                                                                          FILED
                                                               United States Court of Appeals
                                                                       Tenth Circuit

                                                                    December 6, 2011
                     UNITED STATES COURT OF APPEALS
                                                                  Elisabeth A. Shumaker
                                                                      Clerk of Court
                            FOR THE TENTH CIRCUIT


    JOSEPH H. ZBEGNER,

                Plaintiff-Appellant,
                                                          No. 10-1421
    v.                                       (D.C. No. 1:09-CV-02872-BNB-KMT)
                                                           (D. Colo.)
    ALLIED PROPERTY AND
    CASUALTY INSURANCE
    COMPANY, an Iowa corporation,

                Defendant-Appellee.


                             ORDER AND JUDGMENT *


Before O’BRIEN, ANDERSON, and HOLMES, Circuit Judges.



         Plaintiff Joseph H. Zbegner appeals from a district court order dismissing

without prejudice his claims against Allied Property and Casualty Insurance Co.

(Allied) as not ripe for adjudication. Exercising jurisdiction under 28 U.S.C.

§ 1291, we affirm.



*
       After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument. 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not binding precedent, except under the doctrines of law of the case, res judicata,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.
                                         I.

      Zbegner was in an automobile accident in Boulder, Colorado, on June 15,

2007. At that time he had an automobile insurance policy with Allied, which

included underinsured motorist (UIM) coverage. In his complaint against Allied,

Zbegner alleged that he suffered severe injuries as a result of the accident and

sustained damages exceeding $150,000. He claimed Jesse Hanson was the person

at fault in the accident, but Hanson was underinsured, having only $25,000 in

liability coverage with Allstate Insurance Company (Allstate). Allstate paid

Zbegner $351.74 for property damage and offered him $2,145.00 to settle his

injury claim. Zbegner did not accept Allstate’s offer and has not resolved his

claim against Hanson.

      According to his complaint, Zbegner provided Allied with information

regarding his injuries and damages and offered to settle his claim for policy limits

UIM benefits. After Allied declined, Zbegner filed this action. His complaint

included claims for breach of contract, breach of the duty of good faith and fair

dealing, and violation of Colo. Rev. Stat. § 10-3-1115, which provides that an

insurer shall not unreasonably delay or deny payment of a claim.

      Allied moved to dismiss Zbegner’s claims under Fed. R. Civ. P. 12(b)(1)

(lack of subject matter jurisdiction). Allied asserted it could not know the amount

due Zbegner for UIM benefits until he had resolved his claim against Allstate,




                                        -2-
Hanson’s insurer. Because his claims were contingent on a future event, Allied

contended they were not ripe for adjudication.

      The district court 1 granted Allied’s motion, citing the Colorado Court of

Appeals’ decision in Freeman v. State Farm Mutual Automobile Insurance Co.,

946 P.2d 584 (Colo. App. 1997). Freeman held:

             Once recovery is made from the tortfeasor, the insured may
      collect an additional amount necessary to compensate the insured for
      injuries sustained, up to his or her UIM policy limits. In fact, until a
      recovery is made from the at-fault party, the actual amount of
      coverage to which an insured is entitled under an UIM policy cannot
      be known.

Id. at 585-86. Applying this holding, the district court assessed whether

Zbegner’s claim for UIM benefits was ripe. It considered the fitness of the claim

for judicial resolution and the hardship to the parties of withholding judicial

consideration. It concluded:

      Whether, and how much, the plaintiff may recover from Allstate is
      completely contingent at this time; a recovery against Allstate and its
      amount are future events that may not occur as anticipated or may
      not occur at all; and the actual amount of coverage to which the
      plaintiff may be entitled under his Allied underinsured motorist
      policy cannot be known until the claim against the tortfeasor is
      resolved.

Aplee. Supp. App. at 64-65. In addition, it concluded, Zbegner had not alleged

undue hardship as a result of withholding judicial consideration of his UIM claim



1
       The order was issued by a magistrate judge who, with the consent of the
parties, was assigned to decide the case under 28 U.S.C. § 636(c)(1).

                                         -3-
until he had resolved his claim against the tortfeasor. It its words, “plaintiff’s

claims stemming from an underinsured motorist insurance policy are not ripe for

determination until the plaintiff either obtains judgment against or enters into a

good faith settlement with the underinsured tortfeasor.” Id. at 58. It dismissed

Zbegner’s claims without prejudice. Zbegner filed a timely notice of appeal. 2

He contends that the district court misconstrued Colorado law in its ripeness

analysis.

                                          II.

      “Ripeness doctrine is rooted both in the jurisdictional requirement that

Article III courts hear only ‘cases and controversies’ and in prudential

considerations limiting [the court’s] jurisdiction.” Alto Eldorado P’ship v. Cnty.

of Santa Fe, 634 F.3d 1170, 1173 (10th Cir.), cert. denied, No. 11-50, 2011 WL

4533416 (U.S. Oct. 3, 2011). Allied did not argue, and the district court did not

find, that Zbegner’s claims failed to satisfy the case and controversy requirement.

The district court’s analysis concerned prudential ripeness, which is a question of

timing intended to discourage the premature adjudication of abstract



2
      The order dismissing Zbegner’s claims without prejudice was entered on
August 18, 2010, and he filed his notice of appeal on September 13, 2010.
Although the district court did not enter judgment in a separate document, and the
judgment therefore did not become final until 150 days after entry of the
dismissal order, see Fed. R. Civ. P. 58(c)(2)(B), Zbegner’s notice of appeal was
nonetheless valid, see Constien v. United States, 628 F.3d 1207, 1211 (10th Cir.
2010), cert. denied, 131 S. Ct. 2884 (2011).

                                          -4-
disagreements. See New Mexicans for Bill Richardson v. Gonzales, 64 F.3d 1495,

1499 (10th Cir. 1995). “In short, the doctrine of ripeness is intended to forestall

judicial determinations of disputes until the controversy is presented in clean-cut

and concrete form.” Id. (quotations omitted); see also Morgan v. McCotter,

365 F.3d 882, 890 (10th Cir. 2004) (holding ripeness issue focuses on “whether

the harm asserted has matured sufficiently to warrant judicial intervention”

(quotation omitted)). Courts apply a two-factor ripeness analysis, initially

considering “whether an issue is fit for judicial review.” New Mexicans for Bill

Richardson, 64 F.3d at 1499. At this first step, “the central focus is on whether

the case involves uncertain or contingent future events that may not occur as

anticipated, or indeed may not occur at all.” Id. (quotation omitted). The second

prong of the ripeness analysis considers “the hardship to the parties of

withholding court consideration.” Morgan, 365 F.3d at 890 (quotation omitted).

“This court reviews de novo the district court’s order of dismissal premised on

lack of ripeness.” Alto Eldorado P’ship, 634 F.3d at 1173.

                                         A.

      The district court decided the claims were not ripe under Colorado law. It

relied on Freeman, in which the court held that, “until a recovery is made from

the at-fault party, the actual amount of coverage to which an insured is entitled




                                         -5-
under an UIM policy cannot be known.” 946 P.2d at 585-86. Zbegner argues

Freeman is distinguishable because his policy with Allied does not contain the

same language as the Freeman policy. The State Farm policy in Freeman

provided, “There is no [UIM] coverage until the limits of liability of all bodily

injury liability bonds and policies that apply have been used up by payment of

judgments or settlements.” Id. at 585 (emphasis added, all-caps omitted). State

Farm relied on this policy language in refusing to arbitrate a claim for UIM

coverage because its insured had not yet resolved his claim against the tortfeasor.

Id. In response, Freeman sought a judgment declaring State Farm was required to

arbitrate his UIM claim. The Colorado Court of Appeals held that, because the

amount of UIM coverage remains unknown until a recovery is obtained from the

tortfeasor, State Farm could, without violating public policy, require its insured to

obtain judgment or settlement from the underinsured driver as a precondition to

his claim for UIM benefits. Id. at 586.

      Although the Allied policy does not include the same language as the State

Farm policy, Freeman is, nevertheless, on point because the Freeman court’s

holding did not rely solely on the policy language. The court also construed the

following statutory definition of the maximum liability under UIM coverage:




                                          -6-
      The maximum liability of the insurer under the uninsured [3] motorist
      coverage provided shall be the lesser of:

      (a) The difference between the limit of uninsured motorist coverage
      and the amount paid to the insured by or for any person or
      organization who may be held legally liable for the bodily injury; or

      (b) The amount of damages sustained, but not recovered.

Colo. Rev. Stat. § 10-4-609(5). 4 The court held, “The plain language of both the

statute and the policy limits the insurer’s liability to providing UIM coverage to

an amount equal to the gap between the amount an insured receives from an

underinsured driver and the insured’s UIM policy limits.” 946 P.2d at 585

(emphasis added); see also State Farm Mut. Auto. Ins. Co. v. Tye, 931 P.2d 540,

543 (Colo. App. 1996) (“According to the plain language of § 10-4-609(5)(a),

[the insured] is entitled to underinsured motorist compensation up to the

difference between the amount paid by the [tortfeasor’s] insurer and the

underinsured motorist policy limit.” (citation omitted)). It was on this basis the




3
       Although this statutory section refers only to uninsured motorist coverage,
it applies as well to underinsured motorist coverage. See Farmers Ins. Exch. v.
Star, 952 P.2d 809, 812 (Colo. App. 1997) (“[Section] 10-4-609(5) articulates the
maximum liability of the insurer with respect to both uninsured and underinsured
motorist coverage.”); see also Colo. Rev. Stat. § 10-4-609(4) (2007) (“Uninsured
motorist coverage shall include coverage for damage for bodily injury or death
which an insured is legally entitled to collect from the owner or driver of an
underinsured motor vehicle.”).
4
       While the court in Freeman construed the 1994 version of § 10-4-609(5),
the language of that section remained unchanged in 2007.

                                        -7-
Freeman court held that the amount of UIM coverage cannot be determined until

recovery is made from the tortfeasor. See 946 P.2d at 585-86.

      Under Colorado law, the terms of § 10-4-609(5) were incorporated into

Allied’s policy. See Claire v. State Farm Mut. Auto. Ins. Co., 973 P.2d 686, 689

(Colo. App. 1998) (“Section 10-4-609 is incorporated into every contract of

automobile insurance issued in Colorado . . . .”). 5 Consequently, the holding in

Freeman is applicable to Allied’s policy and Zbegner’s claim for UIM benefits.

                                         B.

      Allied argues its policy language also supports the district court’s

conclusion that Zbegner’s claim is not ripe. 6 It cites the following language,

which falls under the heading “Uninsured Motorist Coverage – Limit of


5
       Section 10-4-609(5) was repealed effective January 1, 2008, but it was in
effect on the date of Zbegner’s accident and during the applicable Allied policy
period. See Snell v. Progressive Preferred Ins. Co., No. 09CA0923, 2010 WL
2853754, at *1 (Colo. App. July 22, 2010) (noting amendments to § 10-4-609
applied to policies issued or renewed on or after effective date of act); cf. Sellers
v. Allstate Ins. Co., 82 F.3d 350, 352 (10th Cir. 1996) (holding earlier amendment
to § 10-4-609 not applicable to policy issued and accident occurring before
effective date of amendment).
6
       Zbegner notes Allied did not make this contention in the district court, but
he does not develop an argument for waiver. While we generally do not consider
issues raised for the first time on appeal, the rule “loses its force where a new
ground or reason for affirming a lower court ruling is advanced as opposed to a
new basis for reversing a lower court.” Stahmann Farms, Inc. v. United States,
624 F.2d 958, 961 (10th Cir. 1980). And this court is “free to affirm a district
court decision on any grounds for which there is a record sufficient to permit
conclusions of law, even grounds not relied upon by the district court.” United
States v. Lott, 310 F.3d 1231, 1242 n.7 (10th Cir. 2002) (quotation omitted).

                                         -8-
Liability”: “Any amount otherwise payable for damages under this coverage shall

be reduced by all sums . . . [p]aid because of bodily injury by or on behalf of

persons or organizations who may be legally responsible.” Aplee. Supp. App.

at 50. 7 Allied contends under this provision the amount Allied owes for UIM

benefits depends on the amount Zbegner recovers from the tortfeasor. Thus,

according to Allied, this language limits Zbegner’s UIM coverage to the same

extent and in the same manner as § 10-4-609(5).

      Zbegner asserts a contrary view, writing: “[T]he provision means that, in

the event someone else has paid [Zbegner] some damages for his injuries, that

amount can be subtracted from what Allied pays [Zbegner].” Aplt. Reply Br.

at 2. Thus, while he seems to concede that Allied’s policy calls for a reduction in

his UIM benefits based on the amount he recovers from the tortfeasor, he

contends a deduction is applicable only if and when he chooses to pursue such a

recovery. He maintains, “[I]f no other person or organization has paid [him] for

his damages, Allied must.” Id.

      Most of the courts considering the language found in Allied’s policy have

construed the phrase “any amount otherwise payable for damages under this

coverage” to refer to the UIM policy limit. Those courts have thus held that this

policy language, like § 10-4-609(5), calls for reducing the UIM coverage limit by


7
      This policy reference to uninsured motorist coverage appears to encompass
underinsured motorist coverage as well. The parties do not argue otherwise.

                                         -9-
the amount paid by the tortfeasor. See, e.g., Hopkins v. Am. Econ. Ins. Co.,

896 S.W.2d 933, 936-37 (Mo. Ct. App. 1995); Mead v. Aetna Cas. & Sur. Co.,

509 N.W.2d 789, 790-91 (Mich. Ct. App. 1993) (per curiam); Am. Econ. Ins. Co.

v. Motorists Mut. Ins. Co., 605 N.E.2d 162, 164 (Ind. 1992); Thompson v. Nodak

Mut. Ins. Co., 466 N.W.2d 115, 116-17 (N.D. 1991); Kahn v. Aetna Cas. & Sur.

Co., 542 N.E.2d 878, 879-80 (Ill. App. Ct. 1989).

      Other courts have held this policy language calls for reducing the amount

of the insured’s damages, rather than the coverage limit, by the amount he has

already recovered from the tortfeasor. See, e.g., Penn. Gen. Ins. Co. v. Cantley,

615 A.2d 477, 480 (R.I. 1992) (per curiam). Notably, however, no courts

considering the language found in Allied’s policy have construed it as Zbegner

urges: permitting him to forgo a recovery from the tortfeasor altogether. We

reject his argument.

      The meaning of the policy language cited by Allied is consistent with

§ 10-4-609(5), as that provision was construed in Freeman. To conclude

otherwise would create a conflict between the Allied policy and § 10-4-609(5),

which was incorporated into the terms of the policy, see Claire, 973 P.2d at 689;

see also State Farm Mut. Auto. Ins. Co. v. Kastner, 77 P.3d 1256, 1260

(Colo. 2003) (en banc) (holding § 10-4-609 governs terms of insurance




                                        -10-
contracts). 8 Allied’s policy language and § 10-4-609(5) both provide coverage

equal to “the gap between the amount an insured receives from an underinsured

driver and the insured’s UIM policy limits,” Freeman, 946 P.2d at 585. Under

both the policy language and § 10-4-609(5), therefore, the extent of UIM

coverage is dependent on the amount Zbegner recovers from the tortfeasor and

remains unknown until that amount is determined through a settlement with or

judgment against Hanson. See id. at 585-86.

                                          C.

      Zbegner nonetheless maintains that other policy language solely defines

what he needs to establish to recover UIM benefits from Allied. He relies on the

following: “We will pay damages which an ‘insured’ is legally entitled to recover

from the owner or operator of an ‘uninsured motor vehicle’ because of ‘bodily

injury’ . . . [s]ustained by an ‘insured’; and . . . [c]aused by an accident.” Aplee.

Supp. App. at 52. Based on this language, Zbegner contends that all he needs to



8
       Moreover, under Zbegner’s construction of the policy, Allied would be
required to pay him the full amount of his damages, subject to the UIM coverage
limit, then proceed to recover what it could from the tortfeasor through
subrogation. Yet the record indicates Allied waived its right of subrogation and
gave Zbegner its consent to settle with the tortfeasor’s carrier. See Aplee. Supp.
App. at 51. And under Colorado law, “[i]nsurers are not obligated to pay UIM
benefits and then seek recovery from the liable party or his insurer under a right
of subrogation.” Pham v. State Farm Mut. Auto. Ins. Co., 70 P.3d 567, 574
(Colo. App. 2003) (rejecting insureds’ contention it was bad faith for insurer to
deny UIM claims pending determination of amount of recovery from all of
tortfeasor’s liability insurers).

                                         -11-
show is his legal entitlement to recover damages from the underinsured motorist

and the extent of his damages. For this proposition he relies on Borjas v. State

Farm Mutual Automobile Insurance Co., 33 P.3d 1265, 1269 (Colo. App. 2001),

which construed the phrase “legally entitled to recover damages,” as used in

§ 10-4-609(1)(a). The court construed that phrase to mean “that the insured must

be able to establish that the fault of the uninsured motorist gave rise to damages

and the extent of those damages.” Id. Based on that language, he contends that

the similar Allied policy language requires him to prove the tortfeasor’s fault and

his damages–and nothing more.

      Borjas is inapposite to the issue here. In Borjas, the court considered

whether the insured was “legally entitled to recover damages” from a negligent

driver who was immune from liability, such that she could collect uninsured

motorist benefits. Id. at 1268. But unlike Zbegner, the insured in Borjas first

brought a claim against the negligent driver. Her action was dismissed on the

basis of the driver’s immunity under the Colorado Governmental Immunity Act.

See id. at 1266. Therefore, at the point the insured in Borjas sought uninsured

motorist benefits from her own insurer, the amount she had recovered from the

tortfeasor–nothing–was already established. No deduction under § 10-4-609(5)

was necessary to determine the extent of her coverage, and the court in Borjas

simply did not address the issue raised here.




                                        -12-
                                         D.

      The district court also dismissed Zbegner’s bad-faith and statutory claims

as not ripe for adjudication. “The determination of whether an insurer has in bad

faith . . . breached its duties to an insured is one of reasonableness under the

circumstances. In other words, would a reasonable insurer under the

circumstances have denied or delayed payment of the claim under the facts and

circumstances.” Pham v. State Farm Mut. Auto. Ins. Co., 70 P.3d 567, 572

(Colo. App. 2003) (citation and quotations omitted). “It is reasonable for an

insurer to challenge claims that are fairly debatable.” Id.

      Colorado Revised Statutes § 10-3-1115(1)(a) also provides that an insurer

“shall not unreasonably delay or deny payment of a claim for benefits owed to or

on behalf of any first party claimant.” 9 We found no Colorado case defining the

elements of a claim under § 10-3-1115(1)(a), but by its terms it sets forth a

reasonableness standard as well.

      The Colorado Court of Appeals has addressed the question of when a claim

for bad-faith nonpayment of UIM benefits accrues. See Cork v. Sentry Ins.,

194 P.3d 422, 428 (Colo. App. 2008). Citing Freeman, the court held “a bad faith

claim for nonpayment of UIM benefits cannot accrue until the insured has



9
      “First-party claimant” is defined as one who asserts “an entitlement to
benefits owed directly to or on behalf of an insured under an insurance policy.”
Colo. Rev. Stat. § 10-3-1115(1)(b)(I).

                                         -13-
obtained a judgment against or . . . settled with the underinsured driver.” Id.

Zbegner argues Cork does not apply in this case because it relied on Freeman, but

we have already rejected his contention that Freeman is distinguishable.

                                         III.

      Since, under Colorado law, the extent of UIM coverage available cannot be

known until the insured has resolved his claim against the tortfeasor it was

appropriate to consider whether Zbegner’s claims were ripe. The district court

was correct in concluding his claim for UIM benefits involved an uncertain and

contingent event – his recovery from Hanson by judgment or settlement – and he

had not alleged (let alone demonstrated) undue hardship would result from

postponing resolution of this case until his claim against Hanson was resolved.

      AFFIRMED.


                                                     Entered for the Court



                                                     Terrence L. O’Brien
                                                     Circuit Judge




                                        -14-
