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Federated Mutual Insurance Co. v. Enright

United States District Court, D. Colorado

March 17, 2016

FEDERATED MUTUAL INSURANCE COMPANY, Plaintiff,
v.
MICHAEL ENRIGHT and AAA SERVICE PLUMBING, INC., Defendants.

ORDER ON SUMMARY JUDGMENT

Wiley Y. Daniel Senior United States District Judge

I. INTRODUCTION

THIS MATTER is before the Court on cross motions for summary judgment on the issue of whether Defendant Michael Enright [“Enright”] is entitled to underinsured motorist [“UIM”] coverage on a commercial policy issued to Enright’s company Defendant AAA Insurance Plumbing [“Triple A”]. The Complaint filed by Plaintiff Federal Mutual Insurance Company [“Federated”] seeks a declaratory judgment on this issue. Defendants filed an Answer, Jury Demand, and Counterclaims asserting that Enright is entitled to coverage under the Policy and asserting claims of breach of contract, bad faith breach of insurance contract, and violations of Colo. Rev. Stat. §§ 10-3-1115 and 10-3-1116.

Federated filed its Summary Judgment Motion on July 1, 2015, seeking a judgment that it has no obligation to provide UIM coverage to Enright. It argues that Enright does not qualify as an “insured” because at the time of the accident, Enright was not engaged in a business endeavor for Triple A and was not using a “covered auto” as required by the policy. Instead, Enright was operating his separately owned motorcycle on personal time. A response was filed in opposition to the summary judgment motion on July 22, 2015, and a reply was filed on August 26, 2015.

Defendants filed a Cross-Motion for Partial Summary Judgment on July 22, 2015, which incorporates their argument in their response to Federated’s Summary Judgment motion. Defendants contend that Enright is entitled to UIM coverage under the Policy. A response to the Cross-Motion for Partial Summary Judgment was filed on September 29, 2014, and a reply was filed on November 4, 2014. Accordingly, the cross motions for summary judgment are fully briefed.

II. FACTS

I have cited to the record only when the facts were disputed or where I otherwise thought it was necessary. I address some of the facts, particularly citations to pertinent policy provisions, in Section III, infra.

A. Federated’s Statement of Facts

Enright was involved in a motor vehicle accident on Sunday, August 25, 2013. At the time of the accident, Enright was riding a motorcycle he personally owned. The accident also involved a vehicle operated by Demetra N. Kayne [“Kayne”].

Kayne’s vehicle was insured under a policy issued by GEICO with a per person bodily injury liability limit of $25, 000. Enright’s motorcycle was insured under a policy issued to him by State Farm. The State Farm policy has a UIM limit of $100, 000.

Enright was an officer/owner of Triple A at the time Federated issued a policy to Triple A (along with his daughter Sarah), and is currently Triple A’s sole owner. The Commercial Package Policy issued by Federated to Triple A bears policy number 9052386 and was in effect for the policy period from June 1, 2013 to June 1, 2014 [the “Policy”]. The Policy includes business automobile liability insurance coverage.

The Policy states that “[t]hroughout this policy the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations.” (Pl.’s App. at 6; Defs.’ Ex. 2 at FED 0219.) While Defendants concede this, they deny that it is the only language defining who is an insured under the Policy and who is referred to by the term “You” and “Your” in the Policy. For example, Defendants assert that the addition of Enright as an individual named insured under the Policy’s “Drive Other Car Coverage - Broadened Coverage for Named Individuals” endorsement renders Enright a “Named Insured” under the “Who Is An Insured” Section of the “Colorado Uninsured Motorists Coverage -Bodily Injury” endorsement. (Defs.’ Ex. 2 at FED 0232-33 and FED 0245-46.)

The Common Policy Declarations of the Policy identify the Named Insured as “AAA Service Plumbing, Inc.” (Pl.’s Appx at 00001; Defs.’ Ex. 2 at FED 0002.) .Defendants admit this, but deny that this is the only section of the Policy that defines who is an insured, as discussed in the previous paragraph. It is undisputed that “AAA Service Plumbing, Inc.” is designated in the Common Policy Declarations as a “corporation.” (Id.)

According to Federated, the Policy does not contain any provision stating that Enright is a “Named Insured” under the Policy, citing ECF 1-1 through ECF 1-5. Defendants deny this, stating that the Policy’s “Drive Other Car Coverage - Broadened Coverage for Named Individuals” endorsement specifically identifies “Mike Enright” as an individually named insured under the Policy. (Defs.’ Ex. 2 at FED 0245.)

Federated asserts that the Policy defines who qualifies as “insureds” for automobile liability insurance coverage in the “Who Is An Insured” section of the Business Auto Coverage Form, and that it precludes coverage for Enright because he was not driving a “covered auto” owned by Triple A, but a motorcycle he owned individually. (Pl.’s Appx. at 7-8; Defs.’ Ex. 2 at FED 0220-0221.) Defendants admit that the Policy contains this language relied on by Federated, but deny that it is the only language defining who is insured for automobile liability insurance coverage, as discussed previously.

The Policy also includes an endorsement entitled “Colorado Uninsured Motorists Coverage - Bodily Injury”, which states in part that the insurer (Federated) will “pay all sums the ‘insured’ is legally entitled to recover as compensatory damages from the owner or driver of an ‘uninsured motor vehicle’.” (Pl.’s Appx. at 9; Defs.’ Ex. 2 at FED 0232.) The term “uninsured motor vehicle” includes a vehicle that is an underinsured motor vehicle. The endorsement includes a “Who Is An Insured” provision stating that “If the Named Insured is designated in the Declarations as” as “[a] partnership, limited liability company, corporation or any other form of organization”, then “[a]nyone ‘occupying’ or using a covered ‘auto’ or a temporary substitute for a covered ‘auto’” is covered as an insured. (Pl.’s Appx. at 10; Defs.’ Ex. 2 at FED 0233.) Defendants admit that the Policy contains this language, but deny that it is the only language defining who is an insured for UIM coverage.

Defendants point out that Federated omits the section of the “Who Is An Insured” provision in the endorsement providing that “If the Named Insured is designated in the Declarations as . . . An individual”, then “[t]he Named Insured and any ‘family members’” are insureds. (Defs.’ Ex. 2 at FED 0233.) Additionally, Defendants assert that the Policy’s “Drive Other Car Coverage - Broadened Coverage for Named Individuals” endorsement specifically identifies “Mike Enright” as an individually named insured under the Policy. (Id. at FED 0245.)

It is undisputed that Item Two of the Declarations of the Business Auto Coverage identifies “covered autos” for purposes of the Policy’s UIM coverage by reference to symbol “2A”. (Pl.’s Appx. at 3; Defs.’ Ex. 2 at FED 0214.) The Declarations page then refers to form CA-F-93 (the “Uninsured and Underinsured Motorists Limit of Insurance” endorsement) for further information. (Defs.’ Ex. 2 at FED 0214.) That form is found at page FED 0238 of Defendants’ Exhibit 2

It is also undisputed that the Business Auto Policy’s Endorsement form CA-F-5 (07-93) provides that symbol 2A means “Owned autos only. Only those ‘autos’ you own * * *. This includes those ‘autos’ whose ownership you acquire after the policy begins.” (Pl.’s Appx. at 4-5; Defs.’ Ex. 2 at FED 0254.) Defendants assert, however, that the term “you” includes Enright by virtue of the “Broadened Coverage for Named Individuals” endorsement’s addition of Enright as an individually named insured.

Federated issued Commercial Umbrella Liability Policy number 9052386 to Triple A for the policy period from June 1, 2013 to June 1, 2014. Defendants do not seek to recover UIM coverage benefits under that policy.

B. Defendants’ Additional Facts

Enright purchased the Policy from Federal in approximately May of 2013. The Policy’s Business Auto Coverage Part provides $1, 000, 000 of liability coverage for “any auto.” Federal does not dispute this, but states that the limit of liability is available only to the extent that a specific claim is covered based on all of the Policy’s other terms, provisions, and exclusions.

The Policy’s Business Auto Coverage Part declarations page lists Uninsured Motorists (“UM”) and Underinsured Motorists (“UIM”) coverage for “owned autos only, ” but refers to an endorsement for the limits: “SEE CA-F-93.” (Defs.’ Ex. 2 at FED 0214.) The declarations page does not show an amount for the UIM limit, but instead states “$ INCLUDED” just below the reference to “SEE CA-F-93" related to UM coverage. (Id. at 0214, see also 0238-showing $INCLUDED for UIM coverage “[f]or all directors, officers, partners or owners of the named insured and their ‘family members’ who qualify as ‘insureds’ under the WHO IS INSURED of the Uninsured and Underinsured Motorists Coverage attached to this policy. . .”).

Defendants refer to the Policy’s Liability Coverage Part which states as to “Coverage” that “[w]e will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto.” It states as to “Who Is An Insured”:

a. You for any covered “auto”.
b. Anyone else while using with your permission a covered “auto” you own, hire, or borrow. . . .
c. Anyone liable for the conduct of an “insured” described above but only to the extent of that liability.

(Defs.’ Ex. 2 at FED 0220). Federated denies, however, that this is the only pertinent part of the Business Auto Coverage Part.

Defendants also cite the Colorado UIM Coverage - Bodily Injury endorsement which states, “For a covered “auto” licensed or principally garaged in, or “garage” operations conducted in Colorado, this endorsement modifies insurance provided under the following: . . .BUSINESS AUTO COVERAGE FORM.” It also states:

With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by this endorsement.

* * *
Limit of Insurance $ SEE DECLARATIONS Each “Accident”
Information required to complete this Schedule, if not shown above, will be shown in the Declarations.

A. Coverage

1. We will pay all sums the “insured” is legally entitled to recover as compensatory damages from the owner or driver of an “uninsured motor vehicle.” The damages must result from “bodily injury” sustained by the “insured” caused by an “accident”. The owner’s or driver’s liability for these damages must result from the ownership, maintenance or use of the “uninsured motor vehicle.”

(Defs.’ Ex. 2 at FED 0232-0233.) I address the “Who Is An Insured” section of this endorsement below in Section III. Federated denies that these portions of the policy are material to the pending motions.

Defendants also point to the endorsement in the Policy entitled, “Drive Other Car Coverage - Broadened Coverage for Named Individuals [“Broadened Coverage Endorsement”], which they assert expands the scope of coverage to include the individual named in the Endorsement’s Schedule, i.e., Enright. (Defs.’ Ex. 2 at FED 0245.) Federated denies that the Broadened Coverage Endorsement is material to the pending motions and denies that it generically “expands the scope of coverage to include the individual named in the Endorsement’s schedule.” According to Federated, the endorsement expressly states that “it changes only those coverages where a premium is shown in the Schedule, ” and there is no premium shown for Uninsured Motorists or Underinsured Motorists. (ECF 26-2, FED0245.) Additionally, even if UIM coverage was part of the broadened coverage, Federated asserts that the endorsement expressly provides that it does not qualify Enright for UIM coverage under the Who Is An Insured provisions of the UIM coverage part when he is driving a vehicle he owns. (ECF 26-2, FED0246.)

Federated presented Enright with a “Colorado Commercial Auto Uninsured Motorists Coverage Option Form” in connection with the sale of the Policy [the “UIM Selection-Rejection form]. (Defs.’ Ex. 3.) That form explains that UM/UIM is included at “not less than” the minimum limits required by Colorado law unless either rejected in writing or requested at higher limits than the mandatory minimum. (Id.) The form provides “Limit Options” under two separate categories, and Enright made the noted selections. Enright’s ...


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