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

• Decision Date: 19 April 1993
• Citation: 851 P.2d 165
• Docket Number: 92SC207
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner, v. Louise NISSEN, Respondent.
• Court: Colorado Supreme Court

Page 165

851 P.2d 165

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner, v.Louise NISSEN, Respondent.

No. 92SC207.

Supreme Court of Colorado En Banc.

April 19, 1993.

Levy & Lambdin, P.C., Marc R. Levy, Karen H. Wheeler, Englewood, for petitioner.

Rotole, Jaunarajs, Blanchard & Lumbye, Jack F. Rotole, Paul F. Lumbye, III, Denver, for respondent.

Justice MULLARKEYdelivered the Opinion of the Court.

We granted certiorari in this case in order to determine whether the uninsured motorist insurance obtained by the respondent, Louise Nissen, from the petitionerState Farm Mutual Automobile Insurance Company(State Farm), provides coverage for injuries she received when she tried to prevent the theft of her car.State Farm Mut. Auto. Ins. Co. v. Nissen, 835 P.2d 537(Colo.App.1992).We find that the insurance policy contains conflicting provisions.When construed in favor of the insured and against the insurer, the policy provides coverage for the respondent's injuries.Therefore, we affirm the judgment of the court of appeals.

I.

The parties stipulated to the following facts.Louise Nissen was dining with her husband in a restaurant when she noticed someone trying to steal her car and ran outside.While attempting to stop the theft, she was thrown onto the hood of the car.As Nissen clung to the hood, the thief drove the car into traffic and struck a pick-up truck in a head-on collision.Nissen was pinned between the two vehicles and suffered serious injuries, with damages exceeding $100,000.The driver and passenger in the pick-up truck, William and Martha Wilson, also were injured.

Nissen filed a claim with her insurance company, State Farm, for compensation under her comprehensive policy, which contained both liability and uninsured motorist coverage in the amount of $100,000 each.State Farm denied coverage under the liability portion of her policy because the thief was a non-permissive driver.State Farm also denied coverage under the uninsured motorist portion of Nissen's policy, however, citing language from the policy which, it asserted, excluded her car from the definition of an uninsured vehicle.The Wilsons, who were also insured by State Farm, were told by State Farm to file a claim under their own uninsured motorist coverage.That claim apparently was paid.

State Farm brought a declaratory judgment proceeding seeking affirmation of its interpretation of the allegedly applicable policy exclusions.Nissen counterclaimed, asserting coverage and citing a conflicting provision contained in the paragraph preceding the exclusions relied upon by State Farm.

Upon cross-motions for summary judgment, the trial court disagreed with State Farm's contention that, because Nissen's car was insured by State Farm and was provided for Nissen's regular use, the car was not an uninsured vehicle for purposes of uninsured motorist coverage.Instead, the trial court found that the car effectively was uninsured when the accident occurred.Therefore the trial court, in a summary judgment ruling, awarded compensation in the amount of the uninsured motorist policy limit to Nissen.The court of appeals agreed with the trial court, finding State Farm's interpretations of the exclusions unenforceable as against public policy and legislative intent.State Farm then brought this appeal before us, and we affirm the ruling of the court of appeals.

In so affirming, we note that the resolution of this case turns on the interpretation of conflicting provisions of the insurance policy.We must first examine whether the provision denying uninsured motorist coverage on cars insured under the same policy can be reconciled with other provisions and with legislative intent.Then we will determine whether the provision denying coverage on cars furnished for one's regular use is consistent with public policy in this particular situation.

II.

A.

Before analyzing State Farm's insurance contract, we will summarize briefly the principles which underlie our analysis.Our starting point is the plain language of the contract and the intent of the parties as expressed in that language.Simon v. Shelter Gen. Ins. Co., 842 P.2d 236, 239(Colo.1992).Any ambiguities in the contract are construed against State Farm as its drafter.United States Fidelity and Guar. Co. v. Budget Rent-a-Car Sys., Inc., 842 P.2d 208, 211(Colo.1992)."When provisions of an insurance policy conflict, they are to be construed against the insurer and in favor of coverage to the insured."Simon842 P.2d at 239(citing13 John A. Appleman & Jean Appleman, Insurance Law and Practice§ 7401 at 253-54(1976)).We have declined to give a technical construction to an insurance contract and have stated that the insurance contract's terms are to be construed as they would be understood by a person of ordinary intelligence.SeeSimon, 842 P.2d at 240.This common-sense analysis of an insurance contract is particularly appropriate here because this case involves construction of an automobile insurance policy sold to a consumer who is not expected to be highly sophisticated in the art of reading insurance policies.

With these principles in mind, we will address the parties' contentions.

B.

State Farm denied liability coverage to Nissen under Section I of the policy because, at the time of the accident, her car was being driven by a thief who did not have Nissen's consent to use the car.Under the policy, the term "Insured" means the person, persons or organizations defined as an insured in the specific coverage sections of the policy.Under the relevant portions of Section I of the policy, an insured is "any other person using such a car if its use is within the scope of the consent of you or your spouse."(Emphasis in original).Nissen does not contest State Farm's denial of liability coverage.She asserts, however, that because State Farm denied liability under Section I of the policy, her car was an uninsured vehicle as defined in Section III of the policy concerning uninsured motorist coverage.Nissen relies on the following policy provision in Section III:

Uninsured Motor Vehicle--means:

1. a land motor vehicle, the ownership, maintenance or use of which is:

. . . . .

b. insured or bonded for bodily injury liability at the time of the accident; but:

. . . . .

(2) the insuring company denies coverage....

State Farm responds that Nissen's car is excluded from the definition of an uninsured motor vehicle in Section III by an exclusion which appears in a provision following the definition upon which Nissen relies.The exclusion reads as follows:

An uninsured motor vehicle does not include a land motor vehicle:

1. insured under the liability coverage of this policy....

Under the facts of this case, the two policy provisions conflict.By denying Nissen's claim for liability coverage, State Farm brought Nissen's car within the definition of an "uninsured motor vehicle."Nissen's car was insured for bodily injury liability at the time of the accident but State Farm later denied coverage.In the words of the policy, Nissen's car was a "motor vehicle" which was "insured ... for bodily injury liability at the time of the accident; but ... the insuring company denies coverage."State Farm is an "insuring company" and nothing within the definition indicates that it does not include the situation where State Farm denies liability coverage as it did to Nissen.

Further, defining Nissen's car as an "uninsured" vehicle for purposes of the State Farm policy is consistent with State Farm's own construction of Nissen's policy with respect to the advice that it gave to the Wilsons, who were the other parties injured in the accident.The Wilsons also were insured by State Farm and were advised by State Farm to pursue their injury claims under their own uninsured motorist coverage.State Farm's instructions to the Wilsons must have been based on its conclusion that, for purposes of Nissen's policy, her vehicle was uninsured at the time of the accident.

The exclusion language upon which State Farm relies conflicts with the definition of an uninsured motor vehicle.Under the Simon analysis, the conflicting exclusion must fall."The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations."Robert E. Keeton, Insurance Law--Basic Text§ 6.3(a) at 351(1971).See also2 Irvin E. Schermer, Automobile Liability Insurance§ 25.02[a](1992).Cf.Davis v. M.L.G. Corp., 712 P.2d 985(Colo.1986)(in automobile leasing case, we recognized principle of reasonable expectations as expressed in insurance cases).Nissen had a reasonable expectation based on the coverage language of the insurance contract, despite the conflicting exclusion language, that her injuries due to the negligence of an uninsured person would be covered.

Our construction of the contract is supported by the legislative intent underlying the uninsured motorist statute.¹We have recognized that the legislative intent behind the statute is to compensate innocent insureds for loss caused by financially irresponsible motorists.Terranova v. State Farm Mut. Auto. Ins. Co., 800 P.2d 58, 61(Colo.1990)(citingKral v. American Hardware Mut. Ins. Co., 784 P.2d 759, 765(Colo.1989)).The statute is meant to provide compensation for injury caused by an uninsured motorist equal to that obtainable for injury caused by an insured motorist.Terranova, 800 P.2d at 61(citingAlliance Mut. Casualty Co. v. Duerson, 184 Colo. 117, 124, 518 P.2d 1177, 1181(1974)).Nissen is clearly within the class of persons that the statute intended to protect.She opted to purchase uninsured motorist coverage, and she was injured by an uninsured motorist driving a car which became uninsured at the time of the accident because of State Farm's denial of liability coverage....