Newton v. Nationwide Mut. Fire Ins. Co.

• Decision Date: 30 April 1979
• Docket Number: No. C-1568,C-1568
• Citation: 197 Colo. 462,594 P.2d 1042
• Parties: Julia NEWTON, Ethel M. Clark, and Lynn Saunders, as mother and next friend of James Saunders, Jr., Petitioners, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, an Ohio Corporation, Respondent.
• Court: Colorado Supreme Court

Page 1042

594 P.2d 1042

197 Colo. 462

Julia NEWTON, Ethel M. Clark, and Lynn Saunders, as mother and next friend of James Saunders, Jr., Petitioners, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, an Ohio

Corporation, Respondent.

No. C-1568.

Supreme Court of Colorado, En Banc.

April 30, 1979.

Rehearing Denied June 4, 1979.

Norton Frickey & Associates, Dan W. Corson, Denver, Criswell & Patterson, John Criswell, Englewood, for petitioners.

Paul D. Renner, P. C., Douglas K. Goss, Denver, for respondent.

Erick K. Furedy, Denver, for amicus curiae Steven S. Lovey.

DeMoulin, Anderson, Campbell & Laugesen, Laird Campbell, Richard W. Laugesen, Denver, for amicus curiae State Farm.

E. Gregory Martin, P. C., E. Gregory Martin, Barre M. Sakol, Boulder, Feder & Morris, P. C., Harold A. Feder, Irvin M. Kent, Denver, for amicus curiae Colorado Trial Lawyers' Assn.

CARRIGAN, Justice.

Nationwide Mutual Fire Insurance Company (Nationwide) sought a declaratory judgment ¹ to determine the validity of its policy provision. This provision allows Nationwide to subtract from amounts payable by it as uninsured motorist coverage any amounts of personal injury protection (PIP) claims arising out of the same collision and required under the Colorado Automobile Accident Reparations Act ("No Fault" Act). Section 10-4-701, Et seq., C.R.S.1973. The district court held the policy provision in question void as contrary to public policy. The Colorado Court of Appeals reversed the district court and held the provision valid and enforceable. Nationwide Mut. Ins. Co. v. Newton, Colo.App., 579 P.2d 1178 (1978). We granted certiorari to review the court of appeals' opinion and we now reverse that court's decision.

All parties have stipulated to the following facts. Julia Newton, Ethel Clark and James Saunders, Jr., were injured in a March 1975, automobile accident. At that time the car in which they were riding was covered by an auto insurance policy issued to Julia Newton by Nationwide. The policy contained the compulsory personal injury protection coverage mandated by the "No Fault" Act. Section 10-4-701, Et seq., C.R.S.1973. Besides the required coverage it included, for an extra premium, the minimum $15,000 per person and $30,000 per occurrence uninsured motorist coverage which Colorado insurance companies are required to offer their customers. Section 10-4-319, C.R.S.1973. In addition Nationwide's policy provided:

"In consideration of the coverage afforded under Section I and the adjustment of applicable rates:

"(A) Any amount payable under the Family Protection Coverage (Uninsured Motorist) shall be reduced by the amount of any personal injury protection benefits paid or payable or which would be paid or payable but for the application of a deductible under this or any other automobile insurance policy because of bodily injury sustained by an eligible injured person; . . ."

The other driver involved in the accident was uninsured. For purposes of this appeal it is agreed that the other driver was solely liable for the collision and resulting injuries.

Nationwide paid the claimants a total of $5,865.05 under the policy's PIP coverage. Pursuant to the policy's terms and conditions, the parties arbitrated the uninsured motorist claims. Those claims included both special damages already paid under the PIP coverage, and general damages. The arbitrators determined that the claimants were entitled to recover a total of $15,250.00 from the uninsured motorist. The arbitrators did not, however, earmark any particular portions of the lump sum award as being for PIP-type losses, such as actual medical expenses, as distinguished from general damages, recoverable under the uninsured motorist coverage, such as pain, suffering, and disability. They expressly found that they had no authority to decide the validity or enforceability of the insurance contract language purporting to allow the company to subtract PIP benefits from uninsured motorist awards.

Nationwide brought this action to determine its rights under its policy provision which expressly allows it to offset, against amounts payable under uninsured motorist coverage, any PIP benefits paid, payable, or attributable to a "deductible" amount. The claimants contend that the policy provision in question violates public policy and, therefore, is void. We agree. Because the provision purports to allow an insurance carrier to provide less than the statutorily required minimum coverage of uninsured motorist coverage, it is contrary to the legislative intent to encourage purchase of stated minimum coverages of uninsured motorist insurance. Thus the provision is invalid and unenforceable.

A comparison of PIP coverage and uninsured motorist coverage reveals that the two types of insurance are in many ways quite distinct. Each is set forth in separate contractual provisions and a separate premium is charged and collected for each. Although the law requires that uninsured motorist coverage be offered by every automobile insurance company, insurance purchasers are not required to buy it but may reject it in writing. Section 10-4-319, C.R.S.1973. PIP coverage, however, is compulsory for every motor vehicle operated on the public highways. Section 10-4-705, C.R.S.1973.

Uninsured motorist recovery is available only to persons "legally entitled to recover damages from owners or operators of uninsured motor vehicles . . . ." Section 10-4-319, C.R.S.1973. Thus a claimant may not obtain payment under uninsured motorist coverage without first establishing that the uninsured motorist's fault, normally negligence, caused the collision. In contrast, PIP benefits are recoverable without regard to fault. Sections 10-4-706 and 707, C.R.S.1973.

Comparing the benefits payable under PIP with those payable under uninsured motorist coverage demonstrates that the respective coverages overlap to some extent but are not duplicative. The minimum benefits required to be covered by PIP include medical expenses, ² rehabilitation and occupational training costs, ³ lost wages, ⁴ and, to some extent, loss of essential services that the injured person would have performed without being paid. ⁵ In contrast, uninsured motorist coverage compensates for Any loss arising from bodily injury or death up to the policy limits. Section 10-4-319, C.R.S.1973. Thus, absent a set-off, under uninsured motorist coverage one can recover losses incurred above the PIP limits for medical expenses, lost wages and lost essential services, plus general damages different in kind from those compensable under the PIP provisions, such as pain and suffering.

In section 10-4-319, C.R.S.1973, the General Assembly clearly manifested its intent that one who purchases uninsured motorist coverage obtain, for the additional premium paid, coverage for at least the minimum amounts mandated in the statute, $15,000 per person and $30,000 per accident. ⁶ Nothing in the statute warrants issuing an uninsured motorist policy with lower limits. The set-off provision here involved, however, allows the insurer to reduce the uninsured motorist coverage to less than the statutorily required minimums by deducting the PIP payments.

For example, an insured with $15,000 uninsured motorist coverage who has a total $20,000 loss, of which $15,000 is for PIP-type expenses, will be paid $15,000 under the PIP endorsement of his policy. If that $15,000 is then set off against the minimum required uninsured motorist coverage of $15,000, the insured would receive nothing under his uninsured motorist coverage. He would have to absorb $5,000 of his loss even though he bought and paid for uninsured motorist insurance intended to cover this portion of the loss. In this situation the effect of the set-off provision would be to eliminate completely the insurer's liability under the uninsured motorist provisions if the insured has coverage only for the minimum statutory amounts. Such a set-off clause is repugnant to the state's public policy requiring uninsured motorist coverage to be provided in at least the stated minimum amounts. In accord, Bacchus v. Farmers Insurance Group Exchange, 106 Ariz. 280, 475 P.2d 264 (1970); Heiss v. Aetna Casualty and Surety Co., 250 Ark. 474, 465 S.W.2d 699 (1971); Tuggle v. Government Employees Inc. Co., 207 So.2d 674 (Fla.1968); Peterson v. State Farm Mut. Automobile Ins. Co., 238 Or. 106, 393 P.2d 651 (1964); Sinicropi v. State Farm Ins. Co., 391 N.Y.2d 444, 55 App.Div.2d 957 (1977); Aldcroft v. Fidelity and Cas. Co. of New York, 106 R.I. 311, 259 A.2d 408 (1969); Westchester Fire Ins. Co. v. Tucker, 512 S.W.2d 679 (Tex.1974).

The court of appeals' reliance on this court's decision in Alliance Mut. Cas. Co. v. Duerson, 184 Colo. 117, 518 P.2d 1177 (1974), to uphold the policy provision, is misplaced. Alliance involved two separate uninsured motorist policies issued by two different carriers. We specifically noted in Alliance that upholding the policy provision in issue did not allow an insurance carrier to reduce the total uninsured motorist recovery to less than the minimum amounts required by statute. In contrast, the set-off provision here in issue does allow the insurance carrier to reduce the uninsured motorist coverage available to less than the statutorily required minimum amounts. Thus the reasoning of Alliance is inapplicable here.

Moreover, the effect of the...