutory minimum in uninsured or underinsured motorist
coverage. W e do not rely on unpublished opinions as authoritative precedent.
However, we take this occasion to adopt and publish the following language from
an unpublished decision. In analyzing “the nature and scope of an insurer’s duty”
the Colorado Supreme Court “determined that the insurer must perform its duty of
notification ‘in a manner reasonably calculated to permit the [insured] to make an
informed decision on whether to purchase . . . coverage higher than the minimum
statutory liability limits.’” Johnson, 158 Fed. Appx. at 121 (quoting Parfrey, 830
P.2d at 913). Parfrey elaborated on the proper test for determining whether an
insurer has performed its duty to notify:
In determining whether an insurer has fulfilled its statutory duty, a
court may appropriately consider such factors as the clarity with
which the purpose of . . . coverage was explained to the insured,
whether the explanation was made orally or in writing, the specificity
of the options made known to the insured, the price at which the
different levels of . . . coverage would be purchased, and any other
circumstances bearing on the adequacy and clarity of the notification
and offer.
Parfrey, 830 P.2d at 913. “In the final analysis,” the sufficiency of the offer
“must be resolved under the totality of the circumstances.” Id. at 914.
W hether we apply the specific factors set out in Parfrey, or just consider
the ultimate test to which the Parfrey factors were directed— totality of the
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circumstances— we affirm the district court’s conclusion that State Farm met its
obligation to offer to the Padhiars optional enhanced PIP coverages. 5 As
indicated above, State Farm sent numerous written notices and documents to the
Padhiars which made it clear that they could purchase enhanced PIP coverages.
In particular, in 1998 State Farm sent to the Padhiars the Auto Renewal Policy
which specifically informed them of the premium they would have to pay for
enhanced PIP coverage. The enclosed News and Notes newsletter provided a
more detailed explanation. In 1999, they received a copy of the endorsement
which specifically removed any limitation on the recovery of enhanced PIP
benefits by pedestrians and enclosed a schedule specifically listing all available
PIP coverages. In 2000, a policyholder notice along with another endorsement
specifically informed them of limits to their basic PIP coverage unless they
purchased enhanced PIP coverage. W e note that several other courts have found
that these identical mailings by State Farm provided sufficient notice under § 710.
See Lust, 412 F. Supp. 2d at 1191-92; Stickley, 402 F. Supp. 2d at 1234-36;
5
Not all courts agree that Parfrey should apply to the notice requirement of
Colo. Rev. Stat. § 10-4-710. See, e.g., M ay v. Travelers Prop. Cas. Co., 2006 W L
2784864, at *3 (D. Colo. Sept. 26, 2006) (noting that it “question[s] whether the
comm ercial reasonableness test set forth in Parfrey is the correct standard under
which to evaluate the sufficiency of Travelers’ offer to M r. M ay [under § 710]”
but further noting that “several cases from this District have utilized the Parfrey
standard in similar cases”); Lust v. State Farm M ut. Auto. Ins. Co., 412 F. Supp.
2d 1185, 1191-92 (D. Colo. 2006) (noting that plaintiff’s reliance on the Parfrey
test to show that notice under § 710 was not clear “is unavailing”).
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C alderon v. State Farm Mut. A uto. Ins., Co., 2005 W L 2304735, at **3-4 (D.
Colo. Sept. 21, 2005). W e agree with those decisions. As the court noted in Lust,
“renewal notices constitute[] a portion of plaintiff’s auto insurance policy” which
“the policy holder has the responsibility to read.” Lust, 412 F. Supp. 2d at 1189
(citing Spaur v. Allstate Ins. Co., 942 P.2d 1261, 1265-66 (Colo. App. 1996)).
Padhiar responds that State Farm’s 1998 Auto Renewal Notice and News
and Notes were issued at a time when State Farm’s policies, by failing to include
full pedestrian coverage, did not comply with the No-Fault Act and therefor could
not constitute valid offers. As indicated, Brennan pointed out the necessity for
insurance policies to provide pedestrian coverage, and, after Brennan, State Farm
issued Endorsement 6850AJ which removed the pedestrian limitation from the
Padhiar’s policy and included a complete schedule of all available coverages,
including P4 and P8 enhanced benefits. Setting aside whether Padhiar would
even have standing to bring a claim based on the pedestrian limitation even
though he is not a pedestrian, Padhiar in fact received an offer under § 710
containing all available coverages under a policy which did not contain any
pedestrian limitation. As the district court held in rejecting the identical
argument in Stickley, “[State Farm] complied with section 10-4-710, at the latest,
by M arch 1999, when it sent . . . Endorsement [6850AJ].” Stickley, 402 F. Supp.
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2d at 1235. 6 W hile Padhiar vociferously argues that none of these documents was
sufficiently detailed or clear or descriptive enough, we find that, considering the
totality of the circumstances, they satisfied State Farm’s obligation to “offer”
them under § 710. W e accordingly affirm the district court’s decision that, as a
matter of law , State Farm made a sufficient offer of optional enhanced PIP
benefits under § 710.
C O N C L U SIO N
For the foregoing reasons, the decision of the district court denying
Padhiar’s partial motion for summary judgment and granting State Farm’s motion
for sum mary judgment is A FFIR MED.
6
Padhiar makes in passing an argument that State Farm has waived reliance
on anything other than the 1998 Renewal Notice as establishing that it offered
enhanced PIP coverages as part of a compliant policy. He argues “[w]hen counsel
later asked State Farm to identify the circumstances when Padhiar received what
State Farm considered to be an offer of enhanced PIP benefits for inclusion within
a complying policy, State Farm cited exclusively to the date it disseminated the
combined documents of the Renewal Notice and the News and Notes article in
1998.” A ppellant’s O p. Br. at 13. Padhiar’s reference to the record where State
Farm supposedly “cited exclusively” to the 1998 Notice and article is mystifying
at best. In any event, it fails to support Padhiar’s w aiver argument.
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