[00:00:01] Speaker 05:
All right.

[00:00:02] Speaker 05:
The next case this morning will be 25-1113, garrison property and casualty versus Horton, counsel for appellant.

[00:00:12] Speaker 05:
I understand you're going to try to split your time.

[00:00:14] Speaker 05:
Is that right?

[00:00:15] Speaker 00:
We're going to attempt it.

[00:00:16] Speaker 05:
OK.

[00:00:18] Speaker 05:
If you'll make the first counsel for appellant, if you'll make your appearance and proceed, please.

[00:00:22] Speaker 00:
May it please the court?

[00:00:23] Speaker 00:
Good morning, your honors.

[00:00:24] Speaker 00:
My name is Michelle Cortez, and I represent appellate Nicholas Horton.

[00:00:28] Speaker 00:
Let me explain the injustice that occurred in this case, which we ask this court to remedy.

[00:00:35] Speaker 00:
The district court rewarded USA and Garrison for their egregious conduct when it granted them summary judgment, finding no conflict between exclusion B1 and the non-owned vehicle exceptions.

[00:00:50] Speaker 00:
That was error.

[00:00:51] Speaker 00:
For this contention, the district court claimed the non-owned vehicle exceptions only pertain to ownership and use.

[00:01:01] Speaker 00:
But that's not true.

[00:01:02] Speaker 00:
There's five factors under the non-owned vehicle exceptions.

[00:01:06] Speaker 00:
ownership, use, family member, that it be primarily insured by another carrier, and most importantly here, and what the district court ignored, is that it be a vehicle.

[00:01:20] Speaker 00:
Now that term vehicle was chosen by USA and Garrison and it's a very broad term.

[00:01:26] Speaker 00:
They also chose not to define vehicle even though they could have.

[00:01:33] Speaker 00:
So when we give effect to the term vehicle as the district court should have done, that shows the conflict in the policy.

[00:01:41] Speaker 00:
So what is the conflict?

[00:01:43] Speaker 00:
Exclusion B1 avoids coverage.

[00:01:47] Speaker 00:
for a vehicle, which all parties agree includes a motorcycle.

[00:01:52] Speaker 00:
So exclusion B1 avoids coverage for a motorcycle not listed on the declarations.

[00:01:58] Speaker 00:
But the non-owned vehicle exceptions restore coverage for a non-owned motorcycle not listed on the declarations.

[00:02:10] Speaker 00:
Those provisions conflict, meaning they're internally inconsistent and under established

[00:02:16] Speaker 00:
long-standing Colorado law under Simon, Neeson, Collard, and Worsham, the conflicting exclusion must fall and the policy must be construed in favor of coverage for the insured

[00:02:34] Speaker 00:
here, Horton.

[00:02:35] Speaker 00:
This is supported by USA and Garrison's own interpretations of coverage.

[00:02:42] Speaker 00:
They had an adjuster who said, we are affording coverage.

[00:02:46] Speaker 00:
They had in-house counsel that said that there is coverage under the non-owned vehicle exceptions.

[00:02:51] Speaker 00:
They even certified to the Colorado Insurance Commissioner that they were expanding their

[00:02:58] Speaker 00:
to provide non-owned vehicle coverage.

[00:03:02] Speaker 00:
That is their own term, non-owned vehicle coverage.

[00:03:06] Speaker 00:
So this is consistent with Neeson v. State Farm, in which the court supported its finding of coverage by State Farm's own interpretation, finding coverage for the other victims of the crash.

[00:03:20] Speaker 05:
In Simon, however, we're not

[00:03:24] Speaker 05:
the provisions that led the court to believe, the Colorado Supreme Court to believe that there was a basis for confusion.

[00:03:32] Speaker 05:
They both related to warranties, right?

[00:03:36] Speaker 00:
sort of, Your Honor, but it wasn't that clear when you look at it on its face.

[00:03:40] Speaker 00:
So there was an exception, restoring coverage for warranties.

[00:03:44] Speaker 00:
Then there was an exclusion for what's called completed operations.

[00:03:48] Speaker 00:
When you look at that on its face, you may not think those provisions conflict.

[00:03:53] Speaker 00:
It wasn't until completed operations was defined, which is defined as in part warranties,

[00:04:02] Speaker 00:
then you see the conflict between warranties.

[00:04:07] Speaker 02:
Would you agree in that case, the court found that that was a conflict that was irreconcilable?

[00:04:13] Speaker 02:
Correct.

[00:04:14] Speaker 02:
Now in this case, is your position that the issues here, the conflict that you're raising is irreconcilable, meaning that the various exclusions and the exceptions, there's no way to read those in such a way that there's not a conflict?

[00:04:28] Speaker 02:
Why wouldn't they, with regard to exclusion B1, why wouldn't they put the same language in the exception to B2?

[00:04:37] Speaker 02:
And why does it say, on the exception to B2, why does it specifically say, with regard to exclusion B1?

[00:04:45] Speaker 02:
And the same with B3.

[00:04:46] Speaker 02:
It says the exception with regard to exclusion B3.

[00:04:50] Speaker 02:
I mean, it says that specific language in those paragraphs, right?

[00:04:55] Speaker 00:
Let me make sure I understand the question.

[00:04:57] Speaker 00:
That the exception to B2

[00:05:00] Speaker 00:
says this exclusion does not apply in the B2 language.

[00:05:04] Speaker 00:
The only thing I can understand about that is that these exclusions and exceptions were added to the policy at different times, and so there's different language.

[00:05:12] Speaker 00:
But there's nothing in the policy that says that B1 controls B2.

[00:05:17] Speaker 02:
But you're trying to apply an exception

[00:05:20] Speaker 02:
which is set forth in B2, you're trying to apply that to B1, right?

[00:05:25] Speaker 00:
Incorrect, Your Honor.

[00:05:26] Speaker 00:
That is a red herring that USA and Garrison have raised.

[00:05:29] Speaker 00:
Those are just exceptions under B2 and B3.

[00:05:33] Speaker 00:
The issue is, do they conflict with B1?

[00:05:37] Speaker 00:
Because the policy language does not say B1 and B2 and B3 have to be met.

[00:05:43] Speaker 00:
There's no word and between them.

[00:05:47] Speaker 00:
Adding that word.

[00:05:49] Speaker 02:
Right, but there's no and for the exclusions either.

[00:05:52] Speaker 02:
You have one exclusion, you're excluded, right?

[00:05:56] Speaker 00:
Correct, but under Colorado law, if they conflict, and this is something that is unique to Colorado law.

[00:06:02] Speaker 00:
It's a cornerstone principle of insurance law in Colorado.

[00:06:06] Speaker 00:
If they conflict, the one doesn't still control.

[00:06:11] Speaker 00:
the conflicting exclusion falls.

[00:06:13] Speaker 00:
So in this case, because the exceptions to B2 and B3 restore coverage and because

[00:06:20] Speaker 00:
They conflict with exclusion B1.

[00:06:23] Speaker 00:
B1 falls and does not control, and coverage must be construed in favor of the insured Horton.

[00:06:31] Speaker 05:
But if the exceptions to B2 and B3 apply to B2 and B3, what is the predicate for the conflict, for conflicting basis?

[00:06:42] Speaker 05:
I mean, what's the conflicting basis?

[00:06:43] Speaker 05:
If they apply to their provisions, I think that's what Jez Hyles was talking about.

[00:06:50] Speaker 00:
The problem that I think the district court had was that it was an overgeneralization of what the exclusions were about, but it was not a full analysis of all the factors.

[00:07:05] Speaker 00:
Well, let me ask you this.

[00:07:06] Speaker 02:
Under exclusion B1, do you agree that a motorcycle was excluded from coverage?

[00:07:12] Speaker 00:
That's correct, Your Honor.

[00:07:13] Speaker 02:
OK.

[00:07:13] Speaker 02:
So the issue is, how do the exceptions in B2 and B3 change that?

[00:07:18] Speaker 00:
If it wasn't on the deck sheet, it was excluded from coverage.

[00:07:22] Speaker 00:
And that is a key provision.

[00:07:24] Speaker 00:
Now, B2 and B3, which were added later, which make the policy internally inconsistent, restore coverage for a non-owned motorcycle, not just a motorcycle, a non-owned motorcycle that's not on the deck sheet.

[00:07:41] Speaker 00:
So because the non-owned motorcycle is restored that's not on the deck sheet, that conflicts.

[00:07:47] Speaker 05:
And it makes... And that's the point I was trying to get at earlier.

[00:07:50] Speaker 05:
It seems to me that Simon was dealing with apples and apples.

[00:07:53] Speaker 05:
Here you're not dealing with apples and apples.

[00:07:56] Speaker 05:
B2 goes to... The distinction B2 draws is on ownership.

[00:08:01] Speaker 05:
The distinction B1 draws is on the nature of the vehicle.

[00:08:05] Speaker 05:
And therefore, whereas in Simon, they were both dealing with warranties, so one could read into that a potential for confusion.

[00:08:15] Speaker 05:
Here, you've got B2 and 3 talking about the basis of the vehicle ownership, B1 talking about the nature of the vehicle.

[00:08:22] Speaker 05:
Why would there be any basis for conflicting understanding of those?

[00:08:28] Speaker 00:
Your Honor, let me answer this question, then I probably need to sit down.

[00:08:33] Speaker 00:
that is the key here, is the term vehicle.

[00:08:37] Speaker 00:
There is no restriction on the number of wheels of that vehicle under B2 and B3.

[00:08:45] Speaker 00:
Now, they could have said, we restore coverage for non-owned cars.

[00:08:51] Speaker 00:
Or they could have said, we restore coverage for non-owned autos and define that as a four-wheel car.

[00:08:56] Speaker 00:
They specifically chose non-owned vehicles and certified

[00:09:02] Speaker 00:
vehicles to the Colorado Insurance Commission.

[00:09:05] Speaker 05:
So you're saying the basis for conflict exists in the fact that B1 talks about vehicles and the word vehicle appears in B2 and B3?

[00:09:13] Speaker 00:
And the issue of it not needing to be on the deck sheet, Your Honor.

[00:09:18] Speaker 02:
Is there any issue with regard to how does reliance play into this?

[00:09:22] Speaker 00:
How does reliance play into this?

[00:09:23] Speaker 02:
Was there any reliance on that conflict?

[00:09:27] Speaker 00:
Your Honor, I think that

[00:09:30] Speaker 00:
The conflicting interpretations of USA and Garrison over many years show that they did not know how their provisions operated together.

[00:09:40] Speaker 00:
And I understand that Ms.

[00:09:44] Speaker 00:
Abeda relied on USA and Garrison's representations when she filed suit against Horton regarding coverage.

[00:09:54] Speaker 02:
But the record is pretty clear that Mr. Horton didn't rely on that.

[00:09:58] Speaker 00:
And how does that impact the issue?

[00:10:00] Speaker 00:
Mr. Horton relied on USA and Garrison being upfront with him and treating him as a quasi-fiduciary, which they did not when they didn't raise coverage timely.

[00:10:17] Speaker 00:
For five years, USA and Garrison didn't raise coverage.

[00:10:20] Speaker 00:
And that is prejudice as a matter of law.

[00:10:23] Speaker 00:
And I apologize for stuttering.

[00:10:24] Speaker 00:
I'm just worried about the time if I could pass it over.

[00:10:26] Speaker 00:
Thank you.

[00:10:26] Speaker 02:
All right.

[00:10:27] Speaker 02:
Thank you.

[00:10:48] Speaker 04:
Morning, Your Honors.

[00:10:49] Speaker 04:
Michael Rosenberg here on behalf of Tashira Beta.

[00:10:56] Speaker 04:
March 13th will be the eighth anniversary of this horrible motorcycle crash.

[00:11:05] Speaker 04:
I did want to acknowledge in the front row that

[00:11:08] Speaker 04:
Tashira's mother and sister both came so they could be here to watch these proceedings today.

[00:11:14] Speaker 04:
Our issue, real quickly, I think it's laid out in the briefs.

[00:11:20] Speaker 04:
We do believe that the policy is at best ambiguous, which is reflected by the fact that USAA's own legal department concluded there was coverage.

[00:11:32] Speaker 04:
They offered the $100,000 unconditionally when we got into the case.

[00:11:38] Speaker 04:
We got into the case a year, year and a half after those settlement opportunities were already gone.

[00:11:46] Speaker 04:
And so the idea that you could not raise an exclusion until three and a half years after the accident and one that you didn't raise before is just contrary to every Colorado case there is.

[00:12:03] Speaker 04:
The Lyra case, I did want to say, is a completely different animal because the Lyra case, which says an insurance company doesn't have an obligation to consider punitive damages.

[00:12:15] Speaker 03:
Sure.

[00:12:17] Speaker 03:
Time is short.

[00:12:18] Speaker 03:
So let's focus in a little on a question.

[00:12:23] Speaker 03:
Your brief indicates that the common law bad faith claim is based on the company's failure to settle and then, of course, the resulting

[00:12:33] Speaker 03:
excess judgment.

[00:12:35] Speaker 03:
Is that an accurate statement of your argument?

[00:12:38] Speaker 04:
Well, I don't believe that encompasses all of our argument.

[00:12:42] Speaker 04:
The investigation and the lack of one... Where did you talk about that?

[00:12:46] Speaker 04:
It's talked about throughout all of the briefs.

[00:12:49] Speaker 03:
Where in your brief did you say that?

[00:12:53] Speaker 03:
Because everything in your brief is about the settlement.

[00:12:56] Speaker 04:
We talked about the investigation, Your Honor, and I've

[00:12:59] Speaker 04:
Forgive me.

[00:13:00] Speaker 04:
I do want to give the time back to Ms.

[00:13:02] Speaker 04:
Cortez.

[00:13:03] Speaker 04:
Well, this is the question that I think we need to have.

[00:13:06] Speaker 04:
It's in the brief.

[00:13:07] Speaker 04:
He did not investigate the question of ownership, Your Honor.

[00:13:10] Speaker 04:
He didn't investigate it.

[00:13:11] Speaker 04:
And then when he was told it, this is Todd Ellis.

[00:13:14] Speaker 04:
He was told he doesn't own the vehicle.

[00:13:15] Speaker 03:
OK.

[00:13:15] Speaker 03:
Well, we can read the brief.

[00:13:16] Speaker 03:
If you can't pinpoint where it is, then we need to move on.

[00:13:20] Speaker 03:
The appellees say that you cite no authority that holds an insurer owes a duty to settle a non-covered claim.

[00:13:27] Speaker 03:
And I'm just quoting from their brief on that.

[00:13:29] Speaker 03:
Is that true?

[00:13:30] Speaker 03:
No authority that a duty... You cite no authority that holds an insurer owes a duty to settle a non-covered claim.

[00:13:44] Speaker 04:
I would agree with that, and it is a red herring that doesn't mean anything, Your Honor.

[00:13:48] Speaker 03:
Well, if you have a non-covered claim, then what happens to your argument?

[00:13:53] Speaker 04:
Insurance companies settle claims every day without knowing whether they're going to be covered or not.

[00:13:57] Speaker 03:
Counselor, you're not listening to the question.

[00:13:59] Speaker 03:
Assume the claim is non-covered.

[00:14:02] Speaker 03:
Is there a duty to settle?

[00:14:04] Speaker 03:
And do you have any authority for that?

[00:14:06] Speaker 04:
If you can assume it's non-covered, which they could not do, so I reject it.

[00:14:12] Speaker 03:
I agree.

[00:14:12] Speaker 03:
I'm asking you, counsel.

[00:14:13] Speaker 03:
You don't disagree with the question.

[00:14:14] Speaker 03:
No, I just agree with you.

[00:14:16] Speaker 03:
What's the answer?

[00:14:18] Speaker 03:
Is there a duty to settle a non-covered claim under Colorado law?

[00:14:23] Speaker 04:
If that claim is non-covered and that's been determined, will you properly and timely reserve your rights?

[00:14:29] Speaker 05:
I want to understand the time frame.

[00:14:33] Speaker 05:
When does the duty attach in the context of the settlement situation?

[00:14:41] Speaker 05:
absolutely is not covered.

[00:14:43] Speaker 05:
That's one thing.

[00:14:44] Speaker 05:
But at the time that they rejected the offer to settle, if the knowledge they had did not indicate it was not covered, what is the implication of that for Colorado law?

[00:14:57] Speaker 04:
What Colorado says by statute and from the Trimble case forward in every single case, including the Ariana versus Cruz case that I attached as supplemental authority in every single case,

[00:15:11] Speaker 04:
The question is, would a reasonable insurer act this way, and if not, did it cause damage?

[00:15:18] Speaker 05:
Act this way when, is what I'm saying.

[00:15:22] Speaker 05:
Does timing matter?

[00:15:23] Speaker 04:
Timing is everything, yes.

[00:15:28] Speaker 04:
Do we think for purposes of law?

[00:15:30] Speaker 04:
When it comes to this, timing is absolutely everything.

[00:15:33] Speaker 04:
That's why we have rules about raising coverage defenses within a reasonable time.

[00:15:41] Speaker 04:
It's to prevent this very case of what happened.

[00:15:44] Speaker 04:
I don't think anyone should be OK with what happened and excuse what happened here.

[00:15:52] Speaker 04:
And I think it's sad.

[00:15:54] Speaker 04:
Thank you.

[00:15:57] Speaker 05:
All right.

[00:16:00] Speaker 05:
The case is counseled.

[00:16:02] Speaker 05:
We'll hear from you.

[00:16:10] Speaker 01:
May it please the court?

[00:16:11] Speaker 01:
Jeremy Mosely on behalf of Apolize, Garrison, and USAA.

[00:16:16] Speaker 01:
This case is about two auto policies that plainly exclude coverage for a motorcycle.

[00:16:21] Speaker 01:
As you heard, it is undisputed that exclusion B1 in the policy excludes

[00:16:27] Speaker 05:
coverage for a motorcycle.

[00:16:39] Speaker 05:
At the time that Ms.

[00:16:41] Speaker 05:
Abeita sought to settle, at the time that those settlement conversations were going on, it's my understanding that the light of B-1 had not shown itself in this case in terms of its ability to exclude coverage.

[00:16:58] Speaker 05:
So my question is, when do you judge this duty of common law bad faith?

[00:17:07] Speaker 05:
And to put a finer point on it, if at point A discussions occur in which somebody says, I'm ready to settle, and it is unclear, or it appears that there may be coverage, and the insurer denies it.

[00:17:24] Speaker 05:
Point B, a year down the road, the insurer knows that there is not coverage.

[00:17:30] Speaker 05:
When do you judge their common law of bad faith?

[00:17:35] Speaker 01:
Generally speaking, Colorado law says that you judge their conduct based on what was available at the time.

[00:17:41] Speaker 01:
you still have to have a duty that arises.

[00:17:44] Speaker 01:
And if there's no covered claim, there's no duty to settle.

[00:17:46] Speaker 05:
You judge their conduct.

[00:17:48] Speaker 05:
You judge their, well, I'm talking about the duty now to act, to settle.

[00:17:53] Speaker 05:
And what I'm saying is, do you measure the duty by what they knew at the time?

[00:17:57] Speaker 05:
That's what I understood you to say.

[00:17:59] Speaker 05:
And if that's true, what did you know at the time that this settlement was going on that would have allowed you to, in good faith, deny coverage?

[00:18:06] Speaker 05:
I mean, deny the settlement?

[00:18:09] Speaker 01:
So a few things.

[00:18:11] Speaker 01:
First of all, there's a difference between whether a duty arises and if there is a duty, how that's measured.

[00:18:17] Speaker 01:
So that's why I say that the good faith, how your conduct is measured, is measured based on what you knew at the time for the claim.

[00:18:26] Speaker 01:
But the duty doesn't arise if there was no coverage at all.

[00:18:29] Speaker 01:
So that's the distinction that matters first under Colorado law.

[00:18:32] Speaker 02:
Does that mean no matter what the conduct at point A, as Judge Holm said,

[00:18:38] Speaker 02:
And then later, it's determined that there's no coverage.

[00:18:41] Speaker 02:
Is that just retroactive?

[00:18:43] Speaker 02:
It wipes away any what would otherwise have been bad faith?

[00:18:47] Speaker 01:
It depends on the damages alleged.

[00:18:50] Speaker 01:
There still have to be damages flowing from that alleged bad faith condom.

[00:18:54] Speaker 05:
Well, there is a claim that there are damages.

[00:18:57] Speaker 05:
And Judge Heil stated it more elegantly than I could.

[00:19:00] Speaker 05:
That's the point.

[00:19:02] Speaker 05:
Does it retroactively, the fact that you later learn there's coverage, does it retroactively, let's assume that you acted in bad faith.

[00:19:11] Speaker 05:
I'm not making a judgment on that.

[00:19:13] Speaker 05:
Let's assume you acted in bad faith at point A, and we later find out there was not coverage at point B. Are you absolved from that bad faith at point A?

[00:19:23] Speaker 01:
If the only damages alleged are a failure to settle, and there was never a duty to settle, then there is no actionable conduct that can be tied to the damages being claimed.

[00:19:33] Speaker 01:
Well, I think they're claiming damages.

[00:19:36] Speaker 01:
The only damages they're claiming is an alleged failure to settle, and there was never a duty to settle because there was never coverage.

[00:19:41] Speaker 05:
No, no, no, no, no, no.

[00:19:45] Speaker 05:
the coverage issue I thought we were talking about as being discreet, the question of whether you ultimately had to settle, okay, well, whether there was ultimately coverage.

[00:19:56] Speaker 05:
You're saying that in that moment in time when that settlement conversation was going on, if, why could that, why could the argument not be that you acted unreasonably in that moment in time and not settling based upon what you knew at that time?

[00:20:14] Speaker 01:
At the time, first of all, because you also asked this as well, what is the evidence, in volume 6, page 1045 in the record and around there, there are the letters that USAA sent and Garrison sent saying from the outset that there was no coverage.

[00:20:30] Speaker 01:
And because there was no coverage, they would not pay the claim.

[00:20:34] Speaker 01:
They say that this motorcycle is not insured by USAA or Garrison.

[00:20:39] Speaker 01:
They said that in the letter.

[00:20:41] Speaker 05:
When did those letters arise?

[00:20:43] Speaker 05:
I mean, is this after the lawyer communicated the information about B-1?

[00:20:49] Speaker 05:
What are we talking about now?

[00:20:50] Speaker 01:
We're talking about from the beginning.

[00:20:52] Speaker 01:
October of 2019, when Horton, pardon me, at Betas Council first raised a claim, the response was to say, our position is there is no coverage.

[00:21:01] Speaker 01:
Right.

[00:21:02] Speaker 02:
Why did they say there was no coverage at that time?

[00:21:04] Speaker 02:
It wasn't because of B-1.

[00:21:06] Speaker 01:
They did not cite specifically to B1.

[00:21:08] Speaker 01:
They cited to, well, first of all, their initial was to talk about potential UIM coverage based on the other driver's liability.

[00:21:18] Speaker 01:
They also then said, even for liability coverage, it wouldn't be covered because it's not listed, it's not insured under these policies.

[00:21:25] Speaker 01:
And they subsequently cited to B2 and talked about ownership, which ultimately correctly applied to one policy.

[00:21:33] Speaker 01:
the USAA policy and not to the garrison policy.

[00:21:37] Speaker 02:
Let me ask my same question with regard to Judge Mathis's question, because I ask it in the context of a duty to settle, so to speak.

[00:21:45] Speaker 02:
But let's just say that there's no reasonable investigation.

[00:21:49] Speaker 02:
It's just not done for whatever reason.

[00:21:51] Speaker 02:
Or it was sloppy.

[00:21:52] Speaker 02:
And then later, years later, you find out that there's no coverage based upon an issue that was really never raised.

[00:22:00] Speaker 02:
Does that retroactively wipe away

[00:22:03] Speaker 02:
any problems with the failure to investigate?

[00:22:06] Speaker 02:
It depends on the damages alleged.

[00:22:08] Speaker 02:
Because the duty to investigate is a separate duty, right?

[00:22:12] Speaker 01:
Yes, but it rises out of the contract.

[00:22:15] Speaker 02:
What's your position on whether the claimant preserved a failure to investigate claim?

[00:22:21] Speaker 02:
Is that an issue here?

[00:22:24] Speaker 01:
It's not because what they raised instead is focused on the

[00:22:30] Speaker 01:
duty failure to settle.

[00:22:32] Speaker 01:
And here's the key.

[00:22:35] Speaker 03:
In the abstract, can there be- Could I just jump in, because I've got a follow-up on that answer.

[00:22:42] Speaker 03:
Do you say anything about waiving that issue in your brief?

[00:22:48] Speaker 01:
Well, no.

[00:22:48] Speaker 01:
We argued and said what they focused on.

[00:22:50] Speaker 01:
Their brief focused on failure to settle, so we responded to that.

[00:22:53] Speaker 03:
Yeah, but did you address the unreasonable investigation

[00:22:58] Speaker 01:
question in your brief?

[00:23:09] Speaker 01:
It's undisputed their only damages are the excess verdict that flows from a failure to settle.

[00:23:14] Speaker 01:
Here's what matters.

[00:23:15] Speaker 01:
Horton is the insurer who the duty was owed to if any duty was owed previously in the claims handling.

[00:23:22] Speaker 01:
Horton testified that if he had been consulted about those demands being made, he did not have the money to make that claim or to make that payment.

[00:23:32] Speaker 01:
He also testified he would have simply told Garrison or USA that they should make the payment.

[00:23:36] Speaker 01:
What that turns back to is he's telling them that they should have made a payment for an uncovered claim.

[00:23:42] Speaker 03:
Well, counsel, I'm just asking you what you put in your brief, OK?

[00:23:46] Speaker 03:
Did you argue against any claim for unreasonable investigation?

[00:23:53] Speaker 03:
Counsel says it's all over, that it's all preserved.

[00:23:58] Speaker 03:
And my question, I think you just answered that you don't think it is.

[00:24:02] Speaker 03:
But did you waive the waiver by addressing it in your brief?

[00:24:06] Speaker 01:
No, because what we addressed in our brief was what they raised, and that's what I'm trying to put together, is the focus entirely of the arguments is the failure to settle.

[00:24:17] Speaker 03:
I think you've answered the question.

[00:24:18] Speaker 03:
Thank you.

[00:24:23] Speaker 05:
And what I'm struggling to understand is why could not damages flow from the failure to settle?

[00:24:30] Speaker 05:
And if your answer is because there was no coverage,

[00:24:34] Speaker 05:
That seems a very incomplete answer.

[00:24:36] Speaker 05:
I mean, if the issue is that there was an excess judgment as a result of your failure to settle based upon the information you knew at the time.

[00:24:45] Speaker 05:
And let's just pause it, assume that you were unreasonable in not settling at that point in time.

[00:24:52] Speaker 05:
And because you didn't settle at that point in time, what we ended up with was an excess judgment.

[00:24:57] Speaker 05:
Why couldn't damages flow from that excess judgment?

[00:25:03] Speaker 01:
the duty to settle arises from indemnity.

[00:25:07] Speaker 01:
And if there is no coverage, there is no duty to settle.

[00:25:10] Speaker 01:
That's the principle that the Lyra Court, the Colorado Supreme Court and Lyra B. Shelter made very clear in distinguishing between compensatory damages in that case that were covered and punitive damages that were not covered.

[00:25:23] Speaker 01:
What the court said is this, if the insurer has no contractual duty to indemnify the insurer for punitive damages,

[00:25:30] Speaker 01:
The insurer has no tort duty to settle in good faith with regard to those damages.

[00:25:35] Speaker 03:
Is this answer to Chief Judge Holmes in effect saying it didn't matter what they knew about coverage during this settlement, this key settlement period?

[00:25:48] Speaker 03:
All that matters is whether there in fact was coverage.

[00:25:52] Speaker 01:
On the issue for a duty to settle, correct.

[00:25:55] Speaker 01:
It doesn't matter what was known then, because you have to have the duty that arises before you apply the test of whether there's bad faith.

[00:26:01] Speaker 01:
The duty does not arise on a claim to settle that claim when it's a non-covered claim.

[00:26:07] Speaker 01:
And what was known at the time was that it was a motorcycle.

[00:26:10] Speaker 01:
Ownership was initially questioned.

[00:26:13] Speaker 03:
So let me just, this may be a hypothetical, but let's say during the settlement period,

[00:26:23] Speaker 03:
the company thought there was coverage, even though under the policy maybe there wasn't.

[00:26:32] Speaker 03:
Let's assume there wasn't once you look at the policy and study it and we can argue the exclusion, the exceptions and all that, but let's say that at the time they thought there was coverage and then didn't settle and then we have the excess judgment.

[00:26:47] Speaker 03:
Are you saying that doesn't matter?

[00:26:49] Speaker 03:
What really matters is just whether there was coverage

[00:26:52] Speaker 01:
When we're talking about a duty to settle, that is correct.

[00:26:56] Speaker 01:
What matters is whether there's coverage.

[00:26:57] Speaker 01:
That's what Lyra says.

[00:26:59] Speaker 01:
No duty to settle arises from uncovered damages.

[00:27:01] Speaker 02:
And I want to go back.

[00:27:02] Speaker 02:
Is your answer the same with regard to the duty to investigate, though?

[00:27:06] Speaker 02:
Is your answer the same?

[00:27:07] Speaker 02:
If there's no coverage, then that retroactively wipes away any breach of a duty to investigate?

[00:27:15] Speaker 01:
It depends on what damages are then alleged.

[00:27:17] Speaker 01:
I see.

[00:27:18] Speaker 01:
And that's why I refer to what Horton actually said.

[00:27:20] Speaker 02:
So your answer is different.

[00:27:22] Speaker 02:
on that.

[00:27:24] Speaker 02:
But you still have to show damages.

[00:27:26] Speaker 02:
But your answer is, if there's no coverage at the end, that doesn't wipe away your obligation to investigate reasonably.

[00:27:33] Speaker 02:
Is that correct?

[00:27:33] Speaker 02:
That's correct.

[00:27:34] Speaker 01:
But you then have to show what actual damages are tied to that.

[00:27:37] Speaker 03:
So what would be recoverable damages, and why weren't there recoverable damages here?

[00:27:44] Speaker 01:
Well, for example, when you have a non-covered claim, this is why Horton's testimony matters.

[00:27:49] Speaker 01:
It's one thing if Horton said, had I known about that offer at the time to which you were saying there's no coverage, I would have paid that claim.

[00:27:58] Speaker 01:
I would have entered that settlement.

[00:28:00] Speaker 01:
There are other courts in other states that apply that standard.

[00:28:02] Speaker 02:
But if they assert there's no coverage early on because they investigate it, and they show that there's no coverage, the case probably doesn't even go to trial, right?

[00:28:10] Speaker 01:
Well, not true, because they actually did investigate it.

[00:28:13] Speaker 01:
They said there was no coverage, and they kept coming back.

[00:28:15] Speaker 02:
Well, I mean no coverage on exclusion B1.

[00:28:18] Speaker 01:
Well, that's, I mean, we're hearing today that that's not even true because the other sections provide coverage.

[00:28:27] Speaker 01:
They were sent a copy of the policy in the middle of this, the liability section of the policy, and they still proceeded.

[00:28:32] Speaker 03:
Council, what about these internal documents in the record?

[00:28:37] Speaker 03:
where adjusters or counsel or whatever says there was coverage.

[00:28:41] Speaker 03:
What do we do with that?

[00:28:42] Speaker 01:
Well, I mean, first of all, that's evidence that isn't relative to what their actual damages being claimed are that tie back to the fact that there had to be a duty to settle for us to pay benefits first.

[00:28:53] Speaker 01:
The second thing is those specific documents were asking a single question.

[00:28:59] Speaker 01:
Does B2 apply?

[00:29:00] Speaker 01:
They weren't even addressing B1 in those documents.

[00:29:03] Speaker 01:
There are other documents that address B1 where

[00:29:05] Speaker 01:
the adjuster went and got a coverage opinion, and then after asking about B-1, issued the reservation of rice layer.

[00:29:11] Speaker 01:
So they're being over-read to claim that that meant there was coverage under the policy.

[00:29:16] Speaker 05:
Asking about B-1.

[00:29:17] Speaker 05:
I thought that B-1 surfaced because the lawyer told them about B-1.

[00:29:24] Speaker 01:
No, I mean.

[00:29:25] Speaker 01:
Wheeler-Trigg, that lawyer.

[00:29:27] Speaker 01:
Oh, no, no.

[00:29:28] Speaker 01:
Actually, the timing of that is incorrect.

[00:29:31] Speaker 01:
They had previously, before Wheeler-Trigg was involved, already started

[00:29:35] Speaker 01:
had already requested a coverage opinion from a different law firm, Sweet Mom and Sands.

[00:29:38] Speaker 01:
So while that's what ABETA claims in the record, that's not what's supported by the facts, volume 12, page 1806, you'll see Wendy Boyd testifies that earlier in August they were already requesting this coverage opinion completely separate from Wheeler-Trig because Wheeler-Trig's on the fence and they weren't looking to them for coverage at all.

[00:29:56] Speaker 01:
They were looking to a coverage opinion.

[00:29:57] Speaker 05:
Yeah, but did you find, was the first information you received about B-1 from Wheeler-Trig?

[00:30:02] Speaker 05:
No, it was not.

[00:30:03] Speaker 02:
Let me ask you a question.

[00:30:05] Speaker 02:
I understand this is a difficult question, but what is your position or your client's position on whether or not the claim was initially properly and reasonably investigated?

[00:30:17] Speaker 02:
What is your position on that?

[00:30:18] Speaker 01:
That it was properly and reasonably investigated.

[00:30:21] Speaker 01:
and determined there was no coverage, and that held up that there was no coverage.

[00:30:25] Speaker 01:
And Colorado laws also clear that you can't create coverage later.

[00:30:28] Speaker 02:
What's your position on whether the claim was properly investigated and timely investigated with regard to the reason there was no coverage, meaning ultimately B-1?

[00:30:37] Speaker 02:
What's your position on that?

[00:30:39] Speaker 01:
From the outset, the letter said it was not covered as a result of not being insured under the policy and not being listed on the policy.

[00:30:46] Speaker 01:
And that is part of what B-1 says too.

[00:30:49] Speaker 01:
I believe that there was sufficient information presented from the beginning as to what the ultimate coverage exclusion used that applies is.

[00:30:56] Speaker 01:
And because Colorado law is clear that you can't create coverage by estoppel, that same idea still applies that just because you mention one exclusion and don't mention all the others that could also apply doesn't mean you can't raise them later and it doesn't mean you acted in bad faith by doing that either.

[00:31:15] Speaker 01:
Well, didn't things go off track because

[00:31:19] Speaker 03:
there was a mistake in understanding that Nicholas owned the motorcycle and not the dad.

[00:31:28] Speaker 01:
That was one thing that he was relying on the adjuster and focusing on that exclusion when ultimately it applies to one policy and not the other.

[00:31:36] Speaker 01:
Why isn't that relevant to whether the investigation was reasonable?

[00:31:40] Speaker 01:
Because the only damages that have been alleged as a result of that are to say we should have gone ahead and paid a claim that was not covered.

[00:31:48] Speaker 01:
It's not tied to any other conduct and damages.

[00:31:51] Speaker 01:
That's the fundamental problem that the district court recognized.

[00:31:54] Speaker 01:
And that's why it should be affirmed.

[00:31:58] Speaker 01:
Thank you.

[00:32:01] Speaker 05:
30 seconds.

[00:32:07] Speaker 00:
Your Honor, there was an issue about the Wheeler-Trigg opinion, and that goes back to the reliance question.

[00:32:13] Speaker 00:
There was reliance from Mr. Horton because he relied on retained defense counsel to act in his best interests when they went behind his back.

[00:32:23] Speaker 00:
and issued this coverage opinion adverse to his interest.

[00:32:26] Speaker 02:
He said he wouldn't have done anything differently, though, didn't he?

[00:32:29] Speaker 00:
Your Honor.

[00:32:29] Speaker 02:
What would he have done differently?

[00:32:31] Speaker 00:
He had no right to handle the claim.

[00:32:34] Speaker 00:
If he would have been able to handle the claim, maybe he would have been able to do something differently.

[00:32:39] Speaker 00:
But he had no right to handle the claim.

[00:32:41] Speaker 00:
And so that's boxing him in on a legal argument.

[00:32:44] Speaker 00:
He couldn't pursue that avenue.

[00:32:45] Speaker 00:
And one last thing.

[00:32:46] Speaker 05:
I thought you were going to answer the question.

[00:32:49] Speaker 05:
Do your damages stem from anything other than a failure to settle?

[00:32:53] Speaker 00:
Your Honor, our damages stem from the unreasonable conduct, the excess judgment, which is prejudice as a matter of law.

[00:33:00] Speaker 05:
Which relates to the failure to settle, right?

[00:33:03] Speaker 00:
And it relates to emotional distress, having to go through the underlying trial.

[00:33:10] Speaker 00:
Emotional distress from the deck action.

[00:33:14] Speaker 00:
The reason why we're in this deck action is because Wheeler Trigg issued that opinion adverse to his interests.

[00:33:20] Speaker 00:
And the last point is,

[00:33:24] Speaker 00:
There was a letter that USA and Garrison sent to Horton right after he was sued, affirming coverage under the policy, which he did rely on that there was coverage.

[00:33:36] Speaker 02:
Chief, may I ask another question?

[00:33:37] Speaker 02:
Sure, of course.

[00:33:38] Speaker 02:
I'm going to ask you the same question I ask opposing counsel.

[00:33:41] Speaker 02:
So basically, I said, well, if they would have asserted B1 initially, maybe the case doesn't go to trial.

[00:33:48] Speaker 02:
But your position sounds like,

[00:33:51] Speaker 02:
it would have went to trial anyway if it didn't settle because you would have taken the position that you're taking now that there was coverage under the exception to exclusions B2 and 3, right?

[00:34:01] Speaker 00:
And let me make sure I understand the question.

[00:34:02] Speaker 00:
If they would have properly raised B1, would it have gone to trial?

[00:34:05] Speaker 02:
Well, would you have said, wait a minute, there's no coverage?

[00:34:09] Speaker 02:
I mean, the case goes away essentially.

[00:34:11] Speaker 00:
I think Horton would have informed in beta the insurance companies are saying there's no coverage.

[00:34:17] Speaker 02:
Well, that's what they were saying.

[00:34:19] Speaker 02:
But what would the position on the other side have been?

[00:34:21] Speaker 02:
Will there still coverage under B2 and B3?

[00:34:24] Speaker 00:
I think it raises a reasonable coverage dispute.

[00:34:29] Speaker 00:
And then there is a question from a beta whether to even pursue the claim, because this accident happened in 2018.

[00:34:37] Speaker 00:
Mr. Horton has been fighting this since 2018.

[00:34:40] Speaker 00:
and it's taken years of his life.

[00:34:43] Speaker 00:
And there needs to be an analysis, and there is an analysis by plaintiff's attorneys, would this be reasonable to pursue this?

[00:34:51] Speaker 00:
And in this case, we've been told they wouldn't have pursued it because it would have been a protracted fight.

[00:34:57] Speaker 00:
But since they denied it on a false basis, a beta thought, oh, there's definitely coverage.

[00:35:03] Speaker 00:
We're going to file suit against Horton, and Horton got roped into this.

[00:35:08] Speaker 00:
Thank you for your time, Your Honors.

[00:35:10] Speaker 02:
Well, I know there's some family members here, and I know this is all hard to hear, and I know it's a terrible tragedy under any circumstances, but I'm sorry for your loss.

[00:35:20] Speaker 02:
We're looking at this on legal issues, and that doesn't impact your loss.

[00:35:25] Speaker 02:
Either way, I understand that, so let me just say that.

[00:35:28] Speaker 05:
Okay, thank you.

[00:35:29] Speaker 05:
Case is submitted.

[00:35:29] Speaker 05:
Thank you, Counsel.

[00:35:31] Speaker 05:
And we'll take our 10-minute break now.