Union Ins. Co. v. Houtz

Decision Date07 November 1994
Docket NumberNo. 93SC306,93SC306
PartiesUNION INSURANCE COMPANY, Petitioner/Cross-Respondent, v. Richard HOUTZ and Robert Jeffrey Etheridge, Respondents/Cross-Petitioners.
CourtColorado Supreme Court

Rothgerber, Appel, Powers & Johnson, Franklin D. O'Loughlin, Patrick Q. Hustead, Michael D. Plachy, Denver, for petitioner.

Schey & Schey, P.C., Donald H. Alspaugh, James H. Nelson, Longmont, for respondents.

Justice VOLLACK delivered the Opinion of the Court.

We granted certiorari to review an order by the court of appeals in Houtz v. Union Insurance Co., 865 P.2d 847 (Colo.App.1993), which reversed summary judgment in favor of Union Insurance Company (Union). The court of appeals held that Richard Houtz (Houtz) and Robert Jeffrey Etheridge (Etheridge) (the insureds) were entitled to $300,000 from Union, an amount representing the limit of liability under Union's uninsured/underinsured (UM/UIM) motorist coverage. We hold that the insureds are entitled to $60,000 in UM/UIM motorist coverage, in accordance with the unambiguous language in Union's policy. We further hold that Union's method of calculating underinsurance benefits, by aggregating amounts received by both injured insureds, does not violate public policy. We therefore reverse the judgment of the court of appeals and remand for further proceedings consistent with this opinion.

I.

The parties stipulated to the relevant facts. On February 24, 1988, the insureds were loading a disabled vehicle onto a transport trailer along the shoulder of Interstate 70. The insureds were standing behind the trailer when a vehicle driven by Thomas Eisinger swerved onto the shoulder and struck them. Both men suffered extensive injuries. Houtz's right leg was severely fractured, and his left leg was amputated. Etheridge suffered a head injury and both of his legs were fractured. The parties agreed that Eisinger's negligence was the cause of the accident, and that the insureds suffered damages equal to or exceeding $300,000 each.

Eisinger's vehicle was insured under an automobile liability policy issued by Farmers Insurance Exchange (Farmers). The Farmers policy provided liability coverage of up to $100,000 per person and $300,000 per occurrence. The insureds made claims against Farmers, Eisinger, and other individuals alleged to have been legally responsible for Eisinger's negligence. The insureds settled their claims against those parties, and received a total of $240,000. The payment in settlement was divided between the two insureds: Houtz received $127,500, and Etheridge received $112,500. 1 The settlement amount included $100,000 each to Houtz and Etheridge under the Farmers policy.

The vehicle which was hauling the transport trailer was insured under a policy issued by Union to Anytime Auto Service Corporation. The Union policy provided UM/UIM motorist coverage with a liability limit of $300,000. 2

In an effort to receive additional compensation for their injuries, the insureds made a claim against Union under the UM/UIM motorist provision of the policy, arguing that Union was liable to the limit of liability of $300,000. The insureds argued that, under the language of the policy, the amount of underinsurance should be calculated separately for each injured insured, and that Union took the position that the policy only required it to pay $60,000 in UM/UIM motorist benefits. Union arrived at this figure by adding the entire settlement amount received by both insureds from Farmers and the tortfeasor, for a total of $240,000. Union then subtracted that amount from the $300,000 limit of liability, and determined that the insureds were underinsured by $60,000. Union maintained that it would satisfy its obligations under the policy by virtue of a $60,000 payment, and offered to pay $60,000 to the insureds. The insureds accepted the $60,000, reserving the right to argue that they were entitled to the entire $300,000.

Union should pay them the collective amount by which they were underinsured, up to the $300,000 limit of liability. Under the insureds' calculation, since Houtz received $127,500 from the tortfeasor and the tortfeasor's carrier, Houtz was still underinsured by $172,500. Similarly, Etheridge argued that he was underinsured by $187,500, the difference between what he had received, $112,500, and the limit of liability under Union's UM/UIM motorist coverage. The insureds argued that they were underinsured by a total of $360,000. Since the limit of liability was $300,000, they argued that they were entitled to the entire $300,000.

The insureds filed an action for declaratory relief under C.R.C.P. 57, requesting that the Union policy be interpreted to allow them to recover $300,000 under the policy's UM/UIM motorist provision. The parties filed cross-motions for summary judgment. On January 17, 1992, the trial court issued an order granting summary judgment in favor of Union. The court held that the language of the policy as a whole indicated that the limit of liability should be applied against all claims, rather than against each individual claimant. The court concluded that Union had met its coverage requirements under the policy.

The insureds appealed the decision of the trial court. On March 11, 1993, the court of appeals issued its opinion reversing the judgment of the trial court. The court agreed with Union that, under section 10-4-609, 4A C.R.S. (1987), an insurer may aggregate the amount of damages paid to each insured, and use that figure to offset underinsurance benefits. 3 However, the court of appeals went on to hold that the limit of liability language in the Union policy, as distinguished from the language in the statute, was susceptible to two equally reasonable meanings, creating an ambiguity in the extent of coverage in the policy. The court construed the ambiguity against the drafter, Union, and held that Union was required to pay $300,000 to the insureds.

II.

Union first argues that the court of appeals erred in holding that the language of the policy is ambiguous. Union maintains that the policy, read in its entirety, allows Union to aggregate damages from each injured insured when calculating the amount of UM/UIM benefits due under its policy. We agree.

As with any case of contract interpretation, we look to the language of the policy to ascertain the intent of the parties. Parrish Chiropractic Ctrs., P.C. v. Progressive Casualty Ins. Co., 874 P.2d 1049, 1055 (Colo.1994). The relevant portions of the policy provide as follows:

SECTION VI--DEFINITIONS

....

E. "Insured" means any person or organization qualifying as an insured in the Who Is an Insured provision of the applicable coverage. Except with respect to the Limit of Insurance, the coverage afforded applies separately to each insured who is seeking coverage or against whom a claim or "suit" is brought.

....

COLORADO UNINSURED MOTORISTS COVERAGE

....

A. COVERAGE

1. We will pay all sums the "insured" is legally entitled to recover as damages from the owner or driver of an "uninsured motor vehicle." ...

....

B. WHO IS AN INSURED

1. You 4

2. If you are an individual, any "family member."

3. Anyone else "occupying" a covered "auto".... The covered "auto" must be out of service because of its breakdown, repair, servicing, loss or destruction.

....

D. LIMIT OF INSURANCE

1. Regardless of the number of covered "autos," "insureds," premiums paid, claims made or vehicles involved in the "accident," the most we will pay for all damages resulting from any one "accident" is the least of the following:

a. The LIMIT OF INSURANCE for UNINSURED MOTORISTS COVERAGE shown in the Declarations.

b. The difference between the limit of this insurance and all amounts paid to an "insured" by or for anyone legally liable for damages resulting from "bodily injury," including all sums paid under this Coverage Forms LIABILITY COVERAGE; ....

....

F. ADDITIONAL DEFINITIONS

....

3. "Uninsured motor vehicle" means a land motor vehicle or trailer:

....

b. That is an underinsured motor vehicle. An underinsured motor vehicle for which the sum of all liability bonds or policies at the time of an "accident" provides at least the amounts required by the applicable law ... but their limits are:

(1) Less than the limit of this coverage, ... [.]

(Emphasis added.)

The court of appeals held that the policy was ambiguous because the "an 'insured' " language in subsection D.1.b. of the UM/UIM limit of liability section could reasonably be interpreted in two ways. The insureds interpreted the language to allow them each to recover the difference between the policy limit and what each insured received from the tortfeasor. Union argued that the language referred to the class of insureds under the policy, and that the $300,000 liability limit was a per-accident limit, and not a per-person limit. The court of appeals concluded The court of appeals held that section 10-4-609(5), 4A C.R.S. (1987), was unambiguous and that it allowed an insurer to aggregate amounts received by its insured for purposes of underinsurance benefits. That section provides:

that since both interpretations of "an 'insured' " were reasonable, there was an ambiguity in the contract which would be construed against the drafter of the document, Union, and in favor of broader coverage for the insureds.

(5) The maximum liability of the insurer under the uninsured motorist coverage provided shall be the lesser of:

(a) The difference between the limit of uninsured motorist coverage and the amount paid to the insured by or for any person or organization who may be held legally liable for the bodily injury; or

(b) The amount of damages sustained, but not recovered.

(Emphasis added.) The court of appeals nonetheless found that Union's policy was ambiguous because it used the term "an 'insured' " rather than "the insured," as used in the statute. 5

The interpretation of a...

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