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State Farm Mutual Automobile Insurance Co. v. Johnson

Court of Appeals of Colorado

June 5, 2017

State Farm Mutual Automobile Insurance Company, Petitioner
v.
Brian K. Johnson, Respondent

         Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 13CA752

          Attorneys for Petitioner: Patterson & Salg, P.C. Franklin D. Patterson Brian D. Kennedy Greenwood Village, Colorado, Hall & Evans, LLC Alan Epstein Denver, Colorado

          Attorneys for Respondent: The Kofoed Law Firm, LLC David L. Kofoed Centennial, Colorado

          Attorneys for Amicus Curiae The Colorado Trial Lawyers Association: Taussig & Taussig, P.C. John G. Taussig, III Boulder, Colorado

          Attorneys for Amici Curiae Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies: Ruebel & Quillen, LLC Casey A. Quillen Jeffrey C. Ruebel Westminster, Colorado

         EN BANC

          OPINION

          GABRIEL JUSTICE.

          ¶1 Consistent with his prior practices, the respondent, Brian K. Johnson, tasked a friend with purchasing automobile insurance for the new car that he and the friend had purchased together. The friend did so, and in the course of that transaction, she chose to reject uninsured/underinsured motorist (UM/UIM) coverage on the new car. After an accident in that car with an underinsured motorist, Johnson contended that his friend's rejection of UM/UIM coverage was not binding on him. A division of the court of appeals ultimately agreed with him, see Johnson v. State Farm Mut. Auto. Ins. Co., 2014 COA 135, __ P.3d__, and this case now presents two questions for our consideration. First, does the UM/UIM statute, section 10-4-609, C.R.S. (2016), require each named insured to reject such coverage, or is one named insured's rejection binding on all? And second, did the legislature, by enacting section 10-4-609, abrogate the common law agency principles of implied authority and apparent authority?[1]

¶2 We start with the second issue presented and conclude that nothing in the language of section 10-4-609 precludes an agent from exercising either apparent or implied authority to reject UM/UIM coverage on behalf of a principal. Turning to the facts of this case, we conclude that the record amply demonstrates that Johnson delegated to his friend the task of purchasing insurance for their jointly owned car and that, in undertaking this task, the friend had implied authority to reject, and did in fact reject, UM/UIM coverage on Johnson's behalf. Based on this conclusion, we reverse the division's judgment and need not reach the first question presented.

         I. Facts and Procedural History

         ¶3 Johnson was living with his friend when the two decided to buy a car together. Although Johnson was to be the primary driver, the car was purchased, financed, and titled in both his and the friend's names. The financing was primarily based on the friend's good credit.

         ¶4 For about six months, an insurance policy owned by Johnson and his estranged wife covered the new car. After that policy lapsed, Johnson sought a new policy on his own but found the options to be more expensive than his lapsed policy. His friend then suggested that she insure the car through the petitioner, State Farm Mutual Automobile Insurance Company, from whom she had purchased insurance for her primary car and with whom she had had a long and good business relationship. Consistent with his prior practice of deferring insurance matters to his estranged wife, Johnson agreed to defer to his friend concerning the present insurance matter.

         ¶5 Johnson's friend then contacted State Farm and explained that she wanted the same coverage on the new car as she had on her primary car. A State Farm employee responded that the friend's current policy included $100, 000 in UM/UIM coverage, which extended to everyone who lived in her household (including, at the time, Johnson), regardless of which car he or she was driving. The employee thus explained that the friend could add UM/UIM coverage for the new car, which would result in double coverage in the amount of $200, 000, but that the friend would have to pay a separate premium for the additional coverage. The friend ultimately signed a form rejecting UM/UIM coverage on the new car and received from State Farm a policy that did not include such coverage.

         ¶6 Approximately one month later, Johnson was driving the new car when he was hit by an underinsured driver and sustained serious injuries. Johnson was not at fault, and he made a demand on State Farm for the $100, 000 in UM/UIM benefits. For reasons that are unclear from the record before us, State Farm denied this claim. Johnson subsequently sued State Farm, among others, and sought the additional UM/UIM benefits.

         ¶7 State Farm moved for summary judgment, arguing that Johnson's friend was authorized to reject-and did, in fact, reject-UM/UIM coverage on the new car. In ruling on this motion, the district court considered whether, pursuant to section 10-4-609, Johnson's friend could reject such coverage on behalf of both of them or whether, as Johnson ...


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