Chapter 17 - § 17.4 • PUNITIVE DAMAGES ARE LIKELY NOT RECOVERABLE AS PART OF A STATUTORY BAD FAITH CLAIM

• Jurisdiction: Colorado

§ 17.4 • PUNITIVE DAMAGES ARE LIKELY NOT RECOVERABLE AS PART OF A STATUTORY BAD FAITH CLAIM

In Guarantee Trust Life Insurance Co. v. Estate of Casper, 2018 CO 43, ¶ 1, the court held "that an award of attorney fees and costs under section 10-3-1116(1) is a component of the 'actual damages' of a successful claim under that section." The implication of this case is that since damages for statutory bad faith are "actual damages," they may be used to determine the amount of recoverable punitive damages based upon the one-to-one ratio between compensatory and punitive damages under C.R.S. § 13-21-102(1)(a). However, the court did not address the issue of whether damages recoverable for statutory bad faith are for "a wrong done to the person or to personal or real property," a prerequisite for the award of punitive damages under C.R.S. § 13-21-102. As discussed below, it appears probable the Colorado Supreme Court, if facing this question, would determine that punitive damages are not recoverable for statutory bad faith claims because such claims are not based upon "a wrong done to the person or to personal or real property."

§ 17.4.1—The Casper Case

Michael Casper (Casper) brought an action against Guarantee Trust Life Insurance Company (GTL) for breach of contract, common law bad faith, and statutory bad faith under C.R.S. § 10-3-1116(1). On July 15, 2014, the jury returned a verdict in Casper's favor on all three claims and awarded him compensatory damages, including non-economic damages, and punitive damages. The trial court immediately made an oral order entering judgment in favor of Casper, but on July 24, 2014, Casper died, before a written order of judgment had been entered. On October 30, 2014, the trial court entered judgment in favor of Casper's Estate (the Estate) for almost two million dollars, nunc pro tunc July 15, 2014. GTL moved to amend the judgment to exclude attorney fees and costs from the calculation of actual damages serving as a basis for the punitive damages award and also asserted that the survival statute, C.R.S. § 13-20-101(1), required a significant reduction in damages. GTL appealed from the trial court's order denying the motion to amend, and the court of appeals affirmed. The supreme court for the most part affirmed the court of appeals' judgment but held that the court of appeals erred in finding that it was proper for the trial court to have entered judgment nunc pro tunc.

The court noted that under the survival statute, "all actions survive the death of either party except actions for slander or libel." 2018 CO 43, ¶ 6. Casper's claims all survived since none were for libel or slander. However, the survival statute "does limit the damages available to a successful litigant in two primary scenarios: (1) when punitive damages and penalties are at issue ('penalty limitation'); and (2) in tort actions based on personal injury ('personal-injury limitation')." Id. at ¶ 8. The court recognized that since the penalty limitation "states that 'punitive damages shall not be awarded nor penalties adjudged after the death of the person against whom such punitive damages or penalties are claimed' . . . this limitation could not possibly apply in this case because GTL — the party 'against whom such punitive damages or penalties' were claimed - still exists." Id. at ¶ 9. The court overruled Kruse v. McKenna, 178 P.3d 1198, 1200 (Colo. 2008), to the extent that Kruse "intimated that the statute's limitation on penalties and punitive damages applies when either party dies." Id. at ¶ 10.

The court next examined the personal-injury limitation, which states that "'in tort actions based upon personal injury, the damages recoverable after the death of the person in whose favor such action has accrued shall be limited to loss of earnings and expenses sustained or incurred prior to death and shall not include damages for pain, suffering, or disfigurement . . . .'" Id. at ¶ 6. The court concluded that Casper's breach of contract claim and statutory bad faith claim under § 10-3-1116 were not tort actions based upon personal injury. Id. at ¶¶ 13 and 14. Moreover, even assuming (but not deciding) that Casper's common law bad faith claim was a tort action based upon personal injury, the court held that the personal-injury limitation did not limit recovery of non-economic damages here. The court noted that "the personal-injury limitation limits only damages 'recoverable' after the death of the plaintiff." Id. at ¶¶ 15 and 16. The court found that "Casper recovered his damages for bad-faith breach of insurance contract within the meaning of the survival statute when the jury returned its verdict on that claim." Id. at ¶ 17. Since the non-economic damages were recovered before Casper's death, the personal-injury limitation did not apply. Id.

The court also rejected GTL's argument that the award of punitive damages was subject to the personal-injury limitation, not the penalty limitation. Id. at ¶ 18. The court held that "the survival statute limits punitive damages only when 'the person against whom such punitive damages . . . are claimed' has died." Id. at ¶¶ 19 and 20. Therefore, the court concluded that all of Casper's claims, including the awards of compensatory and punitive damages, survived his death. Id. at ¶ 21.

Next, the court rejected GTL's...