Jordan v. Safeco Ins. Co. of Am.

• Decision Date: 28 March 2013
• Docket Number: Court of Appeals No. 12CA0934
• Citation: 2013 COA 47,348 P.3d 443
• Parties: Philip JORDAN and Roberta Jordan, Plaintiffs–Appellants, v. SAFECO INSURANCE COMPANY OF AMERICA, INC., Defendant–Appellee.
• Court: Colorado Court of Appeals

348 P.3d 443

2013 COA 47

Philip JORDAN and Roberta Jordan, Plaintiffs–Appellants

v.SAFECO INSURANCE COMPANY OF AMERICA, INC., Defendant–Appellee.

Court of Appeals No. 12CA0934

Colorado Court of Appeals, Div. VII.

Announced March 28, 2013

Roger Jatko, Parker, Colorado, for Plaintiffs–Appellants.

Dufford & Brown, P.C., Lawrence D. Stone, Christian D. Hammond, Denver, Colorado, for Defendant–Appellee.

Roberts Levin Rosenberg PC, Michael J. Rosenberg, Denver, Colorado, for Amicus Curiae The Colorado Trial Lawyers Association.

Opinion

Opinion by JUDGE J. JONES

¶ 1 Plaintiffs, Philip Jordan and Roberta Jordan, appeal the district court's summary judgment in favor of defendant, Safeco Insurance Company of America, Inc., on their claim that Safeco unreasonably denied them underinsured motorist benefits. We affirm.

¶ 2 Among the issues the Jordans raise is an issue of first impression in Colorado. Under section 10–4–609, C.R.S.2012, as amended effective January 1, 2008, may an insurer providing underinsured motorist (UIM) insurance deny an insured such coverage for the difference between the limit of the tortfeasor's liability insurance coverage and the amount of a settlement paid by the tortfeasor to the insured? We conclude that it may.

I. Background

¶ 3 In 2009, J.F., a minor driver, and the Jordans were involved in an automobile accident. The Jordans were injured, and they sued J.F. J.F.'s automobile insurance policy covered damages for injuries to others up to $100,000 per person or $300,000 per accident. Mr. and Mrs. Jordan settled their claims against J.F. for $60,000 and $38,500, respectively.

¶ 4 The Jordans sought UIM benefits under their policy with Safeco, asserting that the policy covers all damages unpaid under the settlements, up to the policy limit.¹ Safeco told the Jordans that their UIM coverage would be triggered only if either of them had damages exceeding the $100,000 liability limit of J.F.'s policy. Safeco valued Mr. Jordan's total damages from the accident at less than $100,000, and, although it is not clear from the record, we presume that Safeco similarly valued Mrs. Jordan's total damages at less than $100,000.

¶ 5 The Jordans sued Safeco, asserting claims for (1) common law bad faith breach of an insurance contract; (2) unreasonable delay and denial of payment of a claim for benefits in violation of sections 10–3–1115 and –1116, C.R.S.2012² ; and (3) a deceptive trade practice in violation of the Colorado Consumer Protection Act (CCPA), sections 6–1–101 to –1121, C.R.S.2012. The Jordans moved for summary judgment on their claim under sections 10–3–1115 and –1116. Safeco moved for summary judgment on the bad faith claim and the claim under sections 10–3–1115 and –1116. Subsequently, the Jordans stipulated that neither of them could prove damages in excess of $100,000, and the court granted the Jordans' motion to dismiss their third claim under the CCPA.

¶ 6 The district court granted Safeco's motion for summary judgment. The court determined that under amended section 10–4–609, the Jordans' claims were viable only if either Mr. or Mrs. Jordan could establish damages exceeding $100,000 (J.F.'s policy limit).³ Given the Jordans' stipulation that neither of them could prove damages exceeding $100,000, the district court concluded that no genuine issue of material fact remained, and that Safeco was entitled to judgment as a matter of law.

¶ 7 On appeal, the Jordans challenge only the district court's grant of summary judgment in favor of Safeco on their second claim under sections 10–3–1115 and –1116, and its refusal to grant them summary judgment on that claim. They concede that no material facts are disputed.

II. Standard of Review

¶ 8 We review a grant of summary judgment de novo. Shelter Mut. Ins. Co. v. Mid–Century Ins. Co. , 246 P.3d 651, 667 (Colo.2011). Summary judgment is appropriate when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. C.R.C.P. 56(c) ; Amos v. Aspen Alps 123, LLC , 2012 CO 46, ¶ 13, 280 P.3d 1256.

III. Discussion

¶ 9 In challenging the district court's order granting summary judgment for Safeco and its refusal to grant their motion for summary judgment, the Jordans contend that Safeco unreasonably denied their UIM claim because payment was required by (1) the plain terms of the Safeco policy; and (2) section 10–4–609. We conclude, however, that Safeco's denial of coverage was legally permissible under both the clear language of the policy and the unambiguous terms of section 10–4–609. Therefore, Safeco did not unreasonably delay or deny a claim for payment of benefits in violation of sections 10–3–1115 and –1116 as a matter of law.

A. The Safeco Policy

¶ 10 The Safeco policy's UIM coverage provision (Part C, “INSURING AGREEMENT,” section A) says that Safeco

will pay damages under this coverage caused by an accident with an underinsured motor vehicle only if 1. or 2. below applies: 1. The limits of liability under any applicable bodily injury liability bonds or policies have been exhausted by payment of judgments or settlements, or 2. [not applicable].⁴

¶ 11 The policy later defines an underinsured motor vehicle (in Part C, “INSURING AGREEMENT,” section C) as follows:

“Underinsured motor vehicle” means a land motor vehicle, the ownership, maintenance or use of which is insured or bonded for bodily injury at the time of the accident, but the amount paid for bodily injury under such insurance or bonds is not enough to pay the full amount the insured is legally entitled to recover as damages.

¶ 12 And, as also relevant here, the UIM portion of the policy contains a provision regarding the effect of other insurance on UIM coverage (in Part C, “OTHER INSURANCE,” section B). It states: “[UIM] Coverage shall be excess over all bodily injury liability bonds or policies applicable at the time of the accident.”

¶ 13 We review the interpretation of an insurance contract de novo, employing “well-settled principles of contractual interpretation.” Allstate Ins. Co. v. Huizar, 52 P.3d 816, 819 (Colo.2002) ; accord Shelter Mut. Ins. Co., 246 P.3d at 666. We construe the plain language of the contract to fulfill the intent of the insured and the insurer, and we resolve ambiguities in favor of the insured. Shelter Mut. Ins. Co., 246 P.3d at 666.

¶ 14 We agree with Safeco and the district court that the policy terms unambiguously provide for payment of UIM benefits only for damages above the tortfeasor's insurance policy liability limit.

¶ 15 The relevant UIM coverage provision states that Safeco will pay UIM benefits if “the limits of liability ... have been exhausted by payment of judgments or settlements.” These terms clearly restrict Safeco's UIM liability to amounts exceeding an underinsured tortfeasor's insurance policy's limit of liability. Contrary to the Jordans' assertion, the coverage provision does not say that the tortfeasor's limit of liability is deemed to be exhausted by the payment of any judgment or settlement, regardless of the amount. Rather, it plainly conditions payment of UIM benefits on exhaustion of the tortfeasor's limit of liability, however such exhaustion occurs. See Birchfield v. Nationwide Ins., 317 Ark. 38, 875 S.W.2d 502, 503 (1994) (holding that similar language unambiguously required exhaustion of tortfeasor's policy limit before UIM coverage was available); Hill v. Am. Family Mut. Ins. Co., 150 Idaho 619, 249 P.3d 812, 815–16 (2011) (noting that identical policy language is common in the insurance industry and holding that it unambiguously requires exhaustion of a tortfeasor's policy limit before UIM coverage is available); see also Union Ins. Co. v. Houtz, 883 P.2d 1057, 1061 (Colo.1994) (mere disagreement regarding the interpretation of an insurance policy term does not create an ambiguity).

¶ 16 Also contrary to the Jordans' assertion, the policy's definition of “underinsured motor vehicle” does not dictate a different conclusion. To be sure, a condition of UIM coverage under the policy is that the vehicle is underinsured, as defined in the policy. But, as noted, the coverage provision further conditions payment of UIM benefits – as relevant here, by requiring exhaustion of the tortfeasor's liability policy limit. The definition of “underinsured motor vehicle” does not negate that further condition.

¶ 17 The cases on which the Jordans rely primarily, Freeman v. State Farm Mut. Auto. Ins. Co., 946 P.2d 584 (Colo.App.1997) ; State Farm Mut. Auto. Ins. Co. v. Tye, 931 P.2d 540 (Colo.App.1996) ; and State Farm Mut. Auto. Ins. Co. v. Bencomo, 873 P.2d 47 (Colo.App.1994), are distinguishable. In Freeman and Bencomo, the relevant policy provisions granted coverage once the limits of liability for all bodily injury policies had been “used up” by payments of settlements or judgments. Freeman, 946 P.2d at 585 ; Bencomo, 873 P.2d at 49. The divisions analyzed the meaning of those provisions in light of the former version of section 10–4–609. As discussed in Part III.B below, before the 2008 amendments to that section, subsection (5) of the statute required UIM coverage for damages in excess of amounts paid pursuant to a tortfeasor's liability policy. As amended, however, section 10–4–609 requires coverage for amounts in excess of a tortfeasor's liability policy limit.

¶ 18 Tye also relied on the prior version of section 10–4–609. The division expressly construed the phrase “paid or payable” in the UIM coverage provision there at issue in light of former subsection 10–4–609(5). Tye, 931 P.2d at 542–43.

¶ 19 The coverage provision at issue in this case does not include that same “used up” or “paid or payable” language at issue in the cases decided under the prior version of section 10–4–609. And, the policy here includes an additional relevant provision not mentioned in the earlier cases: namely, the “other insurance” provision in the UIM part of the policy, stating that “[UIM] Coverage shall be excess over all bodily injury...