Wood v. Safeco Ins. Co. of Am.

STEVEN J. WOOD, Plaintiff, v. SAFECO INSURANCE COMPANY OF AMERICA, and SHERYL A. KELLEY, Defendants.

No. 20-2222-SAC-KGG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

March 17, 2021

MEMORANDUM AND ORDER

This diversity personal injury case is one of two federal district actions filed by the plaintiff Steven Wood on April 4, 2020. The other was filed in the United District Court of Colorado and assigned to Chief Judge Philip Brimmer. Both actions arise from a serious single-car accident occurring in Kansas on April 30,2018. The defendant Sheryl Kelley, a resident of Missouri, was driving the car, and Wood, a resident of Colorado, was the only passenger. As alleged in the complaint, Kelley's automobile insurer at the time of the accident was Safeco Insurance Company ("Safeco"). The court's docket reflects two pending motions, Safeco's motion to dismiss (ECF# 18) and Kelley's Motion to Stay/Dismiss (ECF# 20).

This action is also subject to a stay order. On November 25, 2020, on the motions of the plaintiff Steven Wood and the defendant Sheryl Kelley, the court stayed this case pending the ruling of the United States District Court of Colorado's decision on Kelley's pending jurisdictional challenge. ECF# 39. The court directed the parties to "notify the promptly this court and then work expeditiously together to have all claims consolidated in one court for resolution." Id. at p. 7.

On March 3, 2021, Wood filed a notice of voluntary dismissal disclosing that Chief Judge Brimmer had denied Kelley's pending jurisdictional challenge on March 2, 2021. ECF# 40. As background for dismissal, the notice stated that this voluntary dismissal pursuant to Fed. R. Civ. P. 41(a)(1)(A)(i) was "self-executing and closes the case," because the defendants had yet to file a motion for summary judgment. Without attaching Judge Brimmer's order, the notice quoted from it:

5. In his March 2, 2021 order, D. Colo. Chief Judge Brimmer stated, "The Court finds that Wood has met his burden of making a prima facie showing of personal jurisdiction with respect to defendant Kelley and will therefore deny Kelley's motion to dismiss." CO ECF No. 90 at 9. Relatedly, Defendant Safeco has no legitimate grounds to challenge jurisdiction in Colorado.

ECF# 40, p. 2. The notice further explains Wood's reasons for wanting dismissal of his Kansas action and preferring to proceed with his Colorado action. Id. at ¶¶ 6-7.

On March 4, 2021, this court entered a memorandum and order finding that the plaintiff's notice of voluntary dismissal was not legally operative. ECF# 41. The plain terms of Rule 41(a)(1)(A)(i) allow a plaintiff to "dismiss an action without a court order by filing . . . a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment." Because the defendants have filed answers, the court found the plaintiff's notice of dismissal was not legally operative. The court also pointed out the plaintiff could look to Rule 41(a)(1)(ii) or (2) for pursuing dismissal.

After the court entered its order on March 4, 2021, the defendant Safeco filed a response and attached a copy of Chief Judge Brimmer's order. ECF# 42. In it, "Safeco notes that Plaintiff's dismissal notice omitted the fact that the Colorado Court also ordered that the Colorado Action be stayed pending resolution of thisKansas action. See Exhibit A, Colorado Order (Dist. Colo. Do. No. 91)." ECF# 42, p. 2. Chief Judge Brimmer found the conservation of resources from one proceeding and the likelihood of a more expeditious resolution available in Kansas favored the interests of the plaintiff, the witnesses, and the public. ECF# 42-2, pp. 12-13. Thus, he granted Safeco's motion to stay and stayed his case "pending resolution of the Kansas case." Id. at pp. 13-14.

Having received notice that the defendant Kelley's jurisdictional challenge in Colorado has been ruled upon, the court hereby lifts its order staying this case. ECF# 39. Absent other motions, the magistrate judge is encouraged to proceed forthwith in directing the parties toward meeting and establishing in orders a timely path for incorporating all discovery and related agreements from the Colorado action into this suit and for timely completing all discovery in this case.

The following motions are pending: Safeco's motion to dismiss Counts Seven (bad-faith denial of PIP benefits under Colorado law) and Eight (spoliation) (ECF# 18), Wood's response (ECF# 31), and Safeco's reply (ECF# 34); and Kelley's motion to stay or in the alternative to dismiss (ECF# 20) and Wood's response (ECF# 32); and Wood's motion to stay case (ECF# 30), Safeco's response (ECF# 33), and Wood's reply (ECF# 37). In light of Chief Judge Brimmer's ruling, the court dismisses defendant Kelley's motion to stay/dismiss as moot. The court proceeds with ruling on Safeco's pending motion to dismiss.

The court understands from Wood's notice of dismissal that he filed an amended complaint in the Colorado action and named two new defendants, Safeco Insurance Company of Illinois and Liberty Mutual Insurance Company. Consequently, inruling on Safeco's motion to dismiss, the court expects the plaintiff will be amending his complaint to cure naming the correct party on Count VII. In ruing on the motion to dismiss, the court accepts as true the factual allegations in the complaint and draws reasonable inferences in favor of the plaintiff. Gann v. Cline, 519 F.3d 1090, 1092 (10th Cir. 2008). The court is not obliged to accept as true a legal conclusion couched as a factual allegation. Bell Atlantic Corp. v. Twombley, 550 U.S. 544, 555 (2007). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). To survive a motion to dismiss, the complaint must contain enough allegations of fact "to state a claim to relief that is plausible on its face." Twombley, 550 U.S. at 570. "Thus, in ruling on a motion to dismiss, a court should disregard all conclusory statements of law and consider whether the remaining specific factual allegations, if assumed to be true, plausibly suggest the defendant is liable." Kansas Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011).

Count VII-Bad Faith Denial of PIP Benefits

Wood alleges he was entitled to PIP benefits under Kelley's policy and under Kansas law and submitted substantiation of his claim to Safeco for these benefits. He alleges that Safeco unreasonably denied and delayed the payment of PIP benefits, that Wood's counsel tried to resolve any issues with the claim but Safeco delayed responding and refused full reimbursement, that "Safeco knowingly and recklessly disregarded the validity of Plaintiff's PIP claims to delay payment of such claim in bad faith" (¶ 145), that Safeco later issued payment for a portion of the PIP claim when Wood's counsel complained about bad faith, and that "a common lawcause of action in Colorado for bad faith against the insurer" (¶ 142) exists when the insurer unreasonably denies or delays PIP benefits. ECF# 1.

In a diversity action, "the conflict-of-laws rules of the forum state" apply. Kipling v. State Farm Mut. Auto. Ins. Co., 774 F.3d 1306, 1310 (10th Cir. 2014). Thus, the court applies the conflict-of-laws rules of Kansas. Safeco argues Colorado law is unavailable for the plaintiff's Count VII. Characterizing this claim as a contractual dispute, Safeco applies Kansas choice of law rules and finds that Missouri law controls because the insurance policy was delivered to Kelley at her Missouri address. "Consequently, there can be no bad faith claim asserted under Colorado common law." ECF# 18, p. 4. Safeco summarily contends that the plaintiff cannot bring Count VII under Missouri or Kansas law.

The plaintiff counters that his bad faith claim sounds in tort, not contract, and that the law to be applied comes from where the tort occurred, i.e., Colorado, where he lives and has pursued full payment for expenses and losses some of which were incurred in Colorado. The plaintiff relies on Goodson v. American Standard Ins. Co. of Wisconsin, 89 P.3d 409, 414 (Colo. 2004), which recognizes an action in tort for the insurer's breach of the duty of good faith and fair dealing "in unreasonably refusing to pay a claim" or delaying the payment. This decision addressed recovery of emotional distress damages for the insurer's denial of PIP claims submitted by the plaintiff Goodson and her children under the insurance policy of the named car owner, Chet Weber. Wood alternatively asserts he also has alleged a valid claim for the denial and delay of PIP benefits entitling him to attorney's fees,costs and interest under Kansas law. Wood, however, does not argue that he has stated a claim for relief if the governing choice of law is Missouri.

The Kansas Supreme Court has said the party advocating another forum's law bears the burden of showing that forum's law applies and the failure to do so "may justify a default to forum law." In re K.M.H., 285 Kan. 53, 60, 169 P.3d 1025 (2007), cert. denied, 555 U.S. 937 (2008). The Tenth Circuit has found that under Kansas law a bad faith claim against an insurer "'to establish an indebtedness outside these [policy] limits arising from a breach of the insurer's duty to exercise reasonable care and good faith in settling a claim against the insured'" is an "'action [that] sounds in contract.'" Moses v. Halstead, 581 F.3d 1248, 1251 (10th Cir. 2009) (quoting Glenn v. Fleming, 247 Kan. 296, 799 P.2d 79, 89 (1990)); see Payless Shoesource, Inc. v. Travelers Companies, Inc., 569 F.Supp.2d 1189, 1195 (D. Kan. 2008), aff'd, 585 F.3d 1366 (10th Cir. 2009); Mirville v. Allstate Indem. Co., 71 F.Supp.2d 1103, 1107 (D. Kan. 1999), aff'd, 10 Fed. Appx. 640, 2001 WL 280038 (10th Cir. Mar. 21, 2001). Kansas courts apply two general rules for contractual disputes taken from the Restatement (First) of Conflict of Laws (1934...