Case That Clarified Insurance Statute Gets Case of the Year Nomination

Appeals process outlived plaintiff, who died of cancer soon after underlying jury verdict

Colorado’s legislature enacted the state’s insurance bad faith statute in 2008, but landmark Colorado Supreme Court rulings on the subject have only existed since last year. Before the high court delivered a handful of decisions in 2018, it hadn’t been clear how claims under the statute should be classified, which in turn resulted in uncertainty about the statute of limitations and how to calculate the amount plaintiffs can recover. 

One case that helped provide key clarification has earned a nomination for the Case of the Year Award from the Colorado Trial Lawyers Association for attorneys from Levin Sitcoff and Keating Wagner Polidori Free. The lawsuit, Casper v. Guarantee Trust Life Insurance Company, involved claims that the insurance company unreasonably denied the plantiff’s claim for insurance benefits on what was ultimately terminal cancer. Michael Casper, the plaintiff, died nine days after the jury delivered a verdict in his favor, which added additional obstacles in the case’s appeals. The insurance company argued Casper’s death should have voided the jury award under the survival statute.

The case began at the trial level in 2012 and got final word from the Colorado Supreme Court in spring 2018. Zach Warzel, a partner at Keating Wagner, led the case for Casper at trial, and brought in Levin Sitcoff attorneys Brad Levin and Nelson Waneka during the appeals. Levin did the arguments for the Court of Appeals, and Waneka argued the case before the Supreme Court.

Warzel said the insurance policy involved in the lawsuit had an element of fraud because the company’s agents sold it as a straightforward policy for benefits in case of a first diagnosis of certain serious illnesses, but in reality, the policy contained a lot of esoteric fine print that transformed it into an agreement a reasonable person couldn’t be expected to understand. Casper had purchased a “first diagnosis cancer benefit” insurance policy from Guarantee Trust Life Insurance that purported to provide benefits if he got a diagnosis of cancer, stroke or heart attack for the first time while he held the policy. 

But when Casper received a prostate cancer diagnosis several months later, GTL denied his claim for benefits because he had gotten treatment for an enlarged prostate several years before he purchased the insurance policy. When denying his claim, GTL cited language in the policy Casper purchased that defined a “first diagnosis” saying “cancer will not be a covered condition if advice or treatment is received within the Waiting Period, or prior the effective date, and such advice or treatment results in the First Diagnosis of Cancer.”

The trial court judge agreed with Casper’s attorneys that the policy language was ambiguous, which under Colorado law automatically gets construed in favor of the insurance policyholder. 

“It was just so palpably wrong,” Waneka said. “The way they defined first diagnosis was just insane.” Warzel added that even if a lay person tried to read the policy Casper held top to bottom, they probably wouldn’t understand it.

In 2014, the trial court returned its verdict in favor of Casper. The jury awarded $50,000 each for breach of contract and unreasonably denied benefits, $150,000 in economic damages for bad faith and $4 million in punitive damages. The Court of Appeals affirmed that ruling in 2016.

The case’s impact stretches beyond Casper and his family. The Supreme Court’s opinion provided a key clarification about Colorado’s insurance bad faith statute that awards under the law are damages, not penalties. Damages are a more plaintiff-friendly classification than penalties because damages carry a two-year statute of limitations instead of one, and also have the possibility for plaintiffs to recover a higher amount of money. Under the bad faith statute, they can recover three times the amount of benefits at issue plus attorney fees if they can show an unreasonable delay or denial of benefits payments.

Warzel said that distinction is important because, otherwise, plaintiffs with small insurance claim amounts would have a hard time finding attorneys to represent them. He and Waneka estimated between Keating Wagner and Levin Sitcoff, the firms put in thousands of hours on the case. 

“It used to be the case that it would be really hard to find a lawyer to help you with that sort of claim, because there isn’t enough money at stake to get a lawyer on board on a contingent fee,” he said. “[The statute] gives you teeth as a lawyer when you have a small insurance claim.”

Because the case ventured into uncharted waters of Colorado law, Waneka and Warzel said creative lawyering played an important role. Waneka’s briefs and oral arguments discussed 16th-century English common law that a plaintiff’s damages don’t extinguish once they have been awarded in a verdict — even if the plaintiff dies.

“It turned into a history lesson,” Warzel said. Waneka added he ended up researching thousands of cases to inform his work. 

“We were totally in uncharted territory in 2018, but we’re citing to a rule that’s 500 years old,” Waneka said. “We had no idea what the court was going to do with it.”

The attorneys said they believe the case has shown that insurance companies can’t get away with pushing everyday people like Casper around. Warzel took Casper’s trial deposition by video because by the time the trial came around, Casper was in hospice care. When asked what he wanted to come out of the case, one line of Casper’s statements stood out as his voice began to break: “I want them to take this frustration out of my voice.”

— Julia Cardi

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