The Colorado Court of Appeals issued its opinion in Tubbs v. Farmers Insurance Exchange on Thursday, May 21, 2015.
Uninsured/Underinsured Motorist Coverage—Exhaustion Clause.
Tubbs was involved in a car accident in California with another driver. The accident was the other driver’s fault, and Tubbs suffered damages. The other driver’s auto insurance had a $100,000 liability limit. Tubbs was insured by Farmers Insurance Exchange (Farmers), and his policy included uninsured/underinsured motorist (UIM)coverage with a limit of $500,000. Tubbs accepted a $30,000 settlement from the other driver. He then sought to recover under his Farmers policy’s UIM provision, claiming that his total damages exceeded $100,000. Farmers refused to pay benefits, stating that Tubbs did not meet the conditions of the UIM clause, which required him to exhaust the limits of the liable party’s policy before making a UIM claim. The trial court entered summary judgment in favor of Farmers.
On appeal, Tubbs argued that the exhaustion clause in the UIM policy was void and unenforceable. UIM policies are required to cover the difference between the damages the insured party suffered and the limit of any liable party’s legal liability coverage, regardless of whether the insured party’s recovery from the liable party exhausted that limit. As applied to the facts of this case, CRS § 10-4-609(1)(c) requires that Farmers cover Tubbs for damages he sustained in excess of $100,000 (the other driver’s legal liability limit), in an amount up to $500,000 (the limit of Tubbs’s UIM coverage), regardless of how much, if any, he actually recovered under the other driver’s legal liability coverage. Because the exhaustion clause imposes a condition precedent on coverage mandated by the statute, the clause was void and unenforceable. The summary judgment was reversed and the case was remanded for further proceedings.