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Colorado Supreme Court rules tort claim not a debt

By Takesha Thomas | Oct 31, 2018

DENVER (Legal Newsline) – The Colorado Supreme Court has upheld an appellate court ruling in a lawsuit involving attorneys who represented State Farm in a case.

On Oct. 15, the Supreme Court ruled to affirm the Court of Appeals' decision in the matter involving Francis Ybarra and Greenberg & Sada PC. Ybarra petitioned for review of the Court of Appeals’ judgment to dismiss her argument that Greenberg & Sada had violated the Colorado Fair Debt Collection Practices Act. 

"The Supreme Court holds that because a tort does not obligate the tortfeasor to pay damages, a tort cannot be a transaction giving rise to an obligation to pay money, and is therefore not a debt within contemplation of the Act; and because an insurance contract providing for the subrogation of the rights of a damaged insured is not a transaction giving rise to an obligation of the tortfeasor to pay money, it also cannot constitute a transaction creating a debt within contemplation of the Act," the ruling states.

According to the ruling, "Ybarra filed suit in the Denver District Court against Greenberg & Sada, alleging that it violated the Colorado Fair Debt Collection Practices Act by obtaining a judgment against her in the Denver County Court on behalf of State Farm Auto Insurance Co." 

"While represented by Greenberg & Sada, State Farm, as the subrogee of an insured to whom it had paid a claim for damages caused by Ybarra, had taken a default judgment against Ybarra," the ruling states.

Ybarra argued that State Farm was negligent when it filed the suit in a different county from where Ybarra resided and that the insurance company used "a false representation or deceptive means in attempting to collect a debt by filing for damages in tort," the ruling states.

Both the district and appeals courts granted Greenberg & Sada's motion to dismiss the claim, "ruling that the subrogated tort claim upon which State Farm took a default judgment against Ybarra was not a debt as defined by the Act, and therefore the requirements for collection of a debt imposed by the Act did not apply to Greenberg & Sada," according to the ruling.

The appellate court ruled that "the undefined term 'transaction,' which it considered integral to the Act’s definition of 'Debt,' required some kind of business dealing, as distinguished from the commission of a tort; and to the extent an insurance contract providing for the subrogation of the rights of an insured constitutes a transaction in and of itself, that transaction is not one obligating the debtor to pay money, as required by the Act."

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