Goodson v. American Standard Insurance Co. of Wisconsin , 89 P.3d 409 ( 2004 )

Justice COATS,

concurring in the judgment only.

While I do not suggest that the rationale of the court of appeals in Trimble III¹ applies of necessity to first-party, bad-faith-breach-of-contract claims, nor even that the majority’s damages rule in this case transgresses any great principle of law, I can see no reason to gratuitously overturn an existing and eminently reasonable damage limitation in the third-party context that has governed the jurisdiction for more than fifteen years. I therefore concur only in the judgment of the court and not in its opinion.

After this court decided in Trimble II² that the breach of an insurance contract, unlike the breach of any other kind of contract, can give rise to a claim for damages in tort, the court of appeals addressed the question whether those damages can include emotional distress, and if so, upon what showing. Because this court held in Trimble II, 691 P.2d at 1142, that a “bad faith” breach (nomenclature notwithstanding) could be premised upon nothing more than unreasonable (negligent) withholding of payment by an insurer, the court of appeals compared it to the tort of negligent infliction of emotional distress, noting that the latter required a showing of bodily harm or a substantial risk of bodily harm. See Trimble III, 768 P.2d at 1245-46 (citing Towns v. Anderson, 195 Colo. 517, 579 P.2d 1163 (1978), adopting the approach of the Restatement Second of Torts). In seeking a justification for the recovery of damages for emotional distress in “bad faith” breach cases that would not completely ignore the danger of wholly fictitious claims, the court of appeals adopted the California approach, sanctioning recovery for emotional distress, but only upon a showing of substantial property or economic loss. Id. at 1246; see also Gruenberg v. Aetna Ins., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973); Crisci v. Security Ins., 66 Cal.2d 425, 58 Cal.Rptr. 13, 426 P.2d 173 (1967).

Whether or not a similar damage limitation might prove useful in the first-party context, there is admittedly nothing inherent in the rationale of Trimble III requiring it. Unlike negligence, the reckless disregard required for first-party claims in Colorado arguably aligns them more closely with claims for intentional infliction of emotional distress, in which the proof of intent itself provides the necessary protection against fictitious and superficial claims. In the absence, however, of any obligation to prove fault greater than negligence, proof of economic loss, or at least a substantial risk of economic loss, apart from emotional distress may very well be essential to any realistic assessment of insurance claims and constructing a barrier against recovery for what may be little more than irritating delays or trivial slights. See Aetna, 9 Cal.3d at 579, 108 Cal.Rptr. 480, 510 P.2d 1032 (limiting recovery for “mere bad manners” and litigation in “the field of trivialities”); see also Gourley v. State Farm, 53 Cal.3d 121, 127-29, 3 Cal.Rptr.2d 666, 822 P.2d 374, 377-80 (1991) (“It is the financial loss or risk of financial loss which defines the cause of action....”); Kunkel v. U.S. Ins. Co., 84 S.D. 116, 132, 168 N.W.2d 723, 732 (1969) (damages for mental suffering based on showing of insurer's negligence permitted only upon evidence that insured suffered financial distress, property loss, loss of employment, or other pecuniary loss); cf. Anderson v. Continental Ins., 85 Wis.2d 675, 696, 271 N.W.2d 368, 378 (1978) (even upon showing of reckless disregard, recovery for emotional distress requires proof of substantial damages aside and apart from emotional distress itself).

In any event, no third party claim, premised solely on a theory of negligence, is before us, and we are therefore not called upon to resolve that question, much less overrule well-established case law already purporting to resolve it. In my opinion, the majority’s choice to do so, along with its rationale accommodating damages for emotional distress in breach of insurance contract claims generally, comfortably situates this holding within a line of recent holdings by this court deviating from traditionally accepted principles of tort and contract law, all with the practical effect of facilitating and enhancing recoveries from insurance providers. See, e.g., Trimble II, 691 P.2d at 1141 (despite duty of good faith and fair dealing implied in all contracts, only breach of insurance contract gives rise to claim for damages in tort); Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1270-72 (1985)(expanding rule of Trimble to include worker’s compensation insurer); Scott Wetzel Servs., Inc., v. Johnson, 821 P.2d 804, 812 (Colo.1991) (expanding rule of Savio to include tortious damages against independent worker’s compensation claims adjuster); Transamerica Premier Ins. Co. v. Brighton Sch. Dist. 27J, 940 P.2d 348, 352 (Colo.1997)(expanding insurer/insured relationship to include relationship of surety and beneficiary); Giampapa v. Am. Fam. Mut. Ins. Co., 64 P.3d 230, 237 (Colo.2003)(allowing recovery for 'willful and wanton breach of insurance contract, over and above statutory treble damage award for willful and wanton breach of PIP coverage, and expanding recovery for emotional distress resulting from willful and wanton breach of contract); Cary v. United of Omaha Life Ins. Co., 68 P.3d 462, 469 (Colo.2003) (expanding Trimble to permit tort claim against agent of insurer for its role in insurer’s decision to withhold payment).

As I have indicated elsewhere, see Cary, 68 P.3d at 496-72 (Coats, J., dissenting); Giampapa, 64 P.3d at 255-56 (Coats, J., dissenting), I would leave regulation of the insurance industry, and all of the public policy choices that implies, to a primarily deliberative, rather than adjudicative, process. I therefore join only in the judgment of the court.

1 . Farmers Group, Inc. v. Trimble, 768 P.2d 1243 (Colo.App.1988).

2 . Farmers Group, Inc. v. Trimble, 691 P.2d 1138 (Colo.1984).