Apodaca v. Allstate Ins. Co.

• Decision Date: 20 June 2011
• Docket Number: No. 10SC39.,10SC39.
• Citation: 255 P.3d 1099
• Parties: Codiejo APODACA, n/k/a Codiejo Martinez, and Michelle I. Carlton, Petitionersv.ALLSTATE INSURANCE COMPANY, an Illinois insurance corporation, Respondent.
• Court: Colorado Supreme Court

255 P.3d 1099

Codiejo APODACA, n/k/a Codiejo Martinez, and Michelle I. Carlton, Petitioners

v.ALLSTATE INSURANCE COMPANY, an Illinois insurance corporation, Respondent.

No. 10SC39.

Supreme Court of Colorado, En Banc.

June 20, 2011.

Hagens Berman Sobol Shapiro, LLP, Robert B. Carey Megan E. Waples, Colorado Springs, Colorado, The Gold Law Firm, L.L.C., Colleen Parsley, Gregory A. Gold, Greenwood Village, Colorado, Attorneys for Petitioners.Wheeler Trigg O'Donnell LLP, John Vaught, Terence M. Ridley, Denver, Colorado, Meckler Bulger & Tilson LLP, Peter J. Valeta, Chicago, Illinois, Attorneys for Respondent.Justice MÁRQUEZ delivered the Opinion of the Court.

The Uninsured Motorist Act, section 10–4–609, C.R.S. (2010), requires insurers to offer uninsured/underinsured motorist (“UM/UIM”) coverage with every “automobile liability or motor vehicle liability” policy sold in Colorado. In Apodaca v. Allstate Insurance Co., 232 P.3d 253, 258 (Colo.App.2009), the court of appeals held that this statutory requirement does not apply to umbrella policies. We granted a petition for a writ of certiorari to review the court of appeals' ruling, and now affirm.

In June 2002, Codiejo Apodaca (now Codiejo Martinez) and her stepsister Michelle I. Carlton (“insureds”), were injured in an automobile accident. At the time of the accident, the insureds were covered as resident relatives under an auto policy and a personal umbrella policy both issued by Allstate Insurance Company (“Allstate” or the “insurer”). The auto policy included UM/UIM coverage in the amount of $100,000 per person and $300,000 per accident, which matched the auto policy's bodily injury liability limits. The umbrella policy provided $1 million in excess liability coverage for “occurrences” arising out of, among other things, “occupancy of a land vehicle ... by an insured for personal transportation.” It is undisputed that Allstate did not separately offer UM/UIM coverage in connection with the umbrella policy.

The insureds brought suit against Allstate seeking judicial reformation of the umbrella policy to include UM/UIM coverage. In their view, section 10–4–609(1)(a), C.R.S. (2010), requires Allstate to offer UM/UIM coverage in connection with the umbrella policy because the policy includes automobile liability coverage. Thus, the insureds contend, UM/UIM coverage should be deemed incorporated into the umbrella policy as a matter of law.

The trial court granted Allstate's C.R.C.P. 12(b)(5) motion to dismiss. It reasoned that only liability policies expressly linked to a specific, licensed Colorado motor vehicle are required to include the mandatory offer of UM/UIM insurance.

The court of appeals affirmed. Based on the plain language of the UM/UIM statute and Colorado's “minimum recovery” system, the court of appeals held that umbrella policies do not fall within the ambit of section 10–4–609 and thus “are not subject to the UM/UIM coverage requirements of that statute.” Apodaca, 232 P.3d at 258.

We affirm. We hold that an umbrella policy is not an “automobile liability or motor vehicle liability policy” as specified in section 10–4–609(1)(a); therefore, Allstate had no obligation to offer UM/UIM coverage in connection with the umbrella policy.

I. Facts and Procedural Background

At the time of the June 2002 accident, the insureds were both minors covered as resident relatives under an Allstate “Auto Insurance Policy” (“auto policy”) and an Allstate “Personal Umbrella Policy” (“umbrella policy”), both held by Steven Carlton (“policyholder”), who is Michelle Carlton's father and Codiejo Martinez's stepfather. Among other types of coverage, the auto policy provided “automobile liability insurance” for each vehicle up to $100,000 per person and $300,000 per accident. It also provided uninsured/underinsured motorists insurance for bodily injury in the matching limits of $100,000 per person and $300,000 per accident.

The auto policy identified four specific vehicles for coverage. For each vehicle, the policy reflected a premium based on factors specific to that vehicle, including the vehicle's year, make, and model, as well as the nature and extent of coverage purchased (e.g., automobile liability insurance, personal injury protection benefits, auto collision insurance, auto comprehensive coverage, rental reimbursement coverage, and coverage for property damage caused by uninsured motorists). The premium for each vehicle also reflected discounts (e.g., for passive restraint systems or antilock brakes); surcharges (e.g., for an inexperienced operator); and rating information based on vehicle usage patterns specific to the vehicle and its driver.

The umbrella policy provided up to $1 million in generalized excess liability coverage. The policy provided that Allstate would pay when an insured became liable to others for personal injury, property damage, or bodily injury caused by an “occurrence” (defined to include an accident) arising out of the personal activities of an insured, civic services performed by an insured, or “the occupancy of a land vehicle, aircraft, or watercraft by an insured for personal transportation.” The umbrella policy required the insured to maintain underlying primary auto liability insurance coverage in minimum amounts of $100,000 per person and $300,000 per accident, and paid benefits when those underlying policy limits were exceeded. In contrast to the auto policy, the umbrella policy charged a single premium for “basic liability.” The declarations page simply noted that this premium included a charge for “4 automobiles” and “a young driver.” The umbrella policy did not include UM/UIM coverage; indeed, it specifically excluded coverage for “personal injury or bodily injury to an insured.”

The insureds brought this suit against Allstate ¹ alleging that their severe and disabling injuries were caused by an at-fault, underinsured driver. The insureds sought to have the umbrella policy judicially reformed to contain UM/UIM coverage. They contended that Allstate was required to offer UM/UIM coverage for the umbrella policy under section 10–4–609(1)(a) and, because Allstate failed to do so, the coverage should be deemed incorporated into the umbrella policy as a matter of law.

The trial court rejected this claim, reasoning that section 10–4–609(1)(a) applies only to liability insurance policies issued or delivered in Colorado that directly concern or have a demonstrable relationship to “any motor vehicle licensed for highway use in this state.” The court concluded that the umbrella policy is not the type of liability policy subject to a mandatory offer of UM/UIM coverage because it neither refers to any specific, licensed Colorado motor vehicle, nor limits its coverage to motor vehicle related liability.

The court of appeals affirmed, likewise concluding that umbrella policies are not included under section 10–4–609. Apodaca, 232 P.3d at 258. The court reasoned that “[a]utomobile or motor vehicle insurance insures the owner or operator of a motor vehicle against liability arising out of the ownership and operation of designated motor vehicles.” Id. at 257. In contrast, the umbrella policy provides “general liability coverage and requires [an underlying] primary insurance policy with minimum liability limits as to those risks or activities for which specialized liability insurance is generally available and commonly purchased.” Id. Although the court of appeals based its conclusion on the plain language of section 10–4–609(1)(a) and its context, it also found persuasive the decisions from appellate courts from other states with similar UM/UIM provisions. The court of appeals described Colorado's statutory scheme as a “minimum recovery system” under which insurers are required to provide UM/UIM coverage only in the minimum amounts established by the Motor Vehicle Financial Responsibility Act (“MVFRA”). It observed that appellate courts in states with similar “minimum recovery” systems generally have concluded that umbrella policies are not subject to UM/UIM coverage requirements. Id. at 258. Finally, the court of appeals rejected the argument that public policy requires UM/UIM coverage to be included in umbrella policies. Id. at 258–59.

II. Analysis

The issue before us is whether an umbrella policy that includes supplemental liability coverage for automobiles or motor vehicles is an “automobile liability or motor vehicle liability policy” under section 10–4–609(1)(a), thereby requiring the insurer to offer UM/UIM coverage as part of the policy.² We examine the plain language of the statute and hold that the UM/UIM requirements do not apply to general liability policies such as the umbrella policy at issue here. Unlike the court of appeals, we find the distinction drawn by other courts between “minimum liability” and “full recovery” UM/UIM statutes unpersuasive as applied to Colorado's provisions, and do not rely on this reasoning. Finally, we reject the insureds' arguments that public policy considerations compel a different interpretation of section 10–4–609.

A. Standard of Review

We review a court's C.R.C.P. 12(b)(5) dismissal of a complaint for failure to state a claim de novo. Bly v. Story, 241 P.3d 529, 533 (Colo.2010). In doing so, we take the allegations as stated in the complaint as true. Simon v. State Comp. Ins. Auth., 946 P.2d 1298, 1299 (Colo.1997).

Whether umbrella policies fall within the requirements of Colorado's UM/UIM statute is a question of statutory interpretation that we likewise review de novo. Shelter Mut. Ins. Co. v. Mid–Century Ins. Co., 246 P.3d 651, 660–61 (Colo.2011). When interpreting a statute, “[o]ur primary duty ... is to ascertain and effectuate the intent of the General Assembly.” Id. We begin with the statute's express language, “construing words and phrases according to grammar and common usage.” Jefferson Cnty. Bd. of Equalization v. Gerganoff, 241 P.3d 932, 935 (Colo.2010). Ultimately, ...