News & Views

Colorado Supreme Court to Decide If Subrogation Claims Are Consumer Debts

The Colorado Supreme Court has granted a petition for Writ of Certiorari to decide the following question:

Whether the court of appeals erred in holding that an insurance subrogation claim made against an individual is not a “debt” under the Colorado Fair Debt Collection Practices Act, sections 12-14-101 to -137, C.R.S. (2016).

Like the FDCPA, the Colorado Fair Debt Collection Practices Act defines a “debt” as “obligation or alleged obligation of a consumer to pay money arising out of a transaction . . .”  Case law interpreting the FDCPA has held subrogation claims are not “debts” that are subject to the federal Act because a subrogation claim does not arise from a consensual or contractual “transaction.” See, e.g., Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367 (11th Cir. 1998).  Other appellate courts have held in non-subrogation cases that the consensual or contractual transaction requirement applies to FDCPA suits.  See Turner v. Cook, 362 F.3d 1219, 1228 (9th Cir. 2004); Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1326 (7th Cir. 1997); Beauvoir v. Israel, 794 F.3d 244 (2d Cir. 2015)

Notwithstanding these relatively consistent interpretations of the federal Act, the Administrator of the Colorado FDCPA has interpreted the scope of the Colorado Act to include subrogation claims.  In Ybarra v. Greenberg & Sada, P.C., 2016 Colo. App. LEXIS 1172 (Colo. Ct. App. 2016), the plaintiff filed a CFDCPA suit against a law firm, asserting that it had violated the Colorado Act.  The state district court granted the law firm’s motion to dismiss, holding that “the Colorado Act applies solely to consensual consumer transactions, not [to] judgments arising from negligence claims.”

In an August 11, 2016, decision affirming the district court’s dismissal, the Court of Appeals interpreted the word “transaction” to exclude subrogation tort claims.  The appellate court rejected the plaintiff’s argument that it should defer to the advisory opinion of the Colorado Collection Agency Board concluding that “insurance subrogation claims are ‘debt’ within the meaning of [the CFDCPA].”

On February 27, 2017, the Colorado Supreme Court granted the plaintiff’s petition for a writ of certiorari.  See Ybarra v. Greenberg & Sada, P.C., No. 16SC721, 2017 Colo. LEXIS 160, *1 (Colo. Fen. 27, 2017). Collectors of tort and subrogation claims who collect in Colorado may wish to follow this case.