The Colorado Court of Appeals issued its opinion in Calderon v. American Family Mutual Insurance Co. on Thursday, May 22, 2014.
Setting Off Uninsured/Underinsured Motorist Benefits—“Coverage” Versus “Benefit.”
Calderon sustained multiple injuries in an automobile accident with an uninsured driver, requiring him to seek medical treatment and miss work. Calderon was insured by American Family Mutual Insurance Co. (American Family) under an insurance policy providing a total of $300,000 in uninsured/underinsured motorist (UM/UIM) coverage and $5,000 in medical payment (MedPay) coverage.
After the accident, American Family paid Calderon $5,000 under the policy’s MedPay provision. Calderon filed a claim under the UM/UIM provision, but the parties could not agree on the benefit amount due. Calderon sued for breach of contract, violation of CRS § 10-3-115, and breach of the duty of good faith and fair dealing.
A jury returned a verdict of $68,338.97 in favor of Calderon, including $34,394.65 for past medical expenses. The trial court reduced the amount awarded by $5,000 to set off the medical payments Calderon had already received. After adding prejudgment interest, judgment was entered against American Family in the amount of $77,459.
On appeal, Calderon argued he was entitled to the full amount awarded by the jury because CRS §§ 10-4-609(1)(c) and -635(3)(b)(II) prohibited the trial court from setting off his UM/UIM benefits by the amount of MedPay benefits he received. The Court of Appeals disagreed.
The Court noted that setoff is not allowed where the benefits are impaired, but it is allowed to prevent a double recovery. Calderon argued that the statutory sections expressed a legislative intent to prevent insurance companies from using a MedPay setoff to reduce UM/UIM benefits. The Court found that Calderon was incorrectly equating the term “coverage” with the term “benefit.” The sections prohibit a reduction in coverage by a setoff from another coverage but not a benefit. “Coverage” refers to the upper limit for which an insurer may be liable; “benefit” refers to the actual payments made under the policy. Here, Calderon’s UM/UIM coverage was not reduced (he was awarded $68,338.97 with coverage limits of $300,000), but the amount he was awarded was properly reduced by the $5,000 he had already received.
Calderon also argued that the setoff provision was void as against public policy. The Court found that the insurance policy did not dilute, condition, or limit his statutorily mandated coverage and therefore was not void as against public policy. The judgment was affirmed.
Summary and full case available here.