October 21, 2018

Colorado Court of Appeals: UIM Policy Not Triggered if Insurer Agrees to Pay Entire Amount of Jury Award

The Colorado Court of Appeals issued its opinion in Bailey v. State Farm Automobile Insurance Co. on Thursday, September 6, 2018.

Underinsured Motorist Insurance Benefits—Coverage Limitations.

Plaintiff was in a car accident and sued the other driver for negligence and State Farm Mutual Automobile Insurance Co. for underinsured motorist (UIM) benefits. Plaintiff’s policy covered him up to $100,000 for damages caused by underinsured motorists. The other driver’s insurance company covered him for $100,000 in damages and also agreed to pay the full extent of a jury’s verdict. At trial, State Farm presented evidence that plaintiff had not cooperated with claims adjusters and had committed fraud, and therefore plaintiff voided the insurance contract and he was not entitled to UIM benefits.

The jury rejected State Farm’s affirmative defenses of fraud and failure to cooperate and awarded plaintiff $300,000 in damages. State Farm moved for entry of judgment based on a letter from the other driver’s insurance company that effectively provided unlimited liability insurance coverage for him. State Farm argued that because there was no difference between the coverage limit and the amount of damages, plaintiff was not entitled to UIM benefits. The other driver did not object. The trial court granted the motion and the other driver’s insurance company paid the entire judgment.

On appeal, plaintiff argued that it was error to grant State Farm’s motion for entry of judgment. Plaintiff contended that the trial court should not have considered the merits of State Farm’s motion because the motion raised an affirmative defense that State Farm waived by not presenting before trial. An affirmative defense must be in the nature of a confession and avoidance. Here, State Farm did not contend that it owed UIM benefits but could avoid its obligation to pay them for some other reason; rather, the motion asserted that it did not owe benefits at all. State Farm’s motion did not raise an affirmative defense. The motion was properly made and the trial court did not err by entertaining it.

Plaintiff also contended that under the plain language of C.R.S. § 10-4-609, State Farm is required to provide him with the full amount of UIM benefits. Plaintiff argued that even though he recovered the full amount of the jury’s verdict from the other driver’s insurer, he should still be allowed to recover an additional $100,000 in UIM benefits. UIM benefits are intended to cover the difference between the negligent driver’s liability limits and the damages. The plain language of the statute does not allow a plaintiff to recover UIM benefits in excess of the total amount of actual damages. Further, the statute does not prevent an insurer from effectively increasing a driver’s liability coverage by offering to pay any damages awarded at trial. Here, there is no difference between the amount of damages and the amount of coverage, so UIM benefits are not triggered.

The court of appeals also found no statutory support for plaintiff’s arguments that (1) the letter from the other driver’s insurance company does not meet the requirements of a complying policy, and so it is not legal liability coverage; and (2) the determination of whether a driver is underinsured is made at the time of the accident.

The judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

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