Coffman v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 19 September 1994
• Docket Number: No. 93SC411,93SC411
• Citation: 884 P.2d 275
• Parties: Bonnie L. COFFMAN, Petitioner, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.
• Court: Colorado Supreme Court

Page 275

884 P.2d 275

Bonnie L. COFFMAN, Petitioner, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.

No. 93SC411.

Supreme Court of Colorado En Banc.

Sept. 19, 1994.

Rehearing Denied Oct. 11, 1994.

Waltz, D'Antuono, Correll & Anderson, Tim Correll, Denver, for petitioner.

Levy & Lambdin, P.C., Marc R. Levy, Suzanne Lambdin, Scott P. Landry, Englewood, for respondent.

OPINION

Justice KIRSHBAUM delivered the Opinion of the Court.

In Coffman v. Coffman, 865 P.2d 856 (Colo.App.1993), the court of appeals held that household exclusion clauses in automobile insurance policies remained enforceable subsequent to our decision in Meyer v. State Farm Mutual Automobile Insurance Company, 689 P.2d 585 (Colo.1984), wherein we determined that such clauses were unenforceable because they were contrary to the public policy of this state. The court of appeals based its decision on the fact that subsequent to our decision in Meyer the General Assembly adopted section 10-4-418(2)(b), 4A C.R.S. (1994), which statute provides that such exclusion clauses are compatible with the public policy of this state. Having granted certiorari to review the court of appeals' conclusion, we reverse and remand with directions.

I

On December 1, 1984, the petitioner, Bonnie L. Coffman, and her husband purchased an automobile insurance policy from State Farm Mutual Automobile Insurance Company (hereafter State Farm) covering their 1979 Pontiac automobile. The policy provided liability coverage for bodily injury with limits of $100,000 for each person and $300,000 for each accident from December 1, 1984, to May 29, 1985, renewable at six-month intervals thereafter. Although this court's decision in Meyer v. State Farm Mutual Automobile Insurance Company, 689 P.2d 585 (Colo.1984), wherein we concluded that household exclusion clauses were unenforceable, had been announced prior to December 1, 1984, the form on which State Farm issued the Coffman's policy contained such a clause. ¹ The Coffmans renewed their policy in May of 1985 for an additional six-month period ending on November 29, 1985.

On March 4, 1985, State Farm submitted proposed endorsement 6896S to the State Insurance Commissioner (hereafter the Commissioner) for filing and approval pursuant to section 10-4-720(1), 4A C.R.S. (1994). The proposed endorsement contained a "household limitation" clause that provided as follows:

THERE IS NO COVERAGE:

2. FOR ANY BODILY INJURY TO:

c. ANY INSURED OR ANY MEMBER OF AN INSURED'S FAMILY RESIDING IN THE INSURED'S HOUSEHOLD TO THE EXTENT THE LIMITS OF LIABILITY OF THIS POLICY EXCEED THE LIMITS OF LIABILITY REQUIRED BY LAW.

At the time this endorsement was submitted for approval, the minimum liability coverage for bodily injuries to one person was established at $25,000. § 10-4-706(a), 4A C.R.S. (1994). The parties dispute whether the Commissioner approved the proposed endorsement. On June 17, 1985, State Farm amended all its policies issued in Colorado to include endorsement 6896S. With respect to the Coffman's policy, the endorsement purported by its terms to take effect on November 29, 1985, the policy renewal date.

On December 27, 1985, State Farm issued an automobile insurance policy to the Coffmans insuring a 1986 "GMC JIMMY" four-wheel drive vehicle (the insured vehicle). ² That policy stated that the coverage period for this vehicle extended from December 27, 1985, to May 29, 1986, and contained the same limits on bodily injury liability coverage as did the December 1984 policy--$100,000 per person up to a maximum of $300,000 per accident. The policy expressly noted on the cover page that endorsement 6896S was incorporated therein. The December 27, 1985, policy was renewed for an additional six-month period in May 1986.

On July 1, 1986, the General Assembly adopted section 10-4-418(2)(b), which section states as follows:

(b) The commissioner shall not find that a policy form, certificate, or contract of insurance or rider does not comply with the applicable requirements and standards of this title on the ground that it excludes coverage of claims made by a member of a household against another member of the same household. Such exclusions are in conformity with the public policy of this state.

§ 10-4-418(2)(b), 4A C.R.S. (1994).

On August 4, 1986, the Coffmans were involved in an automobile accident. The petitioner was driving the insured vehicle at the time. Her husband, a passenger therein, was seriously injured. He later filed this civil action against the petitioner seeking damages in excess of $70,000 allegedly sustained by reason of the petitioner's negligent operation of the vehicle.

Relying on the provisions of endorsement 6896S to the Coffmans' policy, State Farm refused to pay any claims made by Mr. Coffman against the petitioner in excess of the $25,000 limit contained therein. The petitioner filed a third-party complaint against State Farm, asserting that at the time of the accident the policy provided liability coverage of $100,000 with respect to her husband. The petitioner subsequently filed a motion for partial summary judgment against State Farm, arguing that endorsement 6896S was not effective because it had not received the approval of the Commissioner as required by section 10-4-720(1), 4A C.R.S. (1994). State Farm filed a cross-motion for partial summary judgment in which it contended that endorsement 6896S had been approved by the Commissioner. The trial court denied both motions on the basis of its conclusion that genuine issues of material fact existed with respect to whether endorsement 6896S had been approved by the Commissioner.

On November 26, 1991, State Farm filed a motion for reconsideration of the denial of its motion for partial summary judgment. State Farm argued that this court's decisions in Schlessinger v. Schlessinger, 796 P.2d 1385 (Colo.1990), and Allstate Insurance Company v. Feghali, 814 P.2d 863 (Colo.1991), "indicate that the Supreme Court decision in Meyer, supra, was, in fact, wrong, based upon a mistaken premise, and should not be given any force or effect at all." At that time the case was assigned to a judge other than the judge who had entered the order denying the motions for summary judgment.

On December 27, 1991, the trial court granted State Farm's motion for reconsideration and granted State Farm's motion for partial summary judgment. The trial court made the following pertinent remarks in the course of the ruling:

The Court finds the issue to be whether there was a reduction of coverage without the insurance commissioner's approval. Pursuant to the holdings in both [Feghali and Schlessinger ], the Court finds that the household exclusion clause in an insurance policy is valid.

Therefore, State Farm's endorsement 6896S, providing liability coverage of $25,000, is not a reduction but an increase in coverage and does not need the insurance commissioner's approval. ³

The petitioner appealed this judgment to the court of appeals, arguing, inter alia, that section 10-4-418(2)(b) had prospective effect only and did not nullify the effect of the decision in Meyer with respect to any automobile insurance policy issued to her during the period between the date of that decision and July 1, 1986, the effective date of that statute. The court of appeals rejected this argument. ⁴ Coffman, 865 P.2d at 858. Citing our decision in Schlessinger, a majority of the court explained its conclusion that endorsement 6896S was enforceable against the petitioner as follows:

We reach this conclusion because the issue of the applicable public policy created by the Act was not finally resolved until the General Assembly's enactment [of section 10-4-418(2)(b) ] in 1986. And, were we to conclude otherwise, the directive of the General Assembly on an issue of public policy would be frustrated.

Coffman, 865 P.2d at 858. In a special concurrence, one member of the panel indicated agreement with the trial court's reasoning that endorsement 6896S represented increased coverage for the petitioner and therefore required no approval by the Commissioner. Id.

II

A

In Meyer v. State Farm Mutual Automobile Insurance Company, 689 P.2d 585 (Colo.1984), this court held that pursuant to the Colorado Automobile Accident Reparations Act, sections 10-4-701 to -723, 4 C.R.S. (1973 & 1984 Supp.) (commonly known and hereafter referred to as "the No-Fault Act"), household exclusion clauses in automobile liability insurance policies were invalid. We reached this conclusion on the basis of our examination of the provisions of the No-Fault Act concerning required coverage and permissible exclusions and the Act's declaration of purpose, as set forth in section 10-4-702, 4A C.R.S. (1994). ⁵ We determined that "the legislative purpose in adopting the Act was twofold: To avoid inadequate compensation to victims of automobile accidents, and to require that motor vehicle owners purchase insurance policies which provide coverage for both liability and no-fault benefits." Meyer, 689 P.2d at 588 (emphasis in original). Noting that the provisions of section 10-4-706(1)(a), 4A C.R.S. (1994), ⁶ required insurers to provide minimum levels of liability coverage, we concluded that the language of section 10-4-712, 4A C.R.S. (1987), ⁷ permitting insurers to incorporate exclusions into automobile liability insurance policies so long as such exclusions were approved by the Commissioner did not authorize the Commissioner to approve exclusions that were inconsistent with the requirements of the Act. ⁸ We then held that household exclusion clauses conflicted with the mandatory requirements of the Act and were therefore invalid or void. Meyer, 689 P.2d at 589-92. ⁹

The policy issued to the petitioner in May 1985 contained a household exclusion clause which was invalid as a matter of law under the rule announced in Meyer. Because the household exclusion clause was invalid, it did not in fact limit in any manner the ability...