May 26, 2018

Colorado Court of Appeals: Plaintiff Not Allowed to Treat Denial of Liability as Denial of Coverage

The Colorado Court of Appeals issued its opinion in Pena v. American Family Mutual Insurance Co. on Thursday, April 19, 2018.

Uninsured Motorist—Denial of Liability—Denial of Coverage—CRCP 12(b)(5) Dismissal.

Peña was involved in a three-car collision. Both Peña and Garner, another driver involved in the accident, were insured by defendant American Family Mutual Insurance Company (American Family). Peña sent a letter to American Family asserting a claim under the uninsured motorist provisions of her policy. American Family denied Peña’s claim, asserting that Garner was not responsible for the damage to her vehicle and Garner had coverage at the time of the accident, so Peña’s uninsured motorist property damage (UMPD) provision would not apply.

Peña sued Garner and American Family in separate actions. In this action, she sued American Family under C.R.S. § 10-3-1115 for the unreasonable delay and denial of benefits due under the UMPD provisions of her policy. American Family moved to dismiss, arguing that Peña’s complaint failed, as a matter of law, to state a claim upon which relieve could be granted because Peña’s UMPD coverage applied only if American Family, as Garner’s insurer, denied coverage, rather than liability, for Garner in connection with the accident. The district court agreed with this interpretation of Peña’s policy and the distinction made between denial of coverage and denial of liability. But because American Family had only denied liability and the issue of liability had not yet been determined, the court concluded that Peña’s UMPD coverage did not apply at that point and the lawsuit was premature. The district court dismissed the case without prejudice.

On appeal, Peña contended that the district court erred in dismissing her case. She argued that the district court erred in not considering whether American Family unreasonably delayed or denied her claim before dismissing her action. Because American Family denied liability but not coverage, her policy’s UMPD provision was inapplicable, and there were no benefits that could have been delayed or denied. Peña had no claim as a matter of law. The district court’s determination that Peña’s lawsuit was premature was in error because Peña will never have a claim against American Family under her policy for unpaid UMPD benefits from the accident; Garner’s insurer has not denied coverage, which is the circumstance that would trigger Peña’s UMPD coverage. If Garner is ultimately found liable, Peña will have a claim against American Family under the liability provisions of his policy.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

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