May 23, 2019

Colorado Supreme Court: Criminal-Acts Exclusion Prohibiting Use of Rental Car in Commission of Felonious Crimes Does Not Violate Public Policy

The Colorado Supreme Court issued its opinion in Bailey v. Lincoln Gen. Ins. Co. on May 16, 2011.

Criminal-Acts ExclusionPublic PolicyDoctrine of Reasonable ExpectationsAmbiguous Policy LanguageDeceptive Practices

The supreme court affirms the court of appeals determination to uphold the enforceability of a criminal-acts exclusion in a $1 million excess-insurance policy issued to an insured who rented a vehicle he later drove under the influence of methamphetamines, colliding into another vehicle, critically injuring one person and killing another.

The supreme court holds that the criminal-acts exclusion prohibiting use of a rental car “in the commission of a crime that could be charged as a felony” does not violate public policy as applied to this case, where the insured pled guilty to five felonies involving the use of the car, including second degree murder. Further, the insurer’s use of the criminal-acts exclusion was a proper exercise of the insurer’s freedom to contract and provide coverage for damages caused by fortuitous events instead of for damages caused by intentionally criminal acts.

The supreme court also holds that, in this case, insertion of the criminal-acts exclusion does not violate the doctrine of reasonable expectations. In Colorado, this doctrine manifests itself in two ways: (1) where an ordinary, objectively reasonable person would, based on the language of the insurance policy, fail to understand that he or she is not entitled to the coverage at issue; and (2) where, because of circumstances attributable to an insurer, an ordinary, objectively reasonable insured would be deceived into believing that he or she is entitled to coverage, while the insurer would maintain he or she is not. In this case, from the perspective of an ordinary insured, the policy language is clear that using the rental car to commit a felonious criminal act may void coverage. Further, no circumstances attributable to the insurer can be said to have fostered objectively reasonable coverage expectations for intentional criminal acts.

Summary and full case available here.

Williamson v. Mazda Motor of America: Reviving Seatbelt Tort Claims in State Court

Last week, in Williamson v. Mazda Motor of America, Inc., the Supreme Court of the United States reversed a California decision and made product liability actions involving the failure to install inner-seat lap/shoulder-combination seatbelts available once again in state courts. In a unanimous decision, the Court held that implied preemption did not apply, and distinguished the case from Geier v. American Honda Motor Co. (2000).

In Geier, state law stood as an obstacle to the accomplishment of a significant federal regulatory objective: giving manufacturers a choice among different kinds of passive restraint systems. The Department of Transportation (DOT) had long thought it important to leave manufacturers with a choice of systems, and federal regulations, designed to protect that industry choice, preempted conflicting state law.

However, the Court in Williamson found that while the California tort suit would similarly restrict industry choice by alleging a manufacturer should have installed a particular restraint system, the choice in this case was not a significant regulatory objective. DOT rejected a regulation requiring lap/shoulder-combination seatbelts in rear seats in 1984 due to consumer acceptance concerns. But by 1989, changed circumstances led DOT to require manufacturers to install such seatbelts for rear outer seats but to retain a manufacturer choice for rear inner seats. DOT thought that the same requirement for inner seats would not be cost effective, a much different regulatory analysis than seeking to spur development of alternative safety devices in Geier. Cost-effectiveness alone cannot show that DOT sought to forbid common-law tort suits and, therefore, preemption does not apply to such cases.

SB 11-107: Exception to Noneconomic Damages Limit in Civil Actions for DUI Incidents

On January 31, 2011, Sen. John Morse, D-Colorado Springs, and Rep. Mark Barker, R-Colorado Springs, introduced SB 107 – Concerning the recovery of noneconomic damages in a civil action concerning damages resulting from a DUI incident.

Current law imposes a $250,000 limit on noneconomic damages that may be recovered in a civil action. The bill creates an exception to this limit for actions concerning damages resulting from alcohol-related or drug-related driving incidents. On February 9, the Judiciary Committee amended the bill and referred it to the full Senate for consideration on 2nd Reading.

On February 21, the bill’s second reading was laid over to February 25.

This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report. Summaries of other featured bills can be found here.

HB 11-1106: Recovery of Actual Damages in Personal Injury Cases

On January 21, 2011, Rep. Bob Gardner, R-Colorado Springs, introduced HB 1106 – Concerning the recovery of actual damages in personal injury cases. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The purpose of this bill is to restate and reaffirm the general assembly’s intent that the common-law collateral source rule is abrogated and to indicate that a recent decision of the Colorado supreme court (Volunteers of America v. Gardenswartz) interpreting the statute on reduction of damages for payments from collateral sources is contrary to the general assembly’s intent to prevent compensatory damage awards for medical expenses from exceeding the amount accepted by the health care service provider for treating the injured party. In an action by a person or a legal representative to recover economic damages, the recoverable damages for reasonable and necessary medical or health care, treatment, or services shall include only those amounts actually paid by or on behalf of the injured person to the providers. The bills states that if payment for medical or health care services has not been made at the time of trial or arbitration, the recoverable amounts shall be limited to the amounts customarily accepted by the providers in satisfaction of their bills. Assigned to the Judiciary Committee.

Summaries of other featured bills can be found here.