Parsons v. Allstate Ins. Co.

• Decision Date: 30 November 2006
• Docket Number: No. 03CA2051.,03CA2051.
• Citation: 165 P.3d 809
• Parties: Jessica PARSONS, By and Through her parent and next friend Elissa PARSONS, and Elissa Parsons, individually, Plaintiffs-Appellants and Cross-Appellees, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee and Cross-Appellant.
• Court: Colorado Court of Appeals

165 P.3d 809

Jessica PARSONS, By and Through her parent and next friend Elissa PARSONS, and Elissa Parsons, individually, Plaintiffs-Appellants and Cross-Appellees, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellee and Cross-Appellant.

No. 03CA2051.

Colorado Court of Appeals, Div. I.

November 30, 2006.

Certiorari Denied June 27, 2007.

Lloyd C. Kordick & Associates, Lloyd C. Kordick, Colorado Springs, Colorado, for Plaintiffs-Appellants and Cross-Appellees.

Walberg, Dagner & Tucker, P.C., Wendelyn K. Walberg, Lynaia M. South, Englewood, Colorado, for Defendant-Appellee and Cross-Appellant.

Opinion by Judge BERNARD.

In this insurance bad faith action, plaintiffs, Elissa Parsons (mother) and Jessica Parsons (daughter), appeal the judgment in favor of defendant, Allstate Insurance Company. We affirm in part, reverse in part, and remand.

The following facts are undisputed. This case arises from an automobile accident in which the at-fault party was uninsured (the uninsured driver). The uninsured driver was intoxicated at the time and later pled guilty to an alcohol-related driving offense. The Parsons sued both the uninsured driver and Allstate, their own insurer. The Parsons asserted claims of negligence against the uninsured driver and bad faith breach of an insurance contract, outrageous conduct, and violation of the Colorado Consumer Protection Act against Allstate. They also sought uninsured motorist benefits from Allstate.

Following a trial, the jury found in favor of the Parsons on their negligence and uninsured motorist claims. The jury awarded damages of $19,500 to mother and $10,000 to daughter, plus interest. The jury found in favor of Allstate on the bad faith, outrageous conduct, and Consumer Protection Act claims. The trial court, finding each party prevailed on some issues, ordered each party to pay partial costs.

I. Uninsured Driver as Separate Defendant

Raising a series of arguments, the Parsons contend the trial court should have treated the uninsured driver as a separate defendant from Allstate. We disagree.

The Parsons' original complaint contained tort and contract claims, alleging the uninsured driver was careless, negligent, and reckless and requesting recovery from Allstate under the terms of the uninsured motorist insurance policy. Allstate's answer raised defenses, including some based in contract, and requested a jury trial.

The uninsured driver was served with process and did not file an answer, and a clerk's default was entered pursuant to C.R.C.P.55(a). The Parsons requested the trial court to enter a default judgment against the uninsured driver. Allstate objected, claiming it might be bound by a default judgment and arguing the hearing was set too quickly for it to conduct discovery to defend its interests. Allstate requested the default hearing against the uninsured driver take place when trial was set.

A hearing on damages was then held, which concluded with the trial court's taking the matter under advisement. The trial court subsequently issued a written order deferring any decision on damages until the trial. The Parsons withdrew their request for a default judgment hearing and requested damages be determined by a jury instead of the trial court.

A. Trial on the Issue of Damages

The Parsons contend the trial court erred in refusing to enter a default judgment against the uninsured driver and requiring them to go to trial on the issue of damages. Thus, the Parsons argue the trial court erred by deferring the issue of damages to a trial in which Allstate was allowed to participate. We do not agree.

The Parsons rely on Brekke v. State Farm Mutual Automobile Insurance Co., 81 P.3d 1101 (Colo.App.2003) (Brekke I), a decision of a division of this court in effect at the time of the trial in this case, which was affirmed in part and reversed in part by the supreme court in State Farm Mutual Automobile Insurance Co. v. Brekke, 105 P.3d 177 (Colo. 2004) (Brekke II). The issue in Brekke II was whether, and to what extent, an insurance company providing uninsured motorist coverage could participate in a lawsuit filed by its insured against both the insurance company and an uninsured motorist.

The supreme court held insurance companies do not have a right to a jury trial on tort claims, but may, upon a sufficient showing their interests will not be adequately protected if they are not allowed to participate in the proceedings, be permitted to participate fully in the damages portion of default judgment hearings. This authorization applies when an uninsured motorist does not enter an appearance, the motorist's liability is established by default, and the insured's damages are resolved in a default judgment hearing. The supreme court discussed the trial court's role, stating: "[T]he decision on the proper role for the insurance provider in the litigation falls within the sound discretion of the district court.... [A]n abuse of discretion here occurs where the court's failure to properly order the proceedings virtually assures prejudice to a party." Brekke II, supra, 105 P.3d at 193 (citations omitted).

Here, the trial court entered a default against the uninsured driver, but ruled Allstate would be allowed to participate in a hearing to be held at the time of trial in which the only issue was damages. This course was authorized by the supreme court's decision in Brekke II and did not prejudice the Parsons. Thus, we do not perceive the trial court abused its discretion in permitting Allstate to participate in the damages portion of the proceedings.

Further, when the Parsons withdrew their request for a damages hearing and asked that the issue be resolved by a jury, they waived any objection to Allstate's participation in the damages portion of the trial. Cf. 7C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1914 (2d ed.1977) (existing party that does not object to intervention may waive right to object to intervenor's participation).

We conclude there was no error in the trial court's deferring the entry of a default judgment until the time of trial and allowing Allstate to participate in the trial on the issue of damages.

B. Objection to Discovery

The Parsons contend the trial court treated Allstate as if it had stepped into the uninsured driver's shoes. As grounds for this contention, the Parsons refer to the trial court's ruling on an objection to the discovery of the uninsured driver's alcohol records. We disagree.

In an effort to obtain information about the uninsured driver's level of intoxication at the time of the accident, the Parsons served a subpoena on the probation department, requesting records pertaining to the uninsured driver's alcohol evaluation. The probation department refused to provide these records, citing statutory and privacy concerns. The Parsons filed a motion to compel discovery. Allstate responded that the trial court should deny the Parsons' motion because the Parsons had not complied with rules governing service of subpoenas. The response also stated that, because Allstate had been sued, Allstate had "stepped into the shoes of the tortfeasor."

Contrary to this assertion, Allstate did not assume the uninsured driver's position in this case. While Allstate was entitled to intervene in the action and even align itself with the uninsured driver on certain issues, it was not entitled to undertake the uninsured driver's defense. See Brekke II, supra; Briggs v. Am. Family Mut. Ins. Co., 833 P.2d 859 (Colo.App.1992); State Comp. Ins. Fund v. Gulf Ins. Co., 628 P.2d 182, 183 (Colo.App. 1981) (insurance company does not step into "the shoes of the tortfeasor").

The trial court's order denying the Parsons' discovery motion referred to the privacy considerations raised by the probation department. The trial court then found the motion was moot because the uninsured driver's alcohol content on the date of the accident, which the trial court included in the order, was contained in a police affidavit available in the criminal case file. The order did not treat Allstate as having assumed the uninsured driver's defense or as standing in her "shoes."

Thus, the record does not support the Parsons' contention and instead supports the trial court's determination the issue was moot. Cf. Osborn v. Harrison Sch. Dist. No. 2, 844 P.2d 1283 (Colo.App.1992) (discovery request moot because results had no effect on summary judgment).

C. Limitation of Recovery

The Parsons submit the trial court erred in refusing to enter judgment for the full amount of the jury verdict. The court's ruling was based on Allstate's argument that recovery was limited by mother's uninsured motorist policy. We agree with the Parsons' position.

The purpose of uninsured motorist coverage is to compensate insureds for loss caused by negligent and financially irresponsible motorists. Kral v. Am. Hardware Mut. Ins. Co., 784 P.2d 759 (Colo.1989). The insurer must pay the insured, up to the limits of the policy, whatever losses the insured proves the insured is legally entitled to recover from the uninsured motorist. Briggs v. Am. Family Mut. Ins. Co., supra.

Uninsured motorist coverage is not triggered unless an insured is legally entitled to recover damages from the operator of an uninsured automobile. Section 10-4-609(1)(a), C.R.S.2006. A tort claim against an uninsured motorist is distinct from a contract claim against an insurer. While an insurer's obligation to an insured in these circumstances is prescribed by the policy limits, the insured is also entitled to recover from the uninsured motorist or other insurance sources whatever additional damages may have been found to exist. As the supreme court observed in Brekke II, supra, 105 P.3d at 187: "Once judgment was entered against [the uninsured motorists] Brekke ... had the right to execute judgment and collect damages from these two defendants." See also State Farm Mut. Auto. Ins. Co. v. Progressive Mut....