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

Citation800 P.2d 58
Decision Date10 September 1990
Docket NumberNo. 88SC538,88SC538
PartiesJulie M. TERRANOVA; Janet L. Tretter, By and Through Her Guardian and Next Friend Joseph H. Rea; and Barry M. LeCavalier, Sr., Petitioners, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.
CourtSupreme Court of Colorado

Shelley B. Don, P.C., Shelley B. Don, Watson W. Galleher, Denver, for petitioners.

Anderson, Campbell and Laugesen, P.C., Robert L. McGahey, Jr., Denver, for respondent.

Denis H. Mark, Wilcox & Ogden, Ralph Ogden, Denver, for amicus curiae Colorado Trial Lawyers Ass'n.

Justice ERICKSON delivered the Opinion of the Court.

We accepted certiorari pursuant to C.A.R. 50 to determine whether the trial court properly granted summary judgment in favor of respondent State Farm Mutual Automobile Insurance Co. and dismissed the petitioners' claim for uninsured motorist benefits under an automobile policy issued to their mother, Judy LeCavalier. LeCavalier, while a passenger on her motorcycle, died as a result of a single-vehicle accident caused by the negligence of the driver, who was not insured other than as a permissive driver under LeCavalier's policy. The trial court held, on stipulated facts, that the petitioners could not recover uninsured motorist benefits because the policy specifically provided that an uninsured motor vehicle did not include a vehicle insured under the liability provisions of the policy. We affirm.

I.

The parties stipulated to the following facts. The petitioners are the natural children of Judy LeCavalier, who died in a single-vehicle motorcycle accident on September 7, 1985. The motorcycle, which was owned by LeCavalier and insured by State Farm under a policy issued to LeCavalier, was driven at the time of the accident by Ronald Jackson, who, as a permissive driver, was defined as an additional insured under the policy. Jackson's negligence was the sole cause of the accident. The policy provided liability coverage in the amount of $25,000 for the death of or bodily injury to LeCavalier and furnished uninsured motor vehicle coverage in the amount of $100,000. State Farm paid $25,000, the liability coverage limits, to the petitioners on behalf of Jackson as an additional insured. The petitioners' economic losses as a result of LeCavalier's death exceeded $100,000.

The petitioners filed an action against Jackson alleging that he negligently caused the death of their mother. Thereafter, State Farm was substituted as the defendant in the action and the petitioners sought a declaratory judgment that State Farm was liable to the petitioners for $75,000, the difference between the uninsured vehicle coverage ($100,000) and the $25,000 liability limits that State Farm paid. State Farm moved for summary judgment on the grounds that the policy did not provide uninsured vehicle coverage for a vehicle insured under the liability terms of the policy. The trial court, relying on Barba v. State Farm Mutual Automobile Insurance Co., 759 P.2d 750 (Colo.App.1988), granted State Farm's motion.

II.

The petitioners contend that the policy language is ambiguous because the policy provides uninsured motorist coverage to LeCavalier and then removes the coverage through a restrictive definition of the term "uninsured vehicle." 1 In support of their claim that the policy is ambiguous, petitioners point to the following policy language:

We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle. The bodily injury must be caused by accident arising out of the operation, maintenance or use of an uninsured motor vehicle.

....

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

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

Petitioners maintain that the exclusion of a vehicle insured under the policy's liability coverage from uninsured motor vehicle coverage ("insured vehicle exclusion") is inconsistent with the following "household" exclusion:

THERE IS NO COVERAGE:

....

2. FOR BODILY INJURY TO AN INSURED:

a. WHILE OCCUPYING, OR

b. THROUGH BEING STRUCK BY

A MOTOR VEHICLE OWNED BY YOU, YOUR SPOUSE OR ANY RELATIVE IF IT IS NOT INSURED FOR THIS COVERAGE UNDER THIS POLICY.

We disagree with the petitioners' contentions.

In the absence of an ambiguity, an insurance policy must be given effect according to the plain and ordinary meaning of its terms. In re Estate of Daigle, 634 P.2d 71, 79 (Colo.1981). A court may not rewrite an unambiguous policy nor limit its effect by a strained construction. Urtado v. Allstate Ins. Co., 187 Colo. 24, 26, 528 P.2d 222, 223 (1974). A policy term is ambiguous if it is reasonably susceptible to more than one meaning. See Travelers Ins. Co. v. Jeffries-Eaves, Inc., 166 Colo. 220, 223, 442 P.2d 822, 824 (1968). However, mere disagreement between the parties does not create an ambiguity. Kane v. Royal Ins. Co., 768 P.2d 678, 680 (Colo.1989).

The State Farm policy covenants to pay damages for bodily injury that the insured is "legally entitled to collect from the owner or driver of an uninsured motor vehicle." The policy, in plain and unambiguous terms, excludes a vehicle insured under the liability portion of the policy from the definition of an uninsured vehicle. Moreover, the definition of an uninsured vehicle does not conflict with the "household" exclusion. The "household" exclusion specifically excludes liability for uninsured motorist benefits when the insured is injured in a vehicle owned by the insured spouse or the insured. The "household" exclusion of uninsured motorist coverage does not grant uninsured vehicle coverage to LeCavalier and is not ambiguous. See Williams-Diehl v. State Farm Fire & Cas. Co., 793 P.2d 587 (Colo.App.1989) (household exclusion valid and enforceable); Arguello v. State Farm Mut. Auto. Ins. Co., 42 Colo.App. 372, 374, 599 P.2d 266, 268 (1979) (same). Read together, the exclusion in the policy of an insured vehicle from uninsured motorist coverage does not conflict with the exclusion of a vehicle owned by the insured, the insured's spouse or the insured's relatives from uninsured motorist coverage.

The policy, according to its clear and unambiguous terms, does not provide uninsured motor vehicle coverage for a vehicle insured for liability coverage.

III.

Despite the fact that it is unambiguous, a term in a policy may be void and unenforceable if it violates public policy by attempting to "dilute, condition, or limit statutorily mandated coverage." Meyer v. State Farm Mut. Auto. Ins. Co., 689 P.2d 585, 589 (Colo.1984). The petitioners contend that the exclusion of a vehicle insured under the policy's liability terms from uninsured motor vehicle coverage violates the legislative policies underlying section 10-4-609, 4A C.R.S. (1987). Section 10-4-609 provides in part:

(1) No automobile liability or motor vehicle 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 with respect to any motor vehicle licensed for highway use in this state unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in section 42-7-103(2), C.R.S., under provisions approved by the commissioner, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom; except that the named insured may reject such coverage in writing.

....

(4) Uninsured motorist coverage shall include coverage for damage for bodily injury or death which an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle. An underinsured motor vehicle is a land motor vehicle, the ownership, maintenance, or use of which is insured or bonded for bodily injury or death at the time of the accident, but the limits of liability for bodily injury or death under such insurance or bonds are:

(a) Less than the limits for uninsured motorist coverage under the insured's policy; or

(b) Reduced by payments to persons other than the insured in the accident to less than the limits of uninsured motorist coverage under the insured's policy.

The issue is whether the General Assembly intended section 10-4-609 to be a complete statement of uninsured motorist insurance requirements or whether policy provisions that limit recovery of uninsured motorist benefits may be valid under the circumstances.

The purpose of the uninsured motorist coverage mandated by section 10-4-609 is to compensate an innocent insured for loss, subject to the insured's policy limits, caused by financially irresponsible motorists. Kral v. American Hardware Mut. Ins. Co., 784 P.2d 759, 765 (Colo.1989). The legislative intent is satisfied by coverage that compensates a person injured by an uninsured motorist to the same extent as one injured by a motorist who is insured in compliance with the law. Alliance Mut. Cas. Co. v. Duerson, 184 Colo. 117, 124, 518 P.2d 1177, 1181 (1974). Section 10-4-609 does not require full indemnification of losses suffered at the hands of uninsured motorists under all circumstances. Id. at 123, 518 P.2d at 1180.

A majority, and the better reasoned cases, have upheld the exclusion of a vehicle under the liability coverage of the policy from uninsured motorist benefits. See 1 A. Widiss, Uninsured And Underinsured Motorist Insurance, § 4.18, at 100-01 (2d ed.1985).

In some states, the exclusion is authorized by statute. See, e.g., Or.Rev.Stat. § 742.504(e)(A) (1989). Other jurisdictions, in the absence of express legislative authorization, find that the exclusion does not conflict with the applicable statutory provisions for uninsured motorists. See, e.g., ...

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