The Colorado Supreme Court issued major opinions for plaintiff’s side attorneys to celebrate this year, and some of them came as a trio of opinions last week. The court resolved civil cases with big implications for insurance disputes, privilege between doctors or attorneys and the people they serve and a handful of other areas that change the status quo.
BAD FAITH INSURANCE OPINION
On May 28, the Colorado Supreme Court handed down its rulings in three insurance cases dealing with Colorado’s insurance bad faith statute. The big splash among those cases comes from Guarantee Trust Life v. Estate of Casper — which could affect any civil case involving Colorado’s survival statute, not just bad faith insurance disputes.
In Casper, the plaintiff died between the time a jury delivered a verdict in his favor — including punitive damages and attorney’s fees — but before the judgment was entered. Zachary Warzel, an attorney at Keating Wagner Polidori Free who represented the plaintiff, said the case will have implications in any civil litigation where a plaintiff dies or is at risk of dying during the course of litigation. The Supreme Court found that, according to the state’s survival statute, plaintiffs can recover punitive damages even after their death. The court also said that a plaintiff cannot recover punitive damages if a defendant dies.
The two other cases that reached a Supreme Court resolution last week, American Family Mutual Insurance v. Barriga and Rooftop Restoration v. American Family also open up Colorado laws in new ways. Warzel said the Supreme Court had never weighed in on the state’s bad faith statute dealing with improper delay or denial of claims, section 10-3-1115 of Colorado’s Revised Statutes, which itself is an unusual law around the country.
“Most legislatures haven’t been able to pass this type of statute,” Warzel said. “It gives a hammer against the insurance industry for this type of conduct. The statute was designed to give the little guy the ability to redress these insurance wrongs that were done. Otherwise they might not be able to find an attorney or make it sting against an insurance company at all.”
Barriga dealt with the question of whether an award should be reduced by the amount unreasonably delayed but that an insurance company eventually paid. According to the Supreme Court, those awards should not be reduced by the amount paid; that stacked on top of a provision in the statute that allows jury to award double damages for unreasonably denied or delayed insurance payouts means plaintiffs can recover triple, rather than the stated double, award amount.
And in Rooftop Restoration, the Supreme Court found that a one-year statute of limitations — similar to the statute of limitations for penal actions — doesn’t apply in the context of bad faith insurance claims regarding unreasonable delay or denial of benefits. That statute of limitations is two years, according to the Supreme Court.
“Plaintiffs don’t have the need now to file these statutory claims a year after there’s a denial [of benefits],” Warzel said. “That gives more time and eases the problems and congestion that come with having to file that early.”
Nelson Waneka, an attorney at Levin Sitcoff who worked on the Rooftop Restoration case called the trio of decisions the most significant decisions for insureds in Colorado in more than a decade.
“The best course of action [for insurance companies] is just to do the right thing,” Waneka said. “These laws and decisions help guarantee insurance companies do the right thing.”
PRIVILAGE OPINIONS
The Supreme Court over the course of the fall 2017 to spring 2018 term also took on a handful of cases dealing with questions of doctor-patient or attorney-client privilege.
Gadeco v. Grynberg dealt with a question of whether an individual waives their privilege rights for their mental health records when countersuing against issues involving mental health.
Jack Grynberg, the owner of Gadeco, was going to run his company until he died, but after facing claims about his degrading mental health in an attempt to remove him from company, Grinberg countersued. The lower courts said that by bringing the counterclaims, he put his mental health at issue and was required to waive privilege and hand over mental health records. The Supreme Court, however, said breaking a contract was not enough to waive his privilege rights.
The court also heard two other cases dealing with privilege this session — 2015-2016 Jefferson County Grand Jury, and concerning grand jury witness Amy Brimah; and in Villas at Highland Park Home Owner’s Association v. Villas at Highland Park.
The grand jury case dealt with a decision to subpoena an attorney’s files relating to a marijuana business that was investigated for violating the law. The Supreme Court ruled that the prosecution must show probable cause to believe there is a waiver in attorney client privilege in committing a crime and the court must review every communication to determine whether it has lost privilege.
“In the context of the marijuana industry, it is still illegal federally. Lawyers have clients engaged in commercial marijuana production and sales, and a lawyer in that situation and their client face a difficult situation of whether there is attorney client privilege,” said Thomas Neville, a partner at Ogborn Mihm and co-chair of the Colorado Trial Lawyer’s Association’s amicus committee. He also pointed out the relevance of that case in the era of President Trump and Michael Cohen.
Attorney-client privilege was again questioned in Villas at Highland Park Home Owner’s Association v. Villas at Highland Park, which dealt with one lawyer facing a former client on the opposite side of the “v.” The former client filed a motion to disqualify the attorney under Colorado Rule of Procedure 1.9(a), which asks whether prior and current representation are “substantially related.”
“This is an interesting case for anyone in litigation who are folks who cross the line between plaintiffs and defense work and go back and forth,” Neville said. “What’s the line in a substantially related case?”
The Supreme Court said the trial court abused its discretion by relying on the doctrine of issue preclusion to deny the disqualification motion instead of conducting the requisite analysis. But because each issue is highly fact-driven, Neville said he wished the Supreme Court would provide further guidance on the “substantial relationship test” that determines when that line is crossed. He did, however, say the opinion was “Handy for all lawyers who do litigation to be aware of. It does flesh out what you can do with regard to representing somebody.”
— Tony Flesor