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American Family Mutual Insurance Co. v. Ashour

Court of Appeals of Colorado, Sixth Division

May 18, 2017

American Family Mutual Insurance Company, Plaintiff-Appellee,
Omar Ashour, Defendant-Appellant.

         City and County of Denver District Court No. 15CV33216 Honorable Morris B. Hoffman, Judge

          Campbell Latiolais Averbach, LLC, Robyn B. Averbach, Colin C. Campbell, Denver, Colorado, for Plaintiff-Appellee

          Blanton Law Firm, Michael W. Blanton, Evergreen, Colorado; Gerash Steiner, P.C., Daniel P. Gerash, Eric L. Steiner, Denver, Colorado, for Defendant-Appellant


          ¶ 1 In this insurance coverage action for declaratory judgment, defendant, Omar Ashour, appeals the district court's denial of his motion for summary judgment and its entry of summary judgment in favor of plaintiff, American Family Mutual Insurance Company (AFI). Ashour contends that the district court erred by ruling, as a matter of law, that his claim for underinsured motorist (UIM) coverage under his automobile insurance policy with AFI was precluded because he was not legally entitled to sue his employer or co-employee in tort for his injuries based on their immunity under the Workers' Compensation Act of Colorado (the Act). We agree with Ashour, reverse the judgment of the district court in favor of AFI, and remand with directions for entry of summary judgment in favor of Ashour.

         I. Background and Procedural History

         ¶ 2 Ashour is an employee and co-owner of Nubilt Restoration & Construction (Nubilt). While employed with Nubilt, Ashour was severely injured when he was pinned by a thirty-foot truck to a nearby tractor-trailer. The accident was caused by the negligence of his co-employee, Rebecca Peake, who failed to set the airbrake on the truck that rolled backward and pinned Ashour to the other vehicle.[1]

         ¶ 3 After the accident, Ashour submitted a claim to Nubilt's workers' compensation carrier and subsequently received benefits. He also submitted a claim to Nubilt's corporate liability insurance provider and received a settlement for that claim based on a policy rider that allowed for coverage of workplace injuries. Ashour then made a claim under his personal automobile insurance policy with AFI for UIM benefits to recover the remainder of his alleged damages.

         ¶ 4 After receiving Ashour's claim, AFI filed this action in district court seeking a declaratory judgment as to whether Ashour was owed UIM coverage when the plain language in the policy limited UIM benefits to those situations in which the insured was "legally entitled to recover" from the owner or operator of an uninsured or underinsured motor vehicle. AFI alleged that the Act provided Ashour with his exclusive remedy for damages and that, because the Act immunized Nubilt and Peake from tort suits brought by Ashour for work-related injuries, Ashour was not "legally entitled to recover" under the AFI UIM policy.

         ¶ 5 In his answer, Ashour alleged that the phrase "legally entitled to recover" had been interpreted by Colorado courts to mean that an insured must only establish fault of the party causing the injury (the tortfeasor) and the extent of the insured's damages, and that, accordingly, he was not required to show that he could proceed with a lawsuit against the tortfeasor(s). Ashour asserted as an affirmative defense that AFI was, therefore, estopped from denying coverage on the basis of the policy's "legally entitled to recover" language.

         ¶ 6 Subsequently, Ashour filed a motion for summary judgment, relying on Borjas v. State Farm Mutual Automobile Insurance Co., 33 P.3d 1265 (Colo.App. 2001), in which a division of this court defined the phrase "legally entitled to recover" and ultimately concluded that an insured was "legally entitled to recover" even when the tortfeasor was immune from suit under the Colorado Governmental Immunity Act (CGIA). In its response to Ashour's motion for summary judgment, AFI distinguished Borjas and instead relied on Continental Divide Insurance Co. v. Dickinson, 179 P.3d 202 (Colo.App. 2007), in which another division of this court concluded that an independent contractor subject to a limited recovery provision in the Act was not entitled to claim benefits under his employer's UIM policy.

         ¶ 7 The district court agreed with AFI's interpretation of Colorado law and, in a written order, concluded that Dickinson was dispositive of Ashour's claim if Peake had acted within the scope and course of her employment. At the conclusion of its order, the district court denied Ashour's motion for summary judgment and allowed the case to proceed for a determination of whether Peake had been acting within the course and scope of her employment at the time of the accident.

         ¶ 8 Several weeks later, AFI filed its own motion for summary judgment asserting that, as a matter of law, Peake had been acting within the course and scope of her employment. After full briefing by both parties, the court entered a second written order, reaffirming its prior order on the coverage issue and concluding on undisputed facts that Peake was acting within the course and scope of her employment at the time of Ashour's accident. Accordingly, the court granted AFI's motion for summary judgment and declared that AFI was not obligated under Ashour's policy to pay Ashour UIM benefits.

         ¶ 9 Ashour now appeals. Specifically, he challenges the district court's conclusion that he was not entitled to UIM benefits under his own insurance policy with AFI based on the immunity provided to Peake and Nubilt under the Act. He does not appeal the court's ruling that Peake was acting within the course and scope of her employment.

         II. Standard of Review

         ¶ 10 We review the grant of a summary judgment motion de novo. W. Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo. 2002). In reviewing a motion for summary judgment, the nonmoving party is afforded all favorable inferences that may be drawn from the allegedly undisputed facts. City of Longmont v. Colo. Oil & Gas Ass'n, 2016 CO 29, ¶ 8 (citing Bebo Constr. Co. v. Mattox & O'Brien, P.C., 990 P.2d 78, 83 (Colo. 1999)).

         ¶ 11 For our review, we apply the same standard as the district court. Id. at ¶ 9. "Thus, our task on review is to determine whether . . . the district court correctly applied the law" when it ruled that Ashour was barred from receiving UIM benefits from AFI because he was not legally entitled to recover against his employer or co-employee under the Act. Id. In doing so, we review the district court's legal conclusions de novo. Id.

         III. Applicable Law

         ¶ 12 This case involves the application and interaction of two bodies of Colorado law: workers' compensation and uninsured or underinsured motorist (UM/UIM) coverage.

         A. Workers' Compensation Law

         ¶ 13 The purposes of the Act are to protect employees who suffer injuries arising from their employment and to give injured workers a reliable source of compensation for their injuries. Engelbrecht v. Hartford Accident & Indem. Co., 680 P.2d 231, 233 (Colo. 1984). Employers subject to the Act, including Nubilt, are required to secure insurance to cover their employees' claims for work-related injury. § 8-44-101(1), C.R.S. 2016.

         ¶ 14 An employer who has complied with the Act

shall not be subject to the provisions of section 8-41-101; nor shall such employer or the insurance carrier, if any, insuring the employer's liability under said articles be subject to any other liability for the death of or personal injury to any employee . . .; and all causes of action, actions at law, suits in equity, proceedings, and statutory and common law rights and remedies for and on account of such . . . personal injury to any such employee and accruing to any person are abolished except as provided in said articles.

§ 8-41-102, C.R.S. 2016. There is no dispute that Nubilt was in compliance with the Act at the time of Ashour's accident and that Ashour has received workers' compensation benefits as a result of the accident.

         ¶ 15 Similarly, when an employer complies with the Act, such compliance is construed as

a surrender by the employer, such employer's insurance carrier, and the employee of their rights to any method, form, or amount of compensation or determination thereof or to any cause of action, action at law, suit in equity, or statutory or common-law right, remedy, or proceeding for or on account of such personal injuries . . . of such employee other than as provided in said articles, and shall be an acceptance of all the provisions of said articles, and shall bind the employee personally.

§ 8-41-104, C.R.S. 2016. Thus, Nubilt and its workers' compensation insurance carrier are immune from suit by Ashour for his injuries sustained in the course and scope of his employment.

         ¶ 16 By extension, co-employees are also immune from suit for injuries to a fellow employee arising out of the scope of employment. Kandt v. Evans, 645 P.2d 1300, 1304-05 (Colo. 1982). Thus, here, Peake is also immune from suit.

         ¶ 17 The immunity from suit provided by the Act is often referred to as the exclusivity provisions because the Act has been interpreted to provide the exclusive remedy to a covered employee for injuries sustained while the employee is performing services arising in the course of his or her employment. Horodyskyj v. Karanian, 32 P.3d 470, 474 (Colo. 2001) ("The exclusive-remedy provisions of the Act bar civil actions in tort against an employer for injuries that are compensable under the Act." (citing §§ 8-41-102, -104)). However, this exclusive remedy is limited to suits by an injured employee against his or her employer or co-employee; an injured employee may receive workers' compensation benefits and bring suit against a third-party tortfeasor. See § 8-41-203(1)(a), C.R.S. 2016; Frohlick Crane Serv., Inc. v. Mack, 182 Colo. 34, 38, 510 P.2d 891, 893 (1973) (The "Act is not to shield third-party tort-feasors [sic] from liability for damages resulting from their negligence."); see also Aetna Cas. & Sur. Co. v. McMichael, 906 P.2d 92, 100 (Colo. 1995).

         ¶ 18 Thus, the Act's exclusivity provisions can be summarized this way: the workers' compensation system is an agreement by employers to provide benefits to employees, regardless of fault, and in exchange for assuming that burden, the employer is immunized from tort claims for injuries to its employees. § 8-40-102(1), C.R.S. 2016 ("[T]he workers' compensation system in Colorado is based on a mutual renunciation of common law rights and defenses by employers and employees alike."); People v. Oliver, 2016 COA 180M, ¶ 22.

         B. UM/UIM Law

         ¶ 19 Colorado law requires that all automobile insurance policies insuring against loss resulting from bodily injury or death must provide UM/UIM coverage. § 10-4-609(1)(a), C.R.S. 2016. The statute sets out specific requirements for UM/UIM insurance policies, and if a policy violates those mandatory coverage requirements, courts will read those requirements into the policy. McMichael, 906 P.2d at 101.

         ¶ 20 Specifically, UIM coverage is intended to cover the difference, if any, between the amount of the limits of a tortfeasor's legal liability coverage and the amount of the damages sustained by the injured party, up to the policy limits. § 10-4-609(1)(c). A division of this court has interpreted this subsection to mean that an insurer's obligation to pay UIM benefits is "triggered by exhaustion of the tortfeasor's 'limits of . . . legal liability coverage, ' not necessarily any payment from or judgment against the tortfeasor." Jordan v. Safeco Ins. Co. of Am., Inc., 2013 COA 47, ¶ 29 (alteration in original) (citation omitted).

         ¶ 21 As relevant here, Colorado law limits UM/UIM coverage to "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." § 10-4-609(1)(a) (emphasis added). The statute also provides for payment of benefits when the party at fault is underinsured:

Uninsured motorist coverage shall include coverage for damage for bodily injury or death that 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.

§ 10-4-609(4) (emphasis added).[2] AFI's policy tracks the "legally entitled to recover" language of the statute and explicitly provides coverage for underinsured vehicles: "We will pay compensatory damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle or an underinsured motor vehicle." (Emphasis added.)

         ¶ 22 At issue in this case is the phrase "legally entitled to recover." Colorado courts have considered the meaning of "legally entitled" language in the past, albeit not under the precise circumstances at issue in this case. For example, in Newton v. Nationwide Mutual Fire Insurance Co., in the context of deciding whether the insurer was entitled to reduce the UIM benefits paid to the insured by the amount of personal injury protection benefits paid out under the same policy, the supreme court stated that "[u]ninsured motorist recovery is available only to persons 'legally entitled to recover damages from owners or operators of uninsured motor vehicles.'" 197 Colo. 462, 465, 594 P.2d 1042, 1043 (1979) (citation omitted). "Thus a claimant may not obtain payment under uninsured motorist coverage without first establishing that the uninsured motorist's fault, normally negligence, caused the collision." Id. (emphasis added). This fault-based concept was again articulated in DeHerrera v. Sentry Insurance Co., 30 P.3d 167, 173-74 (Colo. 2001), in which the supreme court, in analyzing section 10-4-609(1)(a), interpreted subsection (1)(a) to mean that "an insured is entitled to recover UM/UIM benefits when a person who is at fault in an accident does not have any liability insurance" or is underinsured.

         C. Interaction Between the Act and UIM Coverage

         ¶ 23 The "legally entitled to recover" requirement is central to this case because of the immunity provided to employers and co-employees under the exclusivity provisions of the Act. The precise question before us is whether Ashour is "legally entitled to recover" under the meaning of the UM/UIM statute when he cannot ...

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