Hill v. Allstate Insurance

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

SCOTT HILL, as Conservator of the
Estate of Katelyn Hill,

Plaintiff - Appellant ,

v. No. 06-1134

ALLSTATE INSURANCE
C OM PA N Y ,

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 . 04-C V -865-R EB -C BS)

Robert B. Carey, Hagens Berman Sobol Shapiro, LLP, Phoenix, Arizona, for
Appellant.

Terence M . Ridley (John M . Vaught and LaM ar F. Jost with him on the brief),
W heeler Trigg Kennedy, LLP, 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 Scott Hill, as conservator for the estate of his

daughter, Katelyn Hill, who was injured in an automobile accident, appeals the

following orders of the district court: one granting defendant Allstate Insurance

Company’s motion for partial summary judgment dated September 14, 2005,

another granting Allstate’s motion for summary judgment dated January 24, 2006,

and the final judgment dismissing the case. The orders denied Hill’s request to

reform an automobile insurance contract to provide additional personal injury

protection benefits for Katelyn, denied Hill’s request for wage-loss benefits, and

dismissed the case with prejudice. 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:

1
Simultaneously with this opinion, we are filing another case involving
similar, but not identical, issues. See Padhiar v. State Farm M ut. A uto. Ins. Co.,
No. 06-1121, ___ W L ____ (M arch 6, 2007).
2
The No-Fault Act was repealed in 2003.

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 (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
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;

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 (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.

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)

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(“Brennan and Thompson reformed those insurance policies to include extended

pedestrian coverage that insurers should have offered under section 710.”). 3

The insurance policy at issue in this case was purchased by John Paul, who

was then still married to, although legally separated from, Katelyn’s m other, April

Paul. He purchased the policy in August 2000 from the M archand Agency, which

was operated by Elizabeth M archand. Christine Pitcher (formerly known as

Christine Clifford) was a licensed agent at M archand. Both Elizabeth M archand

and Pitcher testified as to their standard procedure for processing an insurance

application from an individual. The procedure consisted of three phases— a

quotation phase, an application phase and a signature phase. The agent would

discuss the available coverages, including extended PIP coverages, in all three

phases. The agent would also use Allstate’s “Colorado PIP D isclosure,” which

described all extended PIP coverages, as a visual display of PIP coverages.

W ith respect to Paul’s application, Pitcher testified she “recall[ed] money

being an object. . . . [H]e wanted to go with the basic personal injury protection

coverage.” A ppellant’s A pp. Vol. II at 401. Pitcher further testified that she told

him the aggregate limit of coverage for the extended PIP coverage was $200,000.

Id. at 404. She testified that, after showing him the available extended PIP

3
Brennan alerted all automobile insurance carriers that extended PIP
benefits for pedestrians must be offered under § 710.

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coverages, both on her computer screen and on the PIP D isclosure Form, she

asked him if he wanted her to explain those in more detail and he declined. Paul

purchased a policy with the mandatory minimum PIP coverage.

Allstate subsequently mailed to Paul his policy. It included a summary of

the coverages he selected, including the basic PIP coverage. The policy

specifically stated “O ptional Personal Injury Protection coverages also are

available.” Id. at 425. Along with the policy Allstate mailed an “Important

Notice” (Form X5188) which summarized the major coverages in the Pauls’

policy and informed them that the PIP coverage “provides coverage for you, your

passengers and pedestrians, who are injured in an automobile accident.” Id. The

policy also contained an eight-page description of the extended PIP coverages,

including two options with unlimited medical coverage. The policy further

provided that Allstate would pay basic and extended PIP benefits “in accordance

with [CAARA] and subject to the limits as specified in the Limits of Liability

provision.” Id. at 439-40.

The Pauls renewed the policy every six months from August 2000 through

September 2002. 4 On September 4, 2001, Allstate mailed them a renewal packet

4
Allstate mailed all documents to John and April Paul. In fact, however,
John and April Paul finalized their divorce in November 2000. April Paul then
married plaintiff Scott Hill and took the name A pril Hill. Their daughter,
Katelyn, was born in August 2001.

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which included a form called “Important Notice – A Reminder for You” (Form

X67009), which stated in part:

Allstate offers options to purchase Additional Personal Injury
Protection (PIP) benefits on your Allstate auto policy. These
additional benefits might be very important to you or occupants of
your insured auto if you are involved in a serious injury causing
accident. Allstate’s Additional (PIP) options provide increased
coverages for M edical Expenses, W ork Loss and Essential
Services. . . .
The average[] price associated with purchasing Additional PIP
options is around $77. Your Price for Additional PIP coverage will
vary based on your characteristics (e.g. driving record, geographic
location, age), characteristics of the insured auto (e.g., passive
restraint system, seat belts), and whether you are eligible for certain
discounts or subject to certain surcharges. . . .
There are eight separate coverage options that are available to choose
from. Please see your Colorado Automobile Policy for a full
explanation of these options. (A description of the eight options can
be found under Additional Personal Injury, in the section titled
“Limits of Liability”.) If you wish to purchase Additional Personal
Injury Protection (Coverage V8) options or have any questions about
your PIP benefits, or about any aspect of you insurance coverage,
please feel free to contact your Allstate agent— or call the Allstate
Customer Information Center at 1-800-ALLSTATE.

Id. at 486. Allstate mailed the Pauls another renewal packet in M arch 2002,

which again included the above Notice (Form X67009). The Pauls continued to

renew the policy with the minimum PIP coverage.

On July 25, 2002, April and Katelyn Hill were involved in a serious

automobile accident, in which April died and ten-month-old Katelyn was

seriously injured. Allstate paid approximately $100,000 in basic PIP benefits to

Scott Hill for Katelyn’s care. W hen Allstate refused to make further payments,

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Hill sued Allstate and M s. M archand in state court. He made various claims

under C AARA and sought, inter alia, reformation of the insurance policy to

require Allstate to pay extended PIP benefits to Katelyn, and damages for breach

of contract and bad faith refusal to pay. Allstate removed the case to federal

court on the basis of diversity of the parties. In D ecember 2004, the district court

dismissed: (1) Hill’s claims for essential services under CAARA; (2) Hill’s

claims for lost wages on behalf of April Hill; (3) Hill’s claims against M archand

because she had been fraudulently joined; and (4) Hill’s claims asserted in an

individual capacity.

In June 2005, co-defendant M erastar Insurance Company moved for partial

summary judgment on Hill’s lost-wage claim on behalf of Katelyn under CAARA.

The district court granted M erastar’s motion. Allstate thereafter joined M erastar’s

motion, incorporating M erastar’s undisputed facts and arguments. The court then

granted Allstate’s motion.

Allstate then filed a motion for summary judgment on Hill’s claims for

reformation, breach of contract, and bad faith. Hill filed a cross-motion for

summary judgment arguing, inter alia, that Allstate had failed, as a matter of law ,

to make an adequate offer of enhanced PIP benefits under CAARA. The district

court granted A llstate’s motion, concluding (1) “as a matter of law that Allstate’s

offer of [enhanced PIP] coverage to Paul complied with the requirements of

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§ 10-4-710;” (2) “as a matter of law that the Allstate policy documents provide

the coverages required by the No-Fault Act[;] [t]herefore, Hill’s claim that

Allstate’s offer of [enhanced PIP] coverages was faulty because Allstate’s policy

was faulty must fail.” Order at 12-13, Appellant’s App. Vol. III at 814-15.

Because Hill’s breach of contract and bad faith claims depended upon the

reformation of the insurance policy, the district court dismissed them after

concluding that the policy would not be reformed.

Hill appeals, arguing the district court erred in holding: (1) that an offer of

enhanced PIP benefits complied with the N o-Fault Act even though the basic PIP

description in the policy did not explicitly state that it covered pedestrians and the

enhanced PIP description did not explicitly state that it covered pedestrians or

non-resident relative passengers; (2) an offer of enhanced PIP benefits complied

with the No-Fault Act despite omissions and misstatements in the oral and written

representations and materials concerning such benefits; (3) Katelyn’s wage-loss

claim must be dismissed; and (4) the policy contains an aggregate limit even

though the policy contains no specific w ritten limit.

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

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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 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. Failure to enum erate pedestrians/non-resident passengers

As indicated, § 710 states that an insurer “shall offer” enhanced PIP

benefits for inclusion in a complying insurance policy. Hill argues that the policy

Allstate issued to the Pauls was not a complying policy under the No-Fault Act

because it failed to explicitly state that pedestrians are eligible for minimum PIP

benefits, or that pedestrians and non-resident relative passengers are eligible for

extended PIP benefits. Allstate responds with two arguments: first, it is not

necessary for a policy to specifically list the types of persons covered by PIP

benefits and enhanced PIP benefits; and second, Hill lacks standing to complain

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about the alleged failure to specifically define pedestrians and/or non-resident

relative passengers as beneficiaries because Katelyn, the individual on whose

behalf he seeks additional benefits, was neither. W e agree with A llstate’s first

argument and, as to the second, we conclude that Hill has standing because, in

this particular case, the complaint is explicitly framed as a contract/tort action,

which raises the factual question of whether he was offered a compliant policy. 5

As Allstate points out, the N o-Fault Act does not require insurance carriers

to specifically list those categories of eligible injured persons. It requires

insurance carriers to provide basic PIP and offer extended PIP benefits. The Act

further certainly mandates coverage for those categories of eligible injured

persons, including pedestrians and non-resident relative passengers, but it does

not affirmatively require that they be enumerated in every policy. See Calderon v.

State Farm M ut. Auto. Ins. Co., 2005 W L 2304735, at *4 (D. Colo. Sept. 21,

2005) (finding “as a matter of law that § 10-4-710 . . . did not require State Farm

to list the types of persons who were covered by PIP and [enhanced] PIP

coverages, including pedestrians, when it offered [enhanced] PIP coverages to its

insureds”); Sigala v. Hartford Underwriters Ins. Co., 2005 W L 2098141, at * 6

5
W e note, however, that several courts have held that a non-pedestrian such
as Hill, on behalf of Katelyn, lacks standing to seek reformation on the ground
that coverage of pedestrians was allegedly not offered. See Reid v. Geico Gen.
Ins. Co., 2006 W L 2844381, at *3 (D. Colo. Oct. 2, 2006); W ilson v. Titan Indem.
Co., 2006 W L 2583133, at **1-2 (D . Colo. Sept. 6, 2006).

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(D. Colo. Aug. 29, 2005) (rejecting argument that reformation was required

“because the Hartford policy failed to include [enhanced] PIP benefits for non-

family occupants and pedestrians”).

Furthermore, Allstate’s policy explicitly stated it would provide benefits in

accordance with the Act, which includes providing coverage for pedestrians and

non-resident relative passengers. There is no allegation that Allstate refused to

provide coverage for an eligible pedestrian or non-resident passenger. That is

what distinguishes this case from those in which the court has required

reformation. As Allstate points out, Brennan and our Clark decisions 6 involved

pedestrians who were expressly denied coverage by an insurance carrier. In such

a case, reformation was required because it was absolutely clear that the injured

6
The Clark cases involved the situation where an automobile insured by
State Farm struck Ricky Clark, a pedestrian. Clark filed a class-action suit
against State Farm seeking to collect extended PIP benefits under CAARA. At
that time, State Farm’s policies contained an express Pedestrian Limitation
provision excluding pedestrians from coverage under the extended PIP provisions.
As the Colorado Court of Appeals made clear in Brennan, such a limitation
violates C AA RA . O n appeal from the district court’s dismissal of all claims, w e
held that Brennan required reformation of the policy to provide extended PIP
benefits for Clark, an injured pedestrian. Clark v. State Farm M ut. A uto. Ins. Co.,
319 F.3d 12134 (10th Cir. 2003) (Clark I). W e remanded for a determination of
an effective date for the reformation and the amount of extended PIP benefits to
which Clark was entitled. The district court concluded that the proper
reformation date was the date of its order and found that Clark was entitled to the
statutory aggregate cap of $200,000. Clark v. State Farm M ut. A uto. Ins. Co.,
292 F. Supp. 2d 1252, 1270 (D. Colo. 2003) (Clark II). Clark III was our
decision affirming Clark II on appeal.

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person, a pedestrian, had been denied coverage to which he was entitled and that

such coverage had clearly not been offered to the insured. The Pauls were offered

extended PIP benefits covering persons eligible to receive benefits under the No-

Fault A ct. They specifically chose to purchase only the basic PIP benefits.

Reformation of the contract is not required where the claimed violation of the No-

Fault Act was the failure to expressly enumerate all the parties eligible to receive

PIP benefits, as opposed to the failure to offer those benefits and the subsequent

failure to provide coverage. 7

Alternatively, we hold that, given all the materials that were mailed and

otherwise provided to the Pauls, they were adequately informed that pedestrians

and passengers were eligible to receive PIP benefits.

7
Several courts have noted that, under Colorado law, “[r]eformation of a
written instrument is appropriate only when the instrument does not represent the
true agreement of the parties. The purpose of reformation is to give effect to the
parties’ actual intentions.” Carder, Inc. v. Cash, 97 P.3d 174, 180-81 (Colo. Ct.
App. 2003). W here the insured has expressly declined the optional extended PIP
benefits, these courts have held that reformation to provide those optional
extended PIP benefits on the ground that there was an erroneous pedestrian
exclusion “would not reflect the intent of the parties[] [as the insured’s]
expressed intention was to decline [the insurance carrier’s] offer of additional PIP
benefits.” M orris v. Travelers Indemnity Co., 2006 W L 1889963, at *10 (D.
Colo. July 10, 2006); Sigala v. Hartford Underwriters Ins. Co., 2005 W L
2098141, at *6 (D. Colo. Aug. 29, 2005) (“The fact that the policies issued to [the
plaintiff] contained inaccurate descriptions of the [additional] PIP coverage that
[plaintiff] had been offered, and which she declined, does not support her claim
for reformation.”)

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 II. Sufficiency of offer

Hill argues the initial offer of insurance, particularly extended PIP benefits,

was inadequate because Pitcher failed to explain it fully and the surrounding

docum entation contained misstatements and omissions of various items. He

contends that the offers to renew the Paul insurance policy were similarly

inadequate.

W hile § 710 states that an insurer “shall offer” enhanced PIP benefits to an

insured, 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. A uto. 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.

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

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higher than the statutory minimum in uninsured or underinsured motorist

coverage. W e do not rely on unpublished decisions as authoritative precedent.

However, we take this opportunity to adopt and publish the following language,

as well as language quoted, infra, 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. Both

parties here advocate application of the Parfrey totality of the circumstances test. 8

8
Not all courts agree that Parfrey should apply to the notice requirement of
(continued...)

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 W hether we apply the specific factors set out in Parfrey or simply look at

the totality of the circumstances, we conclude that Allstate’s offer of extended

PIP benefits to Paul was adequate and enabled the Pauls to make an informed

decision about whether to purchase extended coverage. Initially, Paul had a face-

to-face meeting with Pitcher, in which she testified she explained the various

coverages, showed Paul the options for extended PIP coverage on her computer

screen and went over the PIP D isclosure Form. In Johnson, we held that a face-

to-face meeting in which the agent explained the extended PIP coverages, coupled

with a brochure which provided a short explanation of and chart describing PIP

coverages, constituted a sufficient offer under the No-Fault Act. We noted that:

the Parfrey analysis does not require an insurer to thoroughly address
all of the conceivable situations in which enhanced PIP coverage
might be desirable. Rather, the law merely required that the insured
b[e] given enough information to advise the insured of the
availability of coverage and permit a reasonably informed decision
on whether to purchase it.

8
(...continued)
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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Johnson, 158 Fed. Appx. at 122. Here, Pitcher explained the PIP coverages and

offered to quote Paul a price for extended PIP coverage. Paul declined the price

quote. Pitcher also presented Paul with a w ritten summary of the various PIP

coverages in the Colorado PIP Disclosure Form.

Then, the policy which Allstate mailed to the Pauls contained an eight-page

description of the extended PIP coverages available. Form X5188 accompanied

the policy and it specifically stated that PIP coverage provided benefits for the

named insureds, their passengers and pedestrians. This form was mailed to the

Pauls on subsequent occasions as w ell. Additionally, Allstate mailed Form

X67009 to the Pauls on several occasions, and it specifically stated that Allstate

offered extended PIP benefits and provided an average price for such coverage.

W hile Hill argues there were specific arguably ambiguous phrases and/or

wordings in the various documents, it is impossible to conclude that, from all the

above information, the Pauls were unable to make a reasonably informed decision

not to purchase the extended PIP coverage.

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 III. W age-loss b enefits

Because Hill’s claim for wage-loss benefits for Katelyn unlimited in time

depends upon the insurance policy being reformed to provide Katelyn with

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extended PIP benefits, our conclusion that reformation is not necessary disposes

of this issue.

IV . A pplicability of aggregate lim it of $200,000

Because the issue of whether an aggregate limit of $200,000 applies to

Katelyn’s claim also depends upon the insurance policy being reformed to provide

Katelyn with extended PIP benefits, our conclusion that reformation is not

necessary disposes of this issue as w ell.

C O N C L U SIO N

For the foregoing reasons, the orders of the district court are AFFIRMED. 9

9
W e deny Allstate’s motion to strike H ill’s Rule 28(j) letter.

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