Opinion
Civil Action 22-cv-01397-CMA-MEH
12-15-2023
AUTUMN HESS, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.
RECOMMENDATION
Michael E. Hegarty, United States Magistrate Judge
Defendant has filed a Motion for Leave to Amend Defendant's Answer to Amended Complaint and Jury Demand (“Motion to Amend”). ECF 82. This is an action for underinsured motorist coverage arising out of an accident on December 29, 2020. The premise of the Motion is that in this litigation, Plaintiff actively concealed her application for Social Security Disability benefits, thereby violating the Parties' policy of insurance, which has a provision stating:
2. Concealment or Fraud
There is no coverage under this policy if you or any other person insured under this policy has made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under this policy.
ECF 58-1 at 48. The Motion to Amend seeks to add an affirmative defense of fraud, which, if proved, may result in voiding coverage altogether. ECF 82. In addition, by the proposed amendment Defendant seeks to recover attorney's fees under Colo. Rev. Stat. § 13-17-102(4) for vexatious and frivolous litigation. ECF 82-1 at ¶¶ 16.
The Court entertained oral argument on the Motion to Amend on December 14, 2023. ECF 91. For the following reasons, I recommend denying the Motion to Amend.
RELEVANT FACTS
This lawsuit concerns whether Defendant owes Plaintiff any underinsured motorist benefits. For the 2020 accident, the tortfeasor's insurer paid policy limits of $25,000.00 to Plaintiff. Plaintiff then sought underinsured motorist policy limits of $100,000.00 from her own carrier, Defendant. Plaintiff had had a very serious accident in 2017, and Defendant purportedly decided that any injuries Plaintiff was claiming in the 2020 “low impact” accident were attributable to the prior accident. Of course, any evidence that would distinguish between injuries suffered in 2017 and in 2020 is relevant. However, it also happens that Defendant was Plaintiff's insurer in 2017 and, as part of a claim made at that time, obtained all relevant medical records from Plaintiff relating to injuries received in that prior accident. Further, at the oral argument in this case, Defendant's counsel acknowledged that during the adjusting process for the 2020 claim, the claims adjustor had access to, and considered, those prior medical records.
A month before the accident underlying this case, in November 2020, Plaintiff applied for Social Security Disability benefits (“SSDI”). Under section 423(d)(1)(A) of the Social Security Act, a claimant seeking SSDI must prove that she suffers from an “inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which . . . has lasted or can be expected to last for a continuous period of not less than 12 months.” 42 U.S.C. § 423(d)(1)(A). To meet this definition, the claimant must have a severe impairment that renders her unable to do her past relevant work or any other substantial gainful work that exists in the economy. 42 U.S.C. § 423(d)(2)(A); 20 C.F.R. § 404.1520. Thus, any application by Plaintiff for SSDI included her representation that she suffered from such impairment(s). Ultimately, SSDI benefits were denied. And Plaintiff's application file with the Social Security Administration (“SSA”) would inevitably have many relevant medical records.
In November 2022, Defendant asked Plaintiff in discovery to produce any documents relating to any benefits Plaintiff ever sought from the SSA. ECF 82-2 at 3. On December 5, 2022, Plaintiff responded to this request by stating she had “never received . . . federal SDDI [sic] disability benefits.” Id. This was evasive at best. It certainly did not inform Defendant of the truth of the prior application. Then, on March 20, 2023, during her deposition in this case, Plaintiff revealed for the first time that she applied for SSDI in November 2020. ECF 82-3 at 2. Thereafter, Defendant did not attempt to obtain records directly from the SSA either through a release or subpoena, but instead sought them through Plaintiff's counsel. Plaintiff's counsel provided “approximately 6,000 pages of Plaintiff's SSDI file on March 31, 2023,” ECF 82 at 4, barely a week after Plaintiff's deposition. Apparently, those pages were not all of the administrative record from the SSA. In November, based on this Court's directive, additional documents were produced, including a transcript of the SSA appeal hearing. Id. at 5.
As noted above, Defendant now seeks to amend its Answer by adding an affirmative defense of fraud.
LEGAL AUTHORITY
Rule 15 of the Federal Rules of Civil Procedure states that after the deadline for amending a pleading once as a matter of course, “a party may amend its pleading only with the opposing party's written consent or the court's leave.” Fed.R.Civ.P. 15(a)(2). The Court has discretion and “should freely give leave when justice so requires.” Id. “Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment.” Maloney v. City of Pueblo, 323 F.R.D. 358, 360 (D. Colo. 2018) (quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993)). “It is well settled in this circuit that untimeliness alone is a sufficient reason to deny leave to amend . . . especially when the party filing the motion has no adequate explanation for the delay.” Frank, 3 F.3d at 1365-66 (internal citations omitted). A motion to amend is also “subject to denial” if “the party seeking amendment knows or should have known of the facts upon which the proposed amendment is based but fails to include them in the original complaint.” Id. at 1366 (internal citation omitted).
ANALYSIS
Defendant first argues there has been no undue delay in filing the Motion to Amend. I disagree. Defendant states: “The specific factual basis for the affirmative defense is that Plaintiff violated the fraud clause of her insurance contract by concealing that she applied for SSDI benefits one month prior to the subject accident.” ECF 82 at 3. Defendant knew all the facts necessary to support this allegation in March 2023. The Motion to Amend was filed eight months later, on November 28, 2023. Defendant offers no explanation for this delay, merely stating that it was not until November 2023 that Defendant had the “full and complete SSDI file.” ECF 82 at 5. Defendant makes no representation of any material facts in the trailing production that were not contained in the documents provided in March 2023. In my view, this is not even a close case.
Defendant next argues that granting the Motion to Amend will not occasion any undue prejudice on Plaintiff. Again, I disagree. Discovery closed in August 2023. ECF 40. The Final Pretrial Conference is scheduled for December 20, 2023. ECF 79. Up to this point, Plaintiff has been litigating a claim that may, if successful, provide her up to $100,000.00 in contract benefits; twice that in statutory penalties if she proves Defendant's conduct was unreasonable under Colo. Rev. Stat. §§ 10-3-1115, 1116; attorney's fees if she prevails on her statutory claims; and additional damages if she prevails on her common law bad faith claim. The Motion to Amend seeks to insert a defense that would completely avoid all liability and, perhaps, make Plaintiff liable for Defendant's attorney's fees in this litigation.
At the oral argument on the Motion to Amend, Plaintiff's counsel stated credibly that had allegations been a part of this case during discovery-given the “death knell” nature to Plaintiff of any such theory-he would have explored this through numerous avenues, including the Rule 30(b)(6) deposition of Defendant's representative. In my own experience, such a pending allegation also fundamentally alters a party's view toward settlement. To emphasize the surprise this would occasion on Plaintiff, counsel noted, both in the Response (ECF 88) and at oral argument, that on June 2, 2023, more than two months after Defendant knew about the SSDI application and had most of the SSA file in its possession, Defendant's Rule 30(b)(6) representative testified that State Farm was not accusing Plaintiff of committing fraud. ECF 88 at 3. Based on all these circumstances, it is clear to me that these “new allegations add[ing] an element of fraud . . . materially change[s] the nature of [Defendant's theory] and alter[s] the scope of the litigation. Since discovery is closed, the addition of these allegations would result in undue prejudice ....” Slemp v. Transamerica Ins. Co., No. CIV. 87-1354-FR, 1989 WL 35871, at *6 n.2 (D. Or. Apr. 12, 1989).
I view a denial of a motion to amend to be “dispositive” and thus done through a Recommendation, because it would dispose of Defendant's ability to assert the affirmative defense of fraud at trial. See, e.g., S. Buffalo Dev., LLC v. PVS Chem. Sols., Inc., No. 21-cv-1184S, 2023 WL 3713840, at *2 (W.D.N.Y. May 30, 2023); Asten v. City of Boulder, No. 08-cv-00845-PAB
CONCLUSION
For the foregoing reasons, I respectfully recommend denying the Motion to Amend [ECF 82].
Be advised that all parties shall have fourteen (14) days after service hereof to serve and file any written objections in order to obtain reconsideration by the District Judge to whom this case is assigned. Fed.R.Civ.P. 72. The party filing objections must specifically identify those findings or recommendations to which the objections are being made. The District Court need not consider frivolous, conclusive, or general objections. A party's failure to file such written objections to proposed findings and recommendations contained in this report may bar the party from a de novo determination by the District Judge of the proposed findings and recommendations. United States v. Raddatz, 447 U.S. 667, 676-83 (1980); 28 U.S.C. § 636(b)(1). Additionally, the failure to file written objections to the proposed findings and recommendations within fourteen (14) days after being served with a copy may bar the aggrieved party from appealing the factual findings and legal conclusions of the Magistrate Judge that are accepted or adopted by the District Court. Duffield v. Jackson, 545 F.3d 1234, 1237 (10th Cir. 2008) (quoting Moore v. United States, 950 F.2d 656, 659 (10th Cir. 1991)).