Ortiz v. Progressive Direct Ins. Co.

554 P.3d 537

2024 COA 54

Andrew ORTIZ, Plaintiff-Appellee,

v.PROGRESSIVE DIRECT INSURANCE COMPANY, Defendant-Appellant.

Court of Appeals No. 23CA0292

Colorado Court of Appeals, Div. VII.

Announced May 16, 2024

City and County of Denver District Court No. 21CV30994, Honorable Alex C. Myers, Judge

Levin Sitcoff Waneka PC, Nelson A. Waneka, Denver, Colorado; Galperin and Associates, Jacob Galperin, Rebecca Bilello, Denver, Colorado, for Plaintiff-Appellee

Spies, Powers & Robinson, P.C., Janet R. Spies, Brendan O. Powers, Denver, Colorado, for Defendant-Appellant

Opinion by JUDGE GROVE

¶ 1 Defendant, Progressive Direct Insurance Company (Progressive), appeals the district court’s judgment in favor of plaintiff, Andrew Ortiz. We affirm and remand for the district court to determine Ortiz’s reasonable attorney fees and costs incurred on appeal.

I. Background

¶ 2 Tania Granados Camacho injured Ortiz in a car crash when she collided with his car as Ortiz attempted to turn left into a parking lot. Camacho was unlicensed (she had only a learner’s permit), unsupervised by an adult, and uninsured. Ortiz was insured by Progressive under a policy that included uninsured motorist (UM) coverage. After the crash, Progressive denied Ortiz’s claim for UM benefits on the basis that Ortiz was more than 50% at fault for the collision.

A. Ortiz’s Lawsuit

¶ 3 Ortiz sued Camacho for negligence and negligence per se. He included Progressive as a codefendant, asserting claims for breach of contract, common law insurance bad faith, and unreasonable delay and denial of insurance benefits under sections 10-3-1115 to - 1116, C.R.S. 2023. Specifically, Ortiz’s complaint accused Progressive of unreasonably and in bad faith investigating his claim for UM benefits.

¶ 4 Camacho never responded to Ortiz’s complaint, and the district court entered a clerk’s default against her pursuant to C.R.C.P. 55(a) on April 28, 2021. Both Ortiz’s motion requesting entry of clerk’s default¹ and the district court’s order granting the motion and entering default against Camacho were served on Progressive. Progressive did not file anything in response to either the motion or the corresponding order.

¶ 5 Meanwhile, Progressive filed an answer to Ortiz’s complaint in which it

• admitted that Camacho "was partially at fault for the happening of the motor vehicle accident";

• responded to every one of Ortiz’s allegations against Camacho by stating that the claim was "not direct[ed] to [Progressive] and therefore no response is required";

• asserted, in its affirmative defenses, that any damages sustained by Ortiz were due to

• "intervening or superseding causes or circumstances" that Progressive "could not have reasonably foreseen and for which … Progressive is not responsible" and

• "the acts or omissions of parties other than … Progressive," over whom "Progressive had no control and for whom … Progressive was not responsible"; and

• asserted that Ortiz’s "right of recovery, if any, against … Progressive may be barred or diminished by his assumption of risk" and "his comparative/contributory fault."

B. Case Management Order

¶ 6 Three months later, the district court issued a case management order (CMO). The court mostly accepted the language of the parties’ proposed CMO, making a few additions that are not relevant here. The court did not alter the parties’ respective descriptions of the nature of the case or their identifications of the issues to be tried.

¶ 7 In his description of the case and identification of the issues to be tried, Ortiz asserted that the "issues concern liability, causation of Plaintiff’s injuries, the extent of Plaintiff’s damages, [and] the bad faith conduct of Progressive Insurance and its representatives." Progressive, meanwhile, denied Ortiz’s claims against it and described the case as "a simple liability dispute where Plaintiff has failed to support his claim that he was not the majority at fault for the underlying motor vehicle accident." Progressive also listed several affirmative defenses that it intended to assert. It did not, however, include comparative fault in that list.

C. Summary Judgment Order

¶ 8 Ortiz later moved for partial summary judgment against both defendants, arguing, as relevant here, that the undisputed facts showed that Camacho was "the sole proximate cause of the motor vehicle collision" and of Ortiz’s injuries. Ten months after the district court’s entry of the clerk’s default against Camacho, and after completing discovery, Progressive timely responded to Ortiz’s motion for partial summary judgment by asserting in relevant part that it was "entitled to participate in the liability and damages components of the default-judgment hearing." The district court denied Ortiz’s motion as to Camacho because summary judgment cannot be entered against a defaulted party, but the court suggested in its order and at a hearing the next day that it would consider a motion for default judgment against Camacho should Ortiz file one. More importantly for the purposes of our analysis, however, the court also declined to permit Progressive to contest Camacho’s liability.

¶ 9 The district court reasoned that, although the entry of default against Camacho was not a final judgment determining rights or remedies, it nonetheless established Camacho’s liability "for purposes of moving forward with default judgment." Relying on the supreme court’s guidance in State Farm Mutual Automobile Insurance Co. v. Brekke, 105 P.3d 177, 186-93 (Colo. 2004), the court found that Progressive had failed to make the required particularized showing that its participation in determining the issue of liability was necessary to ensure a fair hearing.

To the contrary, even though Brekke required Progressive to "specifically set forth the legitimate defenses it intend[ed] to raise," and to do so "as soon as practicable," id. at 192 (footnote omitted), the district court found that Progressive presented only "general, boilerplate affirmative defenses or statements" in its answer and "did not raise any objection or even concern about its liability issues at [the] time" that default was entered.²

¶ 10 Despite Progressive’s exclusion from participation in the liability issue, the district court explained that, just as Brekke contemplated, Progressive could participate in the hearing at which Ortiz would attempt to establish the damages that he suffered in the crash, and Ortiz’s three claims against Progressive (breach of contract, common law insurance bad faith, and unreasonable delay and denial of insurance benefits) would proceed to trial separately.

D. Damages Hearing

¶ 11 Progressive participated in the damages hearing, which, as the district court described in its default judgment order following the hearing, "address[ed] the issues of causation and damages pertaining to Defendant Camacho." Camacho did not attend the hearing, but Ortiz, Ortiz’s counsel, and Progressive’s counsel attended and participated.

¶ 12 During this hearing, Ortiz and his treating physician testified about causation and the extent of Ortiz’s damages, with Progressive’s counsel cross-examining both witnesses about these matters. The district court awarded Ortiz only $20,000 of the $100,000 that he requested for noneconomic damages and damages for permanent physical impairment.

¶ 13 Progressive then paid Ortiz the $86,958.66 total default judgment entered in favor of Ortiz against Camacho (which was comprised of $20,000 in noneconomic damages, approximately $48,000 in medical expenses, and prejudgment interest), and Progressive and Ortiz proceeded to trial only on the claims for common law insurance bad faith and statutory unreasonable delay and denial of insurance benefits.

E. Trial

¶ 14 At trial on the bad faith and unreasonable delay claims, causation — specifically, Progressive’s position that Ortiz was primarily at fault for the crash — was the central theme. Progressive asserted Ortiz’s fault during opening statements and closing arguments, and throughout witness examinations. It conceded that Camacho had been found liable for the crash but argued that her liability was simply the result of a "technical default" and that Progressive initially refused to pay UM benefits because it reasonably determined that Ortiz was more than 50% at fault.

¶ 15 Consistent with Progressive’s position, the jury instructions stated that

• the district court found Camacho at fault for the accident by default because she "did not respond or contest liability";

• Progressive "denies that it acted in bad faith or unreasonably delayed or denied [UM] benefits" because "it found through its own investigation that [Ortiz] was at fault for the accident, a decision it maintains was reasonable and a good faith basis to deny uninsured motorist benefits";

• "[w]hether or not a person has a valid driver’s license is not relevant to determining whether that person was driving negligently at the time of an accident"; and

• at the time of the accident, several Colorado statutes, all of which were potentially relevant to determining fault for the accident, governed vehicles turning left, drivers passing other drivers on the right, driving on roadways laned for traffic, and careless driving that causes bodily injury.

¶ 16 The jury found in Ortiz’s favor on both claims, awarding him $76,493.53 for statutory unreasonable delay and denial of insurance benefits and $140,000 for common law insurance bad faith.

F. Motion for a New Trial

¶ 17 Progressive moved for a new trial on the sole basis that there were "inherent and unaddressed inconsistencies in the Court’s Orders in this case," which "alone warrant a new trial." Specifically, Progressive argued that the district court’s summary judgment order barring it from contesting Camacho’s liability was inconsistent with the pleadings and the CMO, which purportedly identified comparative fault as an issue to be tried in the case.

¶ 18 The district court denied Progressive’s...