Briggs v. American Family Mut. Ins. Co.

Decision Date09 April 1992
Docket NumberNo. 91CA0126,91CA0126
Citation833 P.2d 859
PartiesValorie BRIGGS, Plaintiff-Appellee, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin corporation, Defendant-Appellant. . V
CourtColorado Court of Appeals

Breit, Best, Richman & Bosch, P.C., Bradley A. Levin, Peggy A. Walker, Denver, Foster, Larson, Laiche & Griff, Timothy E. Foster, Grand Junction, for plaintiff-appellee.

Doehling & Slater, P.C., Gary L. Doehling, Terry D. Slater, Grand Junction, for defendant-appellant.

Opinion by Judge DAVIDSON.

Defendant, American Family Mutual Insurance Company (American), appeals from the summary judgment entered in favor of plaintiff, Valorie Briggs. In its order, the trial court found that the consent to sue clause within Briggs' uninsured motorist policy with American was void and that American was bound by the determination of damages in Briggs' tort action against the uninsured motorist. We agree and therefore affirm.

In November 1987, Briggs was injured in an automobile accident caused by an uninsured motorist. Pursuant to the provisions of her uninsured motorist policy, the parties entered negotiations to settle Briggs' claim. Although American conceded the liability of the uninsured motorist--who had been convicted of vehicular homicide in the death of Briggs' passenger--it was unable to reach an agreement with Briggs as to the damages incurred from the accident.

As pertinent here, the policy provided that if the insurer and the insured were unable to agree on liability or the amount of damages, Briggs had two options to determine the contract benefits she could recover from American: either she could bring suit against American directly, as long as the uninsured motorist was made a defendant and as long as the claim against the uninsured motorist was not barred by the tort statute of limitations; or she could bring suit against the uninsured motorist, provided that she notified American of the action, but any resulting judgment would bind American only if it gave its written consent to be bound.

Accordingly, pursuant to the policy, Briggs timely filed a breach of contract action against American to determine the amount of benefits to which she was entitled. The complaint also contained certain tort claims, including bad faith breach of the insurance contract, for American's alleged misconduct in the handling of her claim.

Briggs did not join the uninsured motorist as a defendant as required by the policy. Instead, on the same date, she filed a separate tort action against the uninsured motorist and, pursuant to the policy, properly notified American. In response, American notified Briggs that it refused to be bound by any resulting judgment entered against the uninsured motorist, but did not challenge her election to file separate suits. Neither party moved to consolidate the two actions.

The uninsured motorist failed to answer Briggs' complaint, and the trial court, on Briggs' motion, entered a default against him. In October 1990, after a full hearing, the court entered a judgment against the uninsured motorist in the amount of $200,000 compensatory and $200,000 exemplary damages. Briggs notified American only of the default. American did not participate in the default judgment hearing.

The breach of contract action was scheduled for trial in December 1990. However, in November 1990, Briggs filed a motion for partial summary judgment asking that American be bound by the default judgment against the uninsured motorist and, thus, be precluded from relitigating damages. The court entered summary judgment for Briggs. Specifically, it found that the consent to sue clause in the policy was invalid, that American was bound by the determination of damages in the tort action, and that the principles of collateral estoppel applied to prevent American from relitigating the issue of damages. The parties settled the claims for tortious conduct prior to the summary judgment hearing.

I.
A.

American contends that the trial court erred in determining that the consent to sue clause in Briggs' uninsured motorist policy was invalid. We disagree.

Parties cannot by private contract abrogate statutory requirements or conditions affecting the public policy of the state. University of Denver v. Industrial Commission, 138 Colo. 505, 335 P.2d 292 (1959). Any provision which violates public policy because it attempts to dilute, condition, or unduly limit statutorily mandated coverage may be declared void and unenforceable. Terranova v. State Farm Mutual Automobile Insurance Co., 800 P.2d 58 (Colo.1990).

The policy provides, in pertinent part:

If any suit is brought by you [the insured] to determine liability or damages, the owner or operator of the uninsured motor vehicle or underinsured motor vehicle must be made a defendant and you must notify us of the suit. Without our written consent we are not bound by any resulting [judgment]. (emphasis added)

The consent to sue clause, emphasized in the above provision, provides that the insured must relitigate the issue of liability and damages if the insurer does not consent to be bound by the determination of those issues in a tort judgment against the uninsured motorist.

Colorado's uninsured motorist statute, § 10-4-609, C.R.S. (1987 Repl.Vol. 4A), provides in pertinent part:

No automobile liability or motor vehicle liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall be delivered or issued for delivery in this state ... unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in section 42-7-103(2), C.R.S., [of the Motor Vehicle Insurance Responsibility Act] under provisions approved by the commissioner, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom; except that the named insured may reject such coverage in writing. (emphasis added)

The purpose of the uninsured motorist coverage mandated by § 10-4-609 is to compensate an insured for loss, subject to the insured's policy limits, caused by negligent and financially irresponsible motorists. Kral v. American Hardware Mutual Insurance Co., 784 P.2d 759 (Colo.1989); State Farm Mutual Automobile Insurance Co. v. Nissen, 835 P.2d 537 (Colo.App.1992). The legislative intent is satisfied by coverage that compensates a person injured by an uninsured motorist to the same extent as one injured by a motorist in compliance with the law. Terranova v. State Farm Mutual Automobile Insurance Co., supra.

Under the statute, the insurer must pay to the insured, up to the limit of the policy, whatever losses the insured proves he or she is "legally entitled to recover" from the uninsured motorist. Thus, the insured has the burden to prove that the uninsured motorist was negligent and the extent of the damages. This can be done in a judicial proceeding against either the uninsured motorist or the insurer, or in an arbitration proceeding. Wales v. State Farm Mutual Automobile Insurance Co., 38 Colo.App. 360, 559 P.2d 255 (1976); see Reese v. State Farm Mutual Automobile Insurance Co., 285 Md. 548, 403 A.2d 1229 (1979). If the insured meets this burden, then the insurer is under statutory and contractual duty to compensate the insured for his losses.

A consent to sue clause, however, dilutes, conditions, and limits the character of the coverage mandated in the statute. See Terranova v. State Farm Mutual Automobile Insurance Co., supra. An insurer, by refusing to be bound, can force an insured, who has already obtained a judicial determination of his losses against the uninsured motorist, to relitigate liability and damages as a condition of recovery. At a minimum, this dilutes coverage by requiring insureds to expend greater resources in order to recover an amount they have already established they are entitled to. See Winner v. Ratzlaff, 211 Kan. 59, 505 P.2d 606 (1973) (multiple litigation is never desirable).

At worst, the insured receives an unfavorable verdict in the second proceeding and recovers nothing. See Vernon Fire & Casualty Insurance Co. v. Matney, 170 Ind.App. 45, 351 N.E.2d 60 (1976) (allowing two actions to decide identical issues leads to possibly conflicting results). This is contrary to the overriding public policy expressed in the statute of protecting an insured against the danger of uninsured motorists. See Kral v. American Hardware Mutual Insurance Co., supra (to protect the insured from "the often devastating consequences of motor vehicle accidents").

Numerous courts have considered the validity of such clauses. The majority have held them invalid because they violate the language and intent of the uninsured motorist statute of their state or because of the desirability of avoiding a multiplicity of suits. See Nationwide Mutual Insurance Co. v. Webb, 291 Md. 721, 436 A.2d 465 (1981) (cites 22 cases which have invalidated consent to sue clauses); see also Heisner v. Jones, 184 Neb. 602, 169 N.W.2d 606 (1969) (it is desirable to "avoid the multiplicity of suits and the harassment of the insured by the necessity to litigate his rights twice"); Vernon Fire & Casualty Insurance Co. v. Matney, supra (regarding the "legally entitled to recover" language of the statute, "it is difficult to imagine that a judgment rendered by a court of competent jurisdiction would not legally entitle [the insured] to recover the damages specified by that judgment"); cf. Boughton v. Farmers Insurance Exchange, 354 P.2d 1085 (Okla.1960) ("The judgment against the uninsured motorist determined that plaintiff was entitled to recover from an uninsured motorist and established the amount she was entitled to recover. [The insurer] cannot now say [that] it is...

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