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2023 Case Law Update

December 2023

Sagome, Inc. v. Cincinnati Insurance Co. No. 21-1359. D. Colo. Sagome operated a restaurant that Cincinnati insurance insured under a comprehensive general insurance policy. Government orders issued due to the COVID-19 pandemic caused Sagome to temporarily close and suffer significant financial losses due to loss of customer traffic. Sagome provided notice of its losses to its insurer and sought to recover under the policy. Cincinnati denied coverage because COVID-19 did not impose physical loss or damage as required by the policy.  Sagome sued under the theories of breach of contract, bad faith, and violation of Colorado insurance law. The district court held that because COVID did not physically damage the property and because no neighboring properties suffered physical loss triggering coverage, Sagome was not entitled to civil authority coverage. The case was dismissed with prejudice following a declaratory judgement action. Sagome appealed, arguing that under the plain language of the policy coverage was intended. However, the appellate court found that for there to be coverage, COVID had to injure or harm its property in some physical manner, and that the loss or damage had to be physical, not simply something stemming from something physical.  The court reasoned that every circuit court that had addressed the question of whether COVID’s presence constitutes physical loss or damage found that COVID did not cause physical loss or damage when distinguishing case law relied upon by Sagome. 

Creekside Endodontics, LLC v. Sullivan 2022 COA 145 No. 21 CA1615. Dr. Stubbs, a licensed dentist, performed root canal therapy on Sullivan, but she continued to experience pain. Subsequently, three separate dentists told Sullivan that her pain could have been caused by Dr. Stubbs overfilling her teeth. Sullivan posted numerous one-star reviews of Dr. Stubbs online, which included statements regarding the root canals and overfilling and issues regarding Dr. Stubbs response to her complaints. Creekside sued Sullivan for libel per se and trade and product disparagement based on allegedly defamatory posts.  The court denied Sullivan’s motion to dismiss based on Colorado anti SLAPP statute (strategic lawsuits against public participation). Sullivan argued that the court must grant the motion to dismiss and award attorney’s fees if the court determines there is not a reasonable likelihood that the plaintiff will prevail on its claims.  The court of appeals assumed, without deciding, that Sullivan’s statements were made in connection with a public issue. The court found that Plaintiff did not show a reasonable likelihood that Sullivan made the statements related to the dental work with actual malice, despite Dr. Stubbs arguing overfilling was insufficient to cause her pain. Furthermore, statements of pure opinion are not actionable in defamation. Because Sullivan provided factual reasons for her opinions, her statements were protected by the first amendment. Finally, because plaintiffs did not have a reasonable likelihood of prevailing on their defamation claims as a matter of law, Sullivan was entitled to recover attorney’s fees. 

Fear v. GEICO Casualty Co. 2023 COA 31. No.21CA2023.  Fear was injured when an underinsured motorist crashed into his car. His economic loses totaled $21,761. Fear then settled with the at fault drivers auto insurance, with his insurer, GEICO’s, consent for the $25,000.00 policy limit. Fear then filed a claim with GEICO under his policy for uninsured/ underinsured motorist (UIM) coverage.  GEICO then conducted an internal evaluation and set an internal “negotiation range” for $2,500 to $9,000 for the UIM claim. Fear did not accept GEICO’s offers or otherwise attempt to negotiate, but instead filed suit in district court alleging unreasonable delay. The court awarded Fear $9,000.00 in noneconomic damages and concluded that $7,200.00 of that amount was and had been undisputed since the time GEICO’s evaluation was created. The trial court found GEICO unreasonably delayed paying Fear $3,961 in UIM benefits and violated Colorado Statutes by conditioning payment of the “undisputed” portion of Fear’s noneconomic damages on his release of any remaining claims for UIM benefits. The trial court also ruled that Fear was entitled to a penalty of double that amount, along with an award of attorney’s fees and costs. On appeal, GEICO argued the trial court erred by relying on its internal settlement evaluation as a basis for concluding that part of Fear’s claimed noneconomic damages was undisputed, as an insurer’s internal evaluation of first party claimant’s non-economic damages does not establish an undisputed amount of benefits owed and is therefore no subject to immediate payment. The court of appeals found this to be error that was not harmless. The court of appeals left undisturbed the $9,000.00 award for noneconomic damages, the award of costs to Fear as the prevailing party, and the award of interest on the noneconomic damage award. However, the award of statutory penalties under Colorado law and the accompanying award of attorney’s fees was reversed and remanded for recalculation of the judgement. Madalena v. Zurich American Insurance Co. 2023 COA 32. No. 21CA1780. Madalena suffered a work-related injury that his employer reported to its claims administrator, Gallagher Bassett Services, Inc. Following an investigation, the workers’ compensation insurer, Zurich and Gallagher Basset, denied the claim. Madalena requested a hearing, and an ALJ awarded temporary total disability benefits. The industrial claim appeals panel affirmed the decision. The defendants later terminated benefits for Madalena, and Madalena challenged the same in a second workers’ compensation proceeding. The second ALJ determined that Madalena was entitled to permanent total disability benefit payments, and defendant did not challenge the same.  Madalena then sued the defendants in district court for bad faith due to allegedly denying and delaying payment of benefits. Zurich received a verdict in its favor. On appeal, Plaintiff argued that the trial court erred by not giving preclusive effect to the determinations of the administrative orders. He maintained that issue preclusion applied to final administrative orders deciding workers’ compensation benefits, including all determinations regarding compensability and causation in a subsequent bad faith case. The court found the issues were different, noting that the administrative proceedings concerned compensability of an injury and benefits due under the Act, while the issues litigated in the bad faith case focused on how Zurich administer Madalena’s claims and arrived at coverage decisions. Therefore, the issues were not identical and the administrative decisions did not have a preclusive effect on the different issues litigated in the bad faith action.

by Brady Ambron

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