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

• Decision Date: 06 April 2006
• Docket Number: No. 04CA2511.,04CA2511.
• Citation: 143 P.3d 1083
• Parties: Thomas LOAR and Donna Loar, Petitioners-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a/k/a State Farm Insurance Company, Respondent-Appellee.
• Court: Colorado Court of Appeals

143 P.3d 1083

Thomas LOAR and Donna Loar, Petitioners-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a/k/a State Farm Insurance Company, Respondent-Appellee.

No. 04CA2511.

Colorado Court of Appeals, Div. IV.

April 6, 2006.

Rehearing Denied May 18, 2006.^*

Certiorari Denied October 16, 2006.

Darrell S. Elliott, P.C., Darrell S. Elliott, Jerold Hart, Denver, Colorado, for Petitioners-Appellants.

Patterson, Nuss & Seymour, P.C., Franklin D. Patterson, Craig S. Nuss, William P. Boyle, Englewood, Colorado, for Respondent-Appellee.

VOGT, J.

Petitioners, Thomas Loar and Donna Loar, appeal the trial court's summary judgment in favor of respondent, State Farm Mutual Automobile Insurance Company. We reverse and remand for further proceedings.

Petitioners purchased an automobile policy from State Farm in 1998. The policy provided bodily injury liability coverage and uninsured-underinsured motorist (UM/UIM) coverage, both with limits of $25,000 per person and $50,000 per accident.

In August 2000, petitioner Donna Loar was injured in an automobile accident while she was in the course and scope of her employment. After receiving workers' compensation benefits and a settlement from the other driver's liability insurer, Donna Loar made a claim for underinsured motorist benefits under her State Farm policy. State Farm denied the claim because the other driver's liability coverage limit of $30,000 exceeded petitioners' $25,000 UM/UIM coverage limit, and the other driver was thus not "underinsured."

Petitioners then brought this action. As relevant here, they sought a declaratory judgment that UM/UIM coverage of $100,000 per person and $300,000 per accident was available to them under their State Farm policy because State Farm had never informed them that they could purchase UM/UIM coverage at a level higher than the minimum statutorily required $25,000 per person and $50,000 per accident.

State Farm moved for summary judgment, asserting that it had no duty to offer petitioners UM/UIM limits in excess of the $25,000/ $50,000 bodily injury liability limits they had selected. The trial court granted the motion. It concluded that the motion presented only a question of law and that the UM/UIM statute "did not require State Farm to offer UM/UIM limits over the bodily injury limits of $25,000/$50,000."

I.

Petitioners contend on appeal that the trial court erred in entering summary judgment in favor of State Farm. We agree.

Summary judgment is appropriate only if the pleadings and supporting documents demonstrate that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. The nonmoving party is entitled to the benefit of all favorable inferences that may be drawn from the undisputed facts, and all doubts as to the existence of a triable issue of fact must be resolved against the moving party. We review a summary judgment de novo. Martini v. Smith, 42 P.3d 629 (Colo.2002); see C.R.C.P. 56(c).

A.

Petitioners contend State Farm had a duty to inform them, when they purchased their policy, that they could purchase UM/UIM coverage with limits higher than the statutory minimum. We agree.

Section 10-4-609, C.R.S.2005, requires insurance companies issuing automobile liability policies to include UM/UIM coverage in their policies unless the named insured rejects such coverage in writing. See Aetna Casualty & Surety Co. v. McMichael, 906 P.2d 92 (Colo.1995); Richardson v. Farmers Ins. Exchange, 101 P.3d 1138 (Colo.App. 2004). Section 10-4-609(1)(a), C.R.S.2005, states, in pertinent part:

No automobile 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 . . . in limits for bodily injury or death set forth in section 42-7-103(2), C.R.S. [2005] . . . for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles . . .; except that the named insured may reject such coverage in writing.

Under § 10-4-609(4), C.R.S.2005, uninsured motorist coverage includes underinsured motorist coverage.

The purpose of § 10-4-609 is to ensure that Colorado motorists are "afforded an opportunity to protect themselves from losses resulting from the negligent conduct of financially irresponsible operators of motor vehicles." Passamano v. Travelers Indemnity Co., 882 P.2d 1312, 1321 (Colo.1994).

However, UM/UIM coverage is not mandatory, and individual insureds are free to decline it. Further, the statute does not require full indemnification of losses suffered at the hands of uninsured motorists under all circumstances. Rather, the intent is to put a person injured by an uninsured or underinsured motorist in the same position as one injured by a tortfeasor insured in compliance with the law. Cruz v. Farmers Ins. Exchange, 12 P.3d 307 (Colo.App.2000); see Terranova v. State Farm Mutual Automobile Ins. Co., 800 P.2d 58 (Colo.1990). In effect, UM/UIM coverage limits act as a replacement for the liability policy limits of an underinsured motorist who is at fault in a motor vehicle accident. DeHerrera v. Sentry Ins. Co., 30 P.3d 167 (Colo.2001).

The dispute in this case concerns § 10-4-609(2), C.R.S.2005, which states, in relevant part:

Prior to the time the policy is issued or renewed, the insurer shall offer the named insured the right to obtain higher limits of uninsured motorist coverage in accordance with its rating plan and rules, but in no event shall the insurer be required to provide limits higher than the insured's bodily injury liability limits or one hundred thousand dollars per person and three hundred thousand dollars per accident, whichever is less. . . . For purposes of this subsection (2), underinsured motorist coverage is included in the term "uninsured motorist coverage" pursuant to subsection (4) of this section.

In Allstate Ins. Co. v. Parfrey, 830 P.2d 905, 912-13 (Colo.1992)(Parfrey), the supreme court held that, in light of the statute's purpose to "provide . . . the driving public with an opportunity to make an informed decision on an appropriate level of UM/UIM coverage," § 10-4-609(2) would be construed as "creating a one-time duty upon an insurer" to "inform an insured in a reasonable manner calculated to permit the insured to make an informed decision on whether to purchase UM/UIM coverage offered by the insurer at a level higher than the minimum statutory liability limits." In DeHerrera, supra, 30 P.3d at 174, the supreme court elaborated further on the purpose of § 10-4-609(2):

[T]he statute requires an insurer to offer an insured the opportunity to purchase more than the minimum UM/UIM insurance because of the effect of the statute in an instance where both parties carry policies with the minimum limits of coverage. In such a case, replacing liability limits of a tortfeasor with UM/UIM limits of an injured insured would not create any additional benefit for the injured insured. An injured insured would still only receive $25,000 to cover her personal injuries even if her damages exceeded that amount. If insurers were not required to offer UM/UIM insurance at higher levels than the minimum liability insurance, then the intent of the statute to protect insureds against the risk of inadequate compensation for injur[i]es caused by an underinsured motorist would be frustrated.

(Citation omitted.)

In opposition to State Farm's summary judgment motion in this case, Donna Loar submitted an affidavit stating that she had not been informed when she purchased the State Farm policy in 1998 that she could elect to purchase UM/UIM coverage "in the amount of $100,000/$300,000." State Farm did not dispute that statement. Rather, it argued in reply, and continues to assert on appeal, that because petitioners selected the minimum bodily injury liability coverage, it was not obligated under the statute to offer them UM/UIM coverage in excess of that amount. State Farm cites the language in § 10-4-609(2) limiting its obligation to provide UM/UIM coverage ("but in no event shall the insurer be required to provide limits higher than the insured's bodily injury liability limits. . ."), and it argues that "no goal or legislative intent is furthered by requiring State Farm to offer coverage that it has no duty to provide." State Farm also asserts that Parfrey is limited to situations in which an insured increases bodily injury liability coverage — which petitioners did not do here. We are not persuaded.

Section 10-4-609(2) does not make the obligation to inform contingent upon the insured's purchase of bodily injury liability coverage in excess of the statutory minimum. Rather, the duty to inform of or "offer . . . the right to obtain" higher UM/UIM coverage is stated broadly in the first and second clauses of § 10-4-609(2); and the following clause, on which State Farm relies, is not a limit on that duty, but on the amount of coverage that the insurer must ultimately provide. The General Assembly chose to use "offer" in one clause and "provide" in the subsequent clause; and we must presume its use of the different terms was intentional. See Carlson v. Ferris, 85 P.3d 504 (Colo. 2003)(courts do not presume that legislature used language idly and with no intent that meaning be given to it; rather, use of different terms signals legislature's intent to afford those terms different meanings). Further, while the "but in no event" clause does not alter the insurer's obligation to inform, it bears significantly on the insurer's coverage obligation, as set forth in Part I(B), below.

Moreover, cases from the supreme court and this court that have discussed the § 10-4-609(2) "one-time duty to inform" have not recognized any limitation on that duty where the...