Brian K. Johnson, Plaintiff-Appellant,
State Farm Mutual Automobile Insurance Company, Inc., a Corporation, Defendant-Appellee.
Arapahoe County District Court No. 11CV517 Honorable Charles M. Pratt, Judge.
The Kofoed Law Firm, LLC, David L. Kofoed, Centennial, Colorado, for Plaintiff-Appellant
Frank Patterson & Associates, P.C., Franklin Patterson, Brian Kennedy, Greenwood Village, Colorado, for Defendant-Appellee
¶ 1 The general rule in Colorado is that automobile liability insurance policies must contain coverage for bodily injury damages caused by uninsured or underinsured motorists (UM/UIM). § 10-4-609(1)(a), C.R.S. 2014. The sole exception to this rule is when "the named insured" waives such coverage in writing. Id.
¶ 2 This appeal presents the question of what happens when more than one person is listed on the policy as a "named insured, " but only one of them waives UM/UIM coverage. Is the named insured who did not waive such coverage bound by the other's waiver in all circumstances? We answer that question "no."
¶ 3 Under the facts of this case, we conclude that the decision of one named insured to waive UM/UIM coverage binds others who are also named insureds on the same policy only if the others expressly authorized such a decision.
¶ 4 Here, the driver and plaintiff, Brian K. Johnson, and his friend, Daphne Satriano, were named insureds on a policy that the defendant insurer, State Farm Mutual Automobile Insurance Company, Inc., had issued. The friend waived UM/UIM coverage, but the driver did not.
¶ 5 The driver was seriously injured in an accident. The insurer paid him the policy limits of the UM/UIM coverage from a second policy that the friend had on her car. But the insurer refused to pay him for any damages subject to UM/UIM coverage under the policy on his car.
¶ 6 He sued the insurer. The trial court decided that the friend's waiver of UM/UIM coverage for the policy on the driver's car bound him.
¶ 7 We reverse because we conclude, under the facts of this case, that the insurer did not show that the driver expressly waived UM/UIM coverage on his car's policy.
A. The Facts
¶ 8 The driver and his wife were contemplating getting a divorce. He needed a place to stay, so the friend allowed him to move in with her in late 2009. As these facts would suggest, they were unrelated adults.
¶ 9 The friend helped the driver to buy a car. When they bought it, the driver's insurance policy covered it. But that policy expired in the summer of 2010.
¶ 10 The driver and the friend agreed that she would call her insurance agent, who represented the insurer, to obtain an insurance policy for the car. As a prelude to this discussion, the friend asked the driver what kind of coverage he had under the policy that had expired. The driver replied that he had "full coverage . . . everything."
¶ 11 The friend telephoned her agent's office and obtained an insurance policy from the insurer for the car. The driver was not present during the call.
¶ 12 The policy from the insurer listed both the friend and the driver as "named insured." The friend signed a form waiving UM/UIM coverage. The driver did not sign the form, and he was not aware that the insurer had offered the friend the option to waive such coverage. The next day, the friend called the driver. She told him that she had "got it done" and that he was "fully covered."
¶ 13 The insurer mailed a copy of this policy to the friend. Under the heading of "important messages, " the policy's declarations page stated that, "[u]nless rejected in writing, [u]ninsured motor vehicle coverage is mandatory with bodily injury limits of $25, 000 for each person and $50, 000 for each accident." The declarations page did not make any other reference to UM/UIM coverage. In other words, the declarations page did not state that the friend had waived UM/UIM coverage, but it also did not state that the policy included such coverage. The rejection form that the friend signed waiving UM/UIM coverage was not included. And the Colorado insurance cards that came with the policy, and which the driver put in his car, did not mention UM/UIM coverage.
¶ 14 Shortly after obtaining this policy, the driver was seriously injured in an accident while driving the car. He was not at fault.
¶ 15 The other driver, who was at fault, was underinsured. With the consent of the insurer, the driver settled with the other driver's insurance company for its policy limits.
¶ 16 The driver then filed a claim with the insurer, requesting that the insurer indemnify him for the rest of his damages under the UM/UIM provisions of the policy that covered his car. The insurer rejected the claim. It stated that the policy did not have UM/UIM coverage because the friend had waived it.
¶ 17 (We note that the friend had another automobile insurance policy because the insurer had also issued a policy that covered a car that she owned. This policy had UM/UIM coverage. When the friend called her insurance agent to get the policy for the driver's car, the agent told her that the UM/UIM coverage under her other car's policy would cover the driver because he was a member of her household.)
¶ 18 But whether the driver had UM/UIM coverage under the policy on the friend's car does not control the outcome of this appeal. To illustrate this point, we observe that (1) the record shows that UM/UIM coverage on the friend's car covered the driver; and (2) the insurer paid him the policy limits from that policy. If he had UM/UIM coverage on his car, he would be entitled to "stack" the UM/UIM coverage limits of both policies if the limits of one of them did not fully indemnify him for his damages. See Rivera v. Am. Family Ins. Grp., 2012 COA 175, ¶ 17.
B. The Lawsuit
¶ 19 The driver then filed this lawsuit against the insurer and the friend's insurance agent. He claimed, among other things, that the court should read UM/UIM coverage into the insurance policy because he, as a named insured, had not waived it. He also filed a C.R.C.P. 56(h) motion that asked the trial court to decide this issue as a matter of law.
¶ 20 While the driver's motion was pending, the insurer and the insurance agent filed summary judgment motions. (We note that the trial court granted the insurance agent's summary judgment motion. That decision is not part of this appeal.)
¶ 21 The insurer's summary judgment motion asked the trial court to conclude that, as a matter of law, the friend's written waiver of UM/UIM coverage bound the driver.
¶ 22 In resolving this motion, the court analyzed section 10-4-609(1)(a). It concluded that, although the statute states that "the named insured may reject [UM/UIM] coverage in writing, " the statute "does not state that the named insured must reject such coverage personally."
¶ 23 The court reasoned that this reading of the statute was "the most logical in light of agency law." Recognizing that "[a]n agent of the named insured may enter into a contract for insurance on behalf of the named insured, " the court determined that the friend had acted as the driver's agent when she waived UM/UIM coverage.
¶ 24 The court noted that "an agent, operating on behalf of the principal, may act only within the scope of authority granted by the principal." The court added that the driver had not argued that the friend had exceeded her authority as an agent. The driver had argued instead that the statute prevented anyone but the named insured from waiving UM/UIM coverage. The court responded to this argument by observing that the driver's position was "inconsistent with the . . . purpose of agency, " which is to "permit one person to act on behalf of another, standing in their position." The court then held that "waiver by one named insured is binding on all named insureds."
¶ 25 But the court denied the insurer's motion for summary judgment. It reasoned that it needed to decide the factual question of whether the insurer's agent had made an offer of UM/UIM coverage to the friend that complied with the pertinent statute. (If the agent had not made such an offer, the insurer would have been obligated to pay the driver UM/UIM benefits.)
¶ 26 The court then, at the driver's request, bifurcated the trial on the issues of coverage and damages. After listening to testimony presented at a trial to the court on the issue of coverage, the court issued a written order. It found that (1) the insurer had made an offer of UM/UIM coverage to the friend that complied with the statute; and (2) the friend had rejected this offer. The court concluded that the driver did not have UM/UIM coverage in the insurance policy.
¶ 27 The court noted that this conclusion was based on its prior determination in the order denying the insurer's summary judgment motion. The court had reasoned there that "under Colorado law, one party to an insurance policy . . . can reject UM/UIM coverage and that rejection applies to everyone else covered by that policy." The insurer therefore was "not obligated to provide a separate explanation to, or obtain a separate rejection from" the driver.
¶ 28 The court then entered judgment for the insurer. The court, for obvious reasons, did not address the issue of damages.
II. Legal Principles
A. Standard of Review
¶ 29 "We review a judgment entered after a trial to the court as a mixed question of fact and law." Jehly v. Brown, 2014 COA 39, ¶ 8. "We defer to the court's credibility determinations and will disturb its findings of fact only if they are clearly erroneous and not supported by the record." Lawry v. Palm, 192 P.3d 550, 558 (Colo.App. 2008). "We review de ...