Twice the covered benefits plus attorneys’ fees and costs is what an insurance company must pay if it acts in bad faith when deciding an uninsured or underinsured insurance claim under CRS 10-3-1116. In this case, the claimant/plaintiff was awarded $0 damages on a statutory bad faith claim, but ultimately recovered three times the amount of UIM coverage available under the policy: double for statutory bad faith and a third under the settlement of a bad faith breach of contract claim. The court of appeals affirmed. First, it held that the policies were ambiguous on the identity of the insured, allowing the jury to conclude claimant was an insured. Then it held that even if the question of coverage was fairly debatable, delay or denying coverage was not necessarily reasonable. And finally, a successful statutory claim independently entitles a claimant to double the covered benefits.
Mind the gap. In this case, the gap is between a settlement less than the policy limits of an insured motorist who caused an accident, and the total amount of actual damages. Under a former version of CRS 10-4-609, underinsured motorist (UIM) coverage must cover the difference between any settlement and the total amount of damages – a reduction approach. But, the law changed, and now UIM policies must only cover the amount of total damages in excess of the policy limits of an insured motorist. Here, the UIM policy was excess and consistent with CRS 10-4-609. The court of appeals therefore held that UIM coverage was not available where, as here, the settlement was less than the policy limits of the available insurance. In light of the public policy reflected by the statute, the court was not free to reach a different result. Thus, there was no unreasonable denial of coverage.
“’For a while’ is a phrase whose length can’t be measured.” – Haruki Murakami. This case began with a car accident in 1995. Litigation ensued. In 1998, Allstate settled, but three suits were still pending. Two state cases were stayed pending the outcome of the third – federal litigation over the denial of coverage by Hartford. The federal case was decided in 2006. The state cases, including a case against State Farm for underinsured motorist coverage, were dismissed in 2007. A new case was brought against State Farm in 2008, which was dismissed on statute of limitations grounds. The Court affirmed dismissal. It held that the 2 year limitation in CRS 13-80-107.5(1)(b) begins upon a payment in the underlying bodily injury claim against the underinsured motorist. Here, it began running in 1998, the point at which the plaintiffs received a settlement payment from Allstate.
Sometimes good law goes bad. It gets on a motorcycle, crashes and kills a passenger. And then the Supreme Court holds that the passenger was only covered by the liability portion of an insurance policy, but not the uninsured/underinsured motorist (UM/UIM) portion of the same policy. And then the legislature amends the law that the Supreme Court interpreted to permit “same policy” exclusions. Once again, a passenger is injured and is paid under the liability portion, but denied UM/UIM coverage. Did that Supreme Court case go bad? No. Here, as in the companion case, the types of covered events an insurer can validly restrict include “same policy” exclusions that do not violate stacking amendments or the prohibition on setoffs. Nor are such exclusions contrary to public policy, because the new statute does not require full indemnification. Thus, the denial of coverage was upheld.
Uninsured/underinsured motorist (UM/UIM) coverage has recently been hotly disputed both in court and in legislatures. This case, together with a companion case, addresses the situation where a passenger is injured by the insured in the insured’s vehicle. Passenger obtains liability coverage insufficient to cover losses, but is denied UM/UIM payments. The policy contains a “same policy” exclusion denying UM/UIM coverage when a person has liability coverage under the same policy. Passenger claims the exclusion is statutorily invalid. The court of appeals disagreed and held that the statute, CRS 10-4-609, does allow a policy to stack liability and UM/UIM coverage, but does not prohibit “same policy” exclusions. Although setoff provisions are prohibited, the court held the exclusion is not a “setoff.” Thus, the exclusion was valid and so was the denial of UM/UIM coverage.