Calderon v. Am. Family Mut. Ins. Co.

• Decision Date: 07 November 2016
• Docket Number: Supreme Court Case No. 14SC494
• Citation: 383 P.3d 676,2016 CO 72
• Parties: Arnold A. CALDERON, Petitioner, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Respondent.
• Court: Colorado Supreme Court

383 P.3d 676

2016 CO 72

Arnold A. CALDERON, Petitioner,

v.AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Respondent.

Supreme Court Case No. 14SC494

Supreme Court of Colorado.

November 7, 2016

Attorneys for Petitioner: Franklin D. Azar & Associates, P.C., Robert O. Fischel, Tonya L. Melnichenko, Keith R. Scranton, Aurora, Colorado, Levin Rosenberg PC, Bradley A. Levin, Nelson A. Waneka, Denver, Colorado

Attorneys for Respondent: Sutton Booker, P.C., Debra K. Sutton, Jacquelyn S. Booker, Katie B. Johnson, Denver, Colorado

Attorneys for Amicus Curiae Colorado Defense Lawyers Association: White and Steele, PC, Joel N. Varnell, Denver, Colorado

Attorneys for Amicus Curiae Colorado Trial Lawyers Association: Ogborn Mihm, LLP, Thomas Neville, Denver, Colorado

En Banc

JUSTICE EID delivered the Opinion of the Court.

¶1 Petitioner Arnold Calderon sustained injuries in a motor vehicle accident with an uninsured motorist. At the time of the accident, Calderon was insured under policies issued by respondent American Family Mutual Insurance Company (“American Family”) providing a total of $300,000 in uninsured/underinsured motorist (“UM/UIM”) coverage and $5,000 in medical payments (“MedPay”) coverage. Following the accident, American Family paid the $5,000 MedPay policy limits directly to Calderon's medical providers. Calderon also made a claim for UM/UIM benefits, but American Family disputed the extent of his damages. Calderon sued for breach of contract, and the jury returned an award of $68,338.97 in his favor. However, the trial court reduced the jury award by $5,000 to set off the MedPay benefits Calderon had already received.

¶2 Calderon appealed the order reducing his judgment, and the court of appeals affirmed, Calderon v. Am. Family Mut. Ins. Co., 2014 COA 70, ¶ 3, –––P.3d ––––, holding that the setoff of MedPay coverage was not barred by the UM/UIM setoff prohibition, which provides: “The amount of the [UM/UIM] coverage available pursuant to this section shall not be reduced by a setoff from any other coverage, including, but not limited to, ... [MedPay] coverage....” § 10–4–609(1)(c), C.R.S. (2016). The court interpreted “[t]he amount of the [UM/UIM] coverage available” as referring to the amount available under the policy in the abstract—that is, the UM/UIM coverage limit. See Calderon, ¶ 2. Under such an interpretation, an insurer may reduce the payment due under the insured's UM/UIM coverage by amounts paid pursuant to the insured's MedPay coverage as long as the UM/UIM coverage limit (here $300,000) is not reduced. Id. at ¶¶ 2–3.

¶3 We granted certiorari and now reverse.¹ We hold that “[t]he amount of the [UM/UIM] coverage available pursuant to this section” refers not to the coverage limit but rather to the amount of UM/UIM coverage available on a particular claim (here, $68,338.97). Accordingly, we reverse the court of appeals and remand the case for further proceedings consistent with this opinion.

I.

¶4 The material facts in this case are not in dispute. On August 22, 2010, an uninsured driver ran a stop sign and collided with a vehicle driven by Calderon. Calderon sustained injuries that left him unable to work for over a month. At the time of the accident, Calderon was insured under American Family policies providing $300,000 in UM/UIM coverage and $5,000 in MedPay coverage, for which Calderon paid separate premiums. The UM/UIM policy endorsement provided in part that

No one will be entitled to receive duplicate payments for the same elements of loss. Any amount we pay under this Part to or for an insured person will be reduced by any payment made to that person under any other Part of this policy. In no event shall a coverage limit be reduced below any amount required by law.

Following the accident, Calderon made claims for MedPay and UM/UIM benefits. American Family paid the $5,000 policy limits of Calderon's MedPay coverage to his medical providers, but disputed the amount due under Calderon's UM/UIM coverage.

¶5 Calderon filed suit asserting breach of contract, common law bad faith, and statutory bad faith under sections 10–3–1115 and –1116, C.R.S. (2016). The trial court bifurcated the contract claim from the issue of bad faith, and the contract claim was tried to a jury on December 17 and 18, 2012. The jury returned a verdict of $68,338.97 in Calderon's favor, including $34,394.65 for past medical expenses. The trial court reduced the award by the $5,000 American Family had previously paid under Calderon's MedPay coverage, and entered judgment against American Family for $77,459, which included prejudgment interest. American Family paid the judgment. The trial court then entered summary judgment for American Family on Calderon's bad faith claims.

¶6 Calderon appealed the order reducing his judgment, and the court of appeals affirmed. Calderon, ¶ 3. The court interpreted the language of the setoff prohibition barring a reduction of “[t]he amount of the [UM/UIM] coverage available” as referring to the amount available under the policy in the abstract—that is, the UM/UIM coverage limit. See id. at ¶ 2. The court reasoned that, because an insurer may reduce the payment due under the insured's UM/UIM coverage by amounts paid pursuant to the insured's MedPay coverage as long as the UM/UIM coverage limit (here, $300,000) is not reduced, the setoff here was permissible. Id. at ¶¶ 2–3. According to the court, Calderon's argument to the contrary “incorrectly equate[d] the term ‘coverage’ with the term ‘benefit,’ ” and improperly permitted “double recovery.” Id. at ¶¶ 12, 16–18, 25–26. We granted certiorari and now reverse.

II.

¶7 Calderon argues that the setoff of the $5,000 in MedPay coverage in this case is contrary to section 10–4–609(1)(c), C.R.S. (2016), which, as amended in 2007, provides: “The amount of the [UM/UIM] coverage available pursuant to this section shall not be reduced by a setoff from any other coverage, including, but not limited to, legal liability insurance, medical payments coverage, health insurance, or other uninsured or underinsured motor vehicle insurance.” We agree that the setoff prohibition of section 10–4–609(1)(c) bars the setoff of MedPay coverage in this case, and accordingly reverse the court of appeals.

¶8 Echoing the court of appeals, American Family argues that the setoff prohibition bars only those setoffs that would reduce the coverage limit of a particular policy. It reads the first portion of the statutory language—namely, “The amount of the [UM/UIM] coverage available pursuant to this section”—as referring to the amount of coverage available in a particular policy in the abstract, or the coverage limit (here, $300,000). By contrast, Calderon reads the same statutory language as referring to the amount of coverage available under a particular claim (here, $68,338.97).

¶9 The question, then, is whether the “amount of the [UM/UIM] coverage available pursuant to this section” refers to the amount available under the policy in the abstract, or in a particular case. When read in isolation, the phrase might be read either way. However, we adopt the latter construction because it makes sense of the entirety of the provision at issue here. See In re Marriage of Ikeler, 161 P.3d 663, 666–67 (Colo. 2007) (“[A] statute must be read and considered as a whole.”).

¶10 The second phrase of the prohibition provides that the amount of UM/UIM coverage available “shall not be reduced by a setoff from any other coverage, including, but not limited to, ... medical payments coverage.” § 10–4–609(1)(c) (emphasis added). This portion of the provision refers to a setoff of the amount actually paid pursuant to a particular coverage, not simply the coverage limit. This is true because a “setoff from any other coverage” is a particular amount paid pursuant to that coverage. See Setoff, Black's Law Dictionary(10th ed. 2014) (defining “setoff” as the “right to reduce the amount of a debt by any sum the creditor owes the debtor”). The language covers all setoffs, not just those where coverage limits have been reached. Indeed, it would make little sense to prohibit a setoff only for the coverage limit of other types of insurance that the claimant might hold—for example, “legal liability insurance, ... health insurance, or other uninsured or underinsured motor vehicle insurance,” § 10–4–609(1)(c) —because the coverage limit of those insurance policies would not generally be known, just the amount paid pursuant to the coverage. In sum, reading the first phrase in light of the second, we conclude that section 10–4–609(1)(c) bars the setoff of MedPay payments from the amount actually paid pursuant to UM/UIM coverage.

¶11 This construction is consistent with our observation that UM/UIM insurance is designed to put “an injured party having uninsured motorist coverage in the same position as if the uninsured motorist had been insured.” Barnett v. Am. Family Mut. Ins. Co., 843 P.2d 1302, 1308 (Colo. 1993) (quoting Kral v. Am. Hardware Mut. Ins. Co., 784 P.2d 759, 764 (Colo. 1989) ); see also USAA v. Parker, 200 P.3d 350, 358–59 (Colo. 2009) (same); § 42–7–102, C.R.S. (2016) (under UM/UIM coverage, “insurance benefits have been paid for by either the negligent driver or the innocent victim for the purpose of compensating the innocent victim for injuries or losses”). Here, no one disputes that had Calderon been injured in an accident caused by an insured driver, he would have received benefits from American Family pursuant to his MedPay coverage, as well as medical expenses from the other driver's insurance company. In other words, under the construction advocated by American Family, Calderon would receive $5,000 less in compensation because he was injured by an uninsured or underinsured driver. We see no indication from the language of the setoff prohibition that the legislature intended such disparate treatment.

¶12 The court of appeals rejected the construction we adopt today for two reasons, neither of which we find...