                                                                        FILED
                                                            United States Court of Appeals
                                                                    Tenth Circuit

                                                                   January 6, 2016
                      UNITED STATES COURT OF APPEALS
                                                   Elisabeth A. Shumaker
                                                                    Clerk of Court
                                  TENTH CIRCUIT


 TRACEY CHECKLEY, individually
 and on behalf of her minor child James
 Checkley,

          Plaintiff - Appellant/Cross-
          Appellee,
                                                  No. 14-1482 and 14-1495
 v.                                            (D.C. No. 1:14-CV-02369-RPM)
                                                          (D. Colo.)
 ALLIED PROPERTY AND
 CASUALTY INSURANCE
 COMPANY,

          Defendant - Appellee/Cross-
          Appellant.


                             ORDER AND JUDGMENT *


Before TYMKOVICH, Chief Judge, KELLY, and LUCERO, Circuit Judges.


      In this removed civil action now on appeal, Plaintiff-Appellant and Cross-

Appellee Tracey Checkley appeals from the district court’s judgment dismissing

her complaint and action against Defendant-Appellee and Cross-Appellant Allied

Property and Casualty Insurance Co. (Allied). Allied cross-appeals from the



      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
district court’s judgment denying its motion for attorney’s fees. Our jurisdiction

arises under 28 U.S.C. § 1291, and we affirm.



                                   Background

      On August 28, 2013, Johnny Branner invited sixteen-year-old Plaintiff

James Checkley to go four-wheeling near Woodland Park, Colorado. The trip

began with Mr. Branner driving his 1999 Jeep Cherokee. Eventually Mr. Branner

pulled over and asked Mr. Checkley, who was not licensed, to drive so that Mr.

Branner could text his girlfriend. Mr. Checkley agreed. While driving down a

dirt and gravel road in Pike National Forest, Mr. Checkley swerved to avoid an

animal and struck a tree. Mr. Checkley fractured his hip socket in the accident.

      Mr. Checkley and his mother filed a claim with GEICO, which insured the

vehicle under Mr. Branner’s mother’s policy. GEICO denied liability for the

Checkleys’ claim, however, because Mr. Branner’s mother had reported different

facts, including that Mr. Checkley was not in the car. The Checkleys then filed a

claim with their insurer, Allied, under the uninsured/underinsured motorist

(UM/UIM) coverage, which included James Checkley, as a relative of the policy

holder. The policy provided that Allied would pay “compensatory damages . . .

which are due by law to you or a relative from the owner or driver of an

uninsured motor vehicle because of bodily injury suffered by you or a relative.”




                                       -2-
Aplt. App. 95. Allied denied the Checkleys’ claim. 1 The Allied policy excluded

from the definition of “uninsured motor vehicle” any motor vehicle operated by

the insured or a relative. Thus, the policy excluded UM/UIM coverage when the

insured or a relative was driving the vehicle at the time of the accident.

      After Allied denied this claim, the Checkleys filed suit in Colorado state

court against Allied. The complaint alleged: (1) breach of contract; (2) breach of

common law duty of good faith and fair dealing (bad faith breach of insurance

contract) in denying the claim; and (3) violation of Colorado Revised Statutes

sections 10-3-1115 and 10-3-1116. Allied removed the case to federal court and

filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). After a

hearing, the district court granted the motion, dismissed all three claims, and

denied Allied’s request for attorney’s fees under Colorado Revised Statutes

section 13-17-201. Because the Allied policy exclusion precludes the UM/UIM

claim and because this exclusion does not violate Colorado public policy, we

affirm the district court’s dismissal of all of the Checkleys’ claims. Because the

substantial predicate of the Checkleys’ claims is the breach of contract claim, we

also affirm the district court’s denial of attorney’s fees.




      1
        At oral argument, counsel indicated that Allied did pay medical under the
policy. Oral Arg. at 30:25–30:47.

                                         -3-
                                      Discussion

      Our review is de novo. To survive a motion to dismiss, the plaintiff must

allege facts that “if assumed to be true, plausibly suggest the defendant is liable.”

Kan. Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1214 (10th Cir. 2011). A

court must not “weigh potential evidence that the parties might present at trial,

but . . . assess whether the plaintiff’s . . . complaint alone is legally sufficient to

state a claim for which relief may be granted.” Brokers’ Choice of Am., Inc. v.

NBC Universal, Inc., 757 F.3d 1125, 1135 (10th Cir. 2014) (internal quotations

and citation omitted). We accept all well-pleaded facts as true, along with

reasonable inferences from those facts. Colony Ins. Co. v. Burke, 698 F.3d 1222,

1228 (10th Cir. 2012). We review the denial of a request for attorney’s fees

under a statute de novo. See Corneveaux v. CUNA Mut. Ins. Grp., 76 F.3d 1498

(10th Cir. 1996) (quoting Supre v. Ricketts, 792 F.2d 958, 961 (10th Cir. 1986)).

The parties agree that Colorado state law controls in this diversity action.

A.    Breach of Contract

      The Checkleys contend that by denying UM/UIM coverage, Allied has

breached the insurance contract. Applying the exclusion, they argue, would

violate Colorado law requiring coverage in this case. Colorado law mandates

UM/UIM coverage be offered in every insurance contract. Colo. Rev. Stat.

§ 10-4-609. This coverage must “include coverage for damage for bodily injury

or death that an insured is legally entitled to collect from the owner or driver of

                                          -4-
an underinsured motor vehicle.” Id. § 10-4-609(4) (emphasis added). The

Checkleys argue the UM/UIM statute requires the contract to include coverage

because they are “legally entitled to collect” against Mr. Branner under the theory

of negligent entrustment. They rely upon Casebolt v. Cowan, 829 P.2d 352

(Colo. 1992) (en banc), which they maintain recognized such a theory. Because

parties cannot contractually limit required coverage, see, e.g., DeHerrera v.

Sentry Ins. Co., 30 P.3d 167, 173 (Colo. 2001) (en banc), the Checkleys argue

that the exclusion in the policy is void and to deny them coverage would be a

breach of contract.

      Allied responds that Casebolt recognized the tort of negligent entrustment

only in drunk driving cases, so the terms of the insurance policy do not conflict

with Colorado public policy or law. Thus, the policy excludes the Checkleys’

claim. We need not read Casebolt as narrowly as Allied to conclude that

negligent entrustment, as recognized in Colorado, does not bar the exclusion in

this case.

      In Casebolt, a surviving spouse sued her husband’s employer for wrongful

death. The husband died driving the employer’s vehicle while intoxicated.

Casebolt, 829 P.2d at 353. The surviving spouse claimed that the employer knew

the decedent had an alcohol problem but still permitted him to drive the company

car after drinking. Id. at 354–55. The surviving spouse based her case on a

theory of negligent entrustment, and the Colorado Supreme Court “confirm[ed]

                                        -5-
that the doctrine of negligent entrustment is part of the law of negligence in this

state.” Id. at 355, 357.

      In determining the applicability and scope of the doctrine, the court turned

to the Restatement (Second) of Torts, specifically sections 308 2 and 390. 3 Id. at

358. The court, however, refused to adopt sections 308 and 390 outright:

      We believe it would be misleading to use the word “adopt” as applied

      to our reliance on the Restatement rules. We consider those rules

      appropriate for analysis of the present case without holding that they

      would necessarily apply to all fact situations that could be construed to

      come within their ambit.



      2
          That pertinent section provides:

      It is negligence to permit a third person to use a thing or to engage in
      an activity which is under the control of the actor, if the actor knows or
      should know that such person intends or is likely to use the thing or to
      conduct himself in the activity in such a manner as to create an
      unreasonable risk of harm to others.

Restatement (Second) of Torts § 308 (Am. Law Inst. 1965).
      3
          That pertinent section provides:

      One who supplies directly or through a third person a chattel for the use
      of another whom the supplier knows or has reason to know to be likely
      because of his youth, inexperience, or otherwise, to use it in a manner
      involving unreasonable risk of physical harm to himself and others
      whom the supplier should expect to share in or be endangered by its
      use, is subject to liability for physical harm resulting to them.

Id. § 390 (Am. Law Inst. 1965).

                                         -6-
Id. at 358 n.6. The court refused to “impose a rigid, formalistic analysis on

entrustment cases.” Id. at 359. Rather, the court indicated a case-by-case

approach to negligent entrustment, requiring courts to analyze and consider

whether policy factors preclude the application of the doctrine. 4 See id. at 361.

      We, like the court in Casebolt, take guidance from the Restatement, which

explains that “[o]ne who accepts and uses a chattel knowing that he is

incompetent to use it safely . . . is usually in such contributory fault as to bar

recovery.” Restatement (Second) of Torts § 390, cmt. c (Am. Law Inst. 1965).

The Restatement thus normally bars recovery under a negligent entrustment

theory when “the person to whom the chattel is supplied realizes his

incompetence . . . .” See id. § 390, cmt. d. An illustration provided by the

Restatement includes facts strikingly similar to this case:

      A permits B, whom he knows to be an inexperienced driver, to use his

      car. B invites his friend C, who knows of his inexperience, to drive

      with him. B’s inexperience leads him to drive in a way which is

      obviously improper. In so doing he collides with the carefully driven

      car of D. The collision results in harm to both B and C. While neither

      4
         In Casebolt, the court considered “the risk involved, the foreseeability
and likelihood of injury as weighed against the social utility of the actor’s
conduct, the magnitude of the burden of guarding against injury or harm, and the
consequences of placing the burden upon the actor,” to determine if any policy
factors counseled against the doctrine’s application. Casebolt, 829 P.2d at 361
(internal quotation and citation omitted). These factors, however, were not
exclusive. Id.

                                         -7-
       B nor C may recover against A, A is subject to liability to D.

Id. § 390, cmt. d, illus. 8.

       This case, therefore, mirrors an exclusion from the doctrine of negligent

entrustment that the Restatement anticipated. Mr. Branner asked Mr. Checkley to

operate the vehicle. Mr. Checkley knew he was not licensed to do so. Even

assuming that Mr. Branner’s request was negligent, Mr. Checkley cannot recover

for this because he knew of his own inexperience. 5 We do not believe that the

Colorado court would extend the scope of negligent entrustment beyond the

Restatement, especially given the limiting language used in Casebolt.

       Our application of Casebolt and the Restatement to this case is bolstered by

the policy behind Colorado’s UM/UIM statute, articulated in Terranova v. State

Farm Mutual Automobile Insurance Co., 800 P.2d 58 (Colo. 1990) (en banc). In

Terranova, the insured’s children sought to recover UM/UIM benefits after their

       5
         The Checkleys argue that Mr. Checkley’s knowledge of his experience is
a question of fact and not appropriate for determination on a motion to dismiss.
But Mr. Checkley admitted he knew of his inexperience in an interview
incorporated into the complaint. At the hearing on the motion to dismiss, the
court suggested treating the allegations in plaintiffs’ response and the two
exhibits (the interview and a letter from the attorney) as constituting an amended
complaint. Aplt. App. 189–90. The parties agreed and the court based its legal
determination on the facts alleged in this “amended complaint.” Id. at 190–91;
see also Hall v. Bellmon, 935 F.2d 1106, 1112 (10th Cir. 1991) (“A written
document that is attached to the complaint as an exhibit is considered part of the
complaint and may be considered in a Rule 12(b)(6) dismissal.”). In this
interview, Mr. Checkley stated that he not only lacked a driver’s license but also
a learner’s permit. Aplt. App. 143. He knew that he was just learning how to
drive and his only driving experience was with his mom a couple of times in a
parking lot. Id. at 143–44.

                                         -8-
mother was killed in a single-vehicle accident while riding on the back of her

motorcycle. Id. at 58. The negligent driver of the motorcycle was a permissive

driver and therefore an additional insured under the policy. Id. The decedent’s

children attempted to collect on the UM/UIM coverage ($100,000 limit) after

exhausting liability coverage for bodily injury ($25,000). Id. at 59. Vehicles

covered by the policy, however, were excluded from the definition of an

uninsured vehicle. Id. Under the terms of the policy, therefore, the uninsured

motorist coverage did not apply. Like the Checkleys, the children argued that this

policy limitation violated the legislative policies of § 10-4-609 by diluting

mandated coverage. Id. at 60.

      The court disagreed and determined that in some circumstances “policy

provisions that limit recovery of uninsured motorist benefits may be valid.” Id. at

61. It explained: “[T]he purpose of the uninsured motorist coverage mandated by

section 10-4-609 is to compensate an innocent insured for loss, subject to the

insured’s policy limits, caused by financially irresponsible motorists.” Id. (citing

Kral v. Am. Hardware Mut. Ins. Co., 784 P.2d 759, 765 (Colo. 1989)). The law

“does not require full indemnification of losses suffered at the hands of uninsured

motorists under all circumstances.” Id. (citing Alliance Mut. Cas. Co. v. Duerson,

518 P.2d 1177, 1180 (Colo. 1974) (en banc)). To eliminate the policy restriction

in Terranova would grant “uninsured motorist coverage for a risk that was

excluded by the policy, and which was not paid for by the insured and not

                                         -9-
contemplated by Colorado’s uninsured motorist legislation.” Id. at 62. The

restriction was thus valid.

      The comparison between Terranova and the Checkleys’ case is strong.

Invalidating the exclusion in this case would undercut the “distinct function” of

Colorado UM/UIM law. The law is “designed to protect an insured from losses

caused by third parties,” id. (citing Kral, 784 P.2d at 765), not losses caused by

the insured himself. See also DeHerrera, 30 P.3d at 173 (“[A]n insured is entitled

to recover UM/UIM benefits when a person who is at fault in an accident does not

have any liability insurance.” (emphasis added)). Mr. Checkley was not an

innocent driver harmed by the negligence of a third party—he caused the accident

himself. Though the Checkleys claim the accident was caused by the negligence

of a third party—namely Mr. Branner’s negligent entrustment of the vehicle to

Mr. Checkley—this ignores Mr. Checkley’s own role in the accident. He knew he

was inexperienced and unlicensed. In these circumstances, we find the exclusion

at issue in this case to be in accord with the policy underlying Colorado’s

UM/UIM statute and therefore the Checkleys’ breach of contract claim fails.

B.    Bad Faith

      In addition to the breach of contract claim, the Checkleys also assert a

claim for common law bad faith breach of an insurance contract and a statutory

claim for unreasonable delay or denial of payment. See Sanderson v. Am. Family

Mut. Ins. Co., 251 P.3d 1213, 1217 (Colo. App. 2010); see also Colo. Rev. Stat.

                                        - 10 -
§§ 10-3-1115, 10-3-1116. To prove a common law claim for bad faith, the

Checkleys must prove that Allied acted unreasonably and either knowingly or

recklessly ignored the validity of their claim. Sanderson, 251 P.3d at 1217. It is

not unreasonable for an insurer to deny claims that are “fairly debatable.”

Zolman v. Pinnacol Assurance, 261 P.3d 490, 496 (Colo. App. 2011). Under the

statute, an insurance agency may “not unreasonably delay or deny payment of a

claim for benefits owed to or on behalf of any first-party claimant.” Colo. Rev.

Stat. § 10-3-1115(1)(a). A delay or denial is unreasonable “if the insurer delayed

or denied authorizing payment of a covered benefit without a reasonable basis for

that action.” Id. § 10-3-1115(2). Unless genuine issues of material fact exist, the

reasonableness of a denial may be decided as a matter of law. Fisher v. State

Farm Mut. Auto. Ins. Co., No. 13CA2361, 2015 WL 2198515, *7 (Colo. App.

May 7, 2015).      The Checkleys’ claims were, at a minimum, “fairly debatable.”

They depended on an interpretation of Colorado case law that was not clearly

established and which we predict Colorado courts would reject. Further, Allied

did not deny the claim without a reasonable basis. The terms of the contract

plainly excluded the claim and this exclusion has never been held impermissible

under Colorado law. Therefore, the district court properly dismissed both claims

for bad faith.

C.    Attorney’s Fees

      After the district court dismissed the Checkleys’ claims, Allied requested

                                       - 11 -
attorney’s fees under Colorado Revised Statutes section 13-17-201. The statute

provides, in part:

      In all actions brought as a result of a death or an injury to person or

      property occasioned by the tort of any other person, where any such

      action is dismissed on motion of the defendant prior to trial under rule

      12(b) of the Colorado rules of civil procedure, such defendant shall

      have judgment for his reasonable attorney fees in defending the action.

Colo. Rev. Stat. § 13-17-201. We have held that the granting of attorney’s fees

under this statute is mandatory and applies to dismissal under Federal Rule of

Civil Procedure 12(b) as well. See Shrader v. Beann, 503 F. App’x 650, 654–55

(10th Cir. 2012). Colorado courts have held that where a complaint alleges both

tort and non-tort claims, attorney’s fees should be granted under section 13-17-

201 “if the action is primarily a tort action.” U.S. Fax Law Ctr., Inc. v. Henry

Schein, Inc., 205 P.3d 512, 517–18 (Colo. App. 2009). In Dubray v. Intertribal

Bison Co-op, 192 P.3d 604 (Colo. App. 2008), the court rejected the plaintiff’s

assertion that his case was primarily a contract action because “six of his eight

claims against defendants, and eight of his ten total claims asserted, were pleaded

as tort claims.” Id. at 607. The court noted that “[p]laintiff obviously chose to

include these claims to obtain relief beyond what was available solely under a

breach of contract theory.” Id. In determining if the action is primarily a tort

action, subsequent Colorado courts have asked “whether the essence of the action

                                        - 12 -
was one in tort . . . .” Castro v. Lintz, 338 P.3d 1063, 1068 (Colo. App. 2014).

One Colorado court has adopted “the ‘predominance’ test, assessing whether the

‘essence of the action’ is tortious in nature (whether quantitatively by simple

number of claims or based on a more qualitative view of the relative importance

of the claims) or not.” Gagne v. Gagne, 338 P.3d 1152, 1168 (Colo. App. 2014)

(internal quotation and citation omitted). If the “predominance test failed to yield

a clear answer, such as when the tort- and non-tort claims are equal in number or

significance,” then courts should “turn to the question of whether tort claims

were asserted to unlock additional remedies . . . .” Id.

      The Checkleys brought three claims against Allied: (1) breach of contract;

(2) breach of covenant of good faith and fair dealing; and (3) violation of

Colorado Revised Statutes sections 10-3-1115 and 10-3-1116, which provide a

statutory cause of action against an insurer that has unreasonably delayed or

denied a claim. We recognize that Colorado treats a common law bad faith

breach of an insurance contract as a tort. Sanderson, 251 P.3d at 1217 (citing

Goodson v. Am. Standard Ins. Co., 89 P.3d 409, 414 (Colo. 2004)). It is

apparent, however, that the substantial predicate of the claims in this case—the

“essence of the action”—is the ostensible breach of contract, a claim which we

have rejected. Thus, the district court properly denied attorney’s fees.




                                        - 13 -
AFFIRMED.


            Entered for the Court


            Paul J. Kelly, Jr.
            Circuit Judge




            - 14 -
