Mid-Century Ins. Co. v. Travelers, 98SC26.

• Decision Date: 21 June 1999
• Docket Number: No. 98SC26.,98SC26.
• Citation: 982 P.2d 310
• Parties: MID-CENTURY INSURANCE COMPANY, Petitioner, v. The TRAVELERS INDEMNITY COMPANY OF ILLINOIS, Respondent.
• Court: Colorado Supreme Court

982 P.2d 310

MID-CENTURY INSURANCE COMPANY, Petitioner, v. The TRAVELERS INDEMNITY COMPANY OF ILLINOIS, Respondent.

No. 98SC26.

Supreme Court of Colorado, En Banc.

June 21, 1999.

Levy & Lambdin, Suzanne Lambdin, Stephanie A. Montague, Michael S. Power, Englewood, Colorado for Petitioner.

Clifton, Hook & Bovarnick, P.C., James R. Clifton, Harvey D. Flewelling, Denver, Colorado, for Respondent.

Justice HOBBS delivered the Opinion of the Court.

Mid-Century Insurance Company (Mid-Century) appeals from the court of appeals judgment in Travelers Indemnity Co. v. Mid-Century Insurance Co., 961 P.2d 509 (Colo.App.1997). The court of appeals affirmed the judgment of the District Court for the City and County of Denver (trial court) awarding treble damages to Travelers Indemnity Company of Illinois (Travelers) for Mid-Century's willful and wanton refusal to pay personal injury protection (PIP) benefits to Elizabeth Burns (Burns). Burns suffered injuries as a passenger in an automobile owned and operated by Mid-Century's named insured, Terry Murray (Murray).¹ The court of appeals held that Travelers, as equitable subrogee of Burns, could collect treble damages under section 10-4-708(1.8), in connection with obtaining reimbursement of the PIP payments it made to her after Mid-Century, the primary insurer, refused to pay them.² We conclude that Travelers may not retain the treble damages award as part of its equitable subrogation; this claim belongs to Burns. Because she was not a party to the litigation between the insurance carriers, we reverse and remand with directions that the trial court amend its judgment to delete the treble damages award to Travelers.

I.

This case arises out of a dispute between Mid-Century and Travelers regarding payment of PIP benefits to Burns. On February 20, 1992, Murray, a Mid-Century insured, drove Burns, a Travelers insured, to work. Prior to reaching Burns' place of employment, Murray's car was involved in an accident that caused Burns to suffer bodily injuries. Burns submitted a claim for PIP benefits to Mid-Century. Mid-Century denied insurance coverage to Burns based on its position that Travelers was the primary insurer for her PIP benefits.³ Burns subsequently filed a claim with the excess carrier, Travelers; Travelers reserved its subrogation rights while agreeing to pay Burns her PIP benefits due from Mid-Century.

Thereafter, Travelers filed a complaint against Mid-Century for a declaration that Mid-Century was the primary provider of PIP benefits for Burns and for reimbursement of PIP benefits it paid to her. The trial court ordered the parties to refer their dispute to some form of alternative dispute resolution; they attempted mediation but did not resolve their differences. This litigation resumed.⁴

The trial court subsequently granted Travelers' motion for summary judgment, finding and concluding that Mid-Century was the primary insurer for Burns' PIP benefits. The trial court initially determined that the jury should decide the reasonableness and necessity of the PIP reimbursement amount claimed by Travelers. Prior to trial, Travelers amended its complaint to add a claim for recovery of treble damages, prejudgment interest, and attorneys fees, pursuant to section 10-4-708(1.8), claiming that Mid-Century willfully and wantonly failed to pay PIP benefits it owed to Burns. The trial court reconsidered its prior order for jury trial on the issue of reasonableness and necessity of the PIP reimbursement amount, granted summary judgment in favor of Travelers on that issue, and determined that the only issue remaining for trial was whether Mid-Century willfully and wantonly refused to pay PIP benefits to Burns for purposes of the statutory treble damages provision.

The trial court submitted to the jury a special interrogatory⁵ to answer whether Mid-Century had willfully and wantonly refused to pay PIP benefits to Burns when due. The trial court's instruction read, in pertinent part:

[T]here is only one issue which you, the jury, must decide, namely, whether the defendant's refusal to provide personal injury protection (PIP) benefits to Elizabeth Burns was a willful and wanton breach of contract, that is a breach of the contractual obligations which defendant had to Elizabeth Burns as a result of her being a passenger in Terry Murray's car.

The jury answered "yes" to this question.

Upon receiving the jury's verdict, the trial court entered judgment against Mid-Century in favor of Travelers for the PIP benefits paid by Travelers to Burns, interest on that amount at the eighteen percent statutory rate, costs, and treble damages under section 10-4-708(1.8).⁶ It denied Travelers' motion for attorneys fees.⁷

Mid-Century appealed the treble damages award. The court of appeals held that Travelers, as equitable subrogee, was entitled to collect and retain statutory treble damages upon establishing that Mid-Century had willfully and wantonly refused to pay Burns her PIP benefits. See Travelers Indem. Co. v. Mid-Century Ins. Co., 961 P.2d at 511.

Mid-Century, the primary insurer, contends that the common law governing equitable subrogation and the plain language of section 10-4-708(1.8) preclude Travelers, the excess insurer, from having the benefit of the treble damages award. We agree that neither the statute, nor the doctrine of equitable subrogation, entitles Travelers to have the benefit of the treble damages award.

II.

We hold that a claim for treble damages under section 10-4-708(1.8) belongs to the person entitled to PIP coverage required of the primary insurer by Colorado's No-Fault Act. Burns was not a party to the litigation between Mid-Century and Travelers. Subrogation limits the excess carrier's recovery to that amount which makes it whole under 10-4-708, 3 C.R.S. (1998).

A. First Party PIP Coverage under the No-Fault Act

In ascertaining who can receive treble damages under section 10-4-708(1.8), we first determine that Burns is a person to whom Mid-Century's primary coverage for PIP benefits extends. The Colorado Auto Accident Reparations Act, sections 10-4-701 to 726, 3 C.R.S. (1998) (No-Fault Act), "governs compensation, including medical and rehabilitation benefits, for personal injuries resulting from automobile accidents regardless of fault." State Farm Mut. Auto. Ins. v. Peiffer, 955 P.2d 1008, 1010 (Colo.1998).⁸ A stated purpose of the No-Fault Act is to avoid inadequate compensation to victims of automobile accidents. See § 10-4-702, 3 C.R.S. (1998); Farmers Ins. Exch. v. Bill Boom Inc., 961 P.2d 465, 468 (Colo.1998). It must be "liberally construed to further its remedial and beneficent purposes." Peiffer, 955 P.2d at 1011 (quoting Regional Transp. Dist. v. Voss, 890 P.2d 663, 669 (Colo.1995)). Accordingly, the owner of a motor vehicle is required to have a complying insurance policy that includes PIP protection for himself or herself, family members, passengers, and pedestrians involved in the accident. See § 10-4-705(1), -706(1)(b), -707(1), 3 C.R.S. (1998). "PIP" or "Personal Injury Protection" is defined as "direct or no fault benefit coverage." § 10-4-703(11), 3 C.R.S. (1998).

Murray was both owner and operator of the car in which Burns was injured. Burns, as an injured passenger, had PIP coverage from Mid-Century under Murray's policy. This relationship between the automobile owner and operator's insurer and the passenger injured in that automobile follows directly from the legislature's decision to replace parts of the common law tort liability system with minimum required no-fault insurance. See Allstate Ins. Co. v. Avis, 947 P.2d 341, 344 (Colo.1997)

; Committee on Automobile Insurance, Colorado Legislative Council, Report to the Colorado General Assembly, Res. Pub. No. 190 (1972) (Committee Report). First party coverage under the No-Fault Act includes medical benefits and is applicable to "the owner of the automobile, members of his family, the occupants of his automobile, and pedestrians in accidents involving his automobile." See Committee Report at 7; accord § 10-4-707(1). "If a passenger is covered by a policy other than the policy covering the vehicle in which he is injured, primary coverage would be afforded by the policy covering the vehicle."⁹ Committee Report at 7.

Burns is Mid-Century's insured for purposes of a PIP reimbursement action under section 10-4-708; neither carrier contests this conclusion, which follows from the PIP coverage requirements of the statute and third party contract beneficiary principles. The statute and our cases demonstrate that the term "insured" must be viewed in the context of the provisions of the act in which it is used and construed to carry out the purposes and intent of the General Assembly. See Gorman v. Tucker, 961 P.2d 1126, 1128 (Colo.1998)

("A statute must be read and considered as a whole and should be construed to give consistent, harmonious, and sensible effect to all of its parts."). The Committee Report leading to the adoption of Colorado's No-Fault Act is clear that the legislature intended the direct benefit prompt recovery provisions of the No-Fault Act to apply to all persons entitled to PIP benefits. The No-Fault Act expressly provides treble damages for the injured insured against the primary carrier that willfully and wantonly refuses to pay PIP benefits to him or her when they are due. See § 10-4-708(1.8). Section 10-4-708(1.8) states that:

The insurer shall pay interest to the insured on the benefits recovered at a rate of eighteen percent per annum, with interest commencing from the date the benefits recovered were due. In addition, in the event of willful and wanton failure of the insurer to pay such benefits when due, the insurer shall pay to the insured, in addition to any other amounts due to the insured under this subsection (1.8), an amount which is three times the amount of unpaid benefits recovered in the proceeding.

We construe the term "insured" under ...