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Auto-Owners Insurance Co. v. Unruh

United States District Court, D. Colorado

November 6, 2017

AUTO-OWNERS INSURANCE COMPANY, Plaintiff,
v.
DAVID UNRUH and KENDALL UNRUH, Defendants.

          ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

          Richard P. Matsch, Senior District Judge

         Defendants David and Kendall Unruh were seriously injured in a motor vehicle accident in Colorado Springs, Colorado on August 10, 2014. Just before the accident the Unruhs had been on a Sunday drive to the mountains and were headed home after having breakfast together. Their vehicle, a 1965 Chevrolet Corvette driven by David Unruh, was struck head-on by a 2008 Mercedes operated by Megan Allison, a minor, and owned by Jesus Shark. David Unruh held legal title to the Corvette and the vehicle was being used by the Unruhs solely for their personal use. Kendall Unruh was a front-seat passenger in the Corvette. According to the Unruhs, Ms. Allison was immediately recognized as the at-fault driver, and was cited for careless driving because she was texting while driving and crossed the center line before crashing head-on into the Unruhs. The Unruhs' injuries were catastrophic and their combined medical bills exceeded $1, 245, 000.

         Ms. Allison was insured under an automobile liability insurance policy issued by United Services Automobile Association (USAA) to Mr. Shark, which had coverage limits of $100, 000 per person and $300, 000 per accident. The Unruhs presented claims to USAA for the injuries caused by Ms. Allison's negligence and later settled their claims for the available liability insurance limits of $200, 000. The Unruhs did not request or obtain Auto-Owners' consent before settling their claims with USAA.

         At the time of the accident, the Corvette was insured by State Farm Mutual Automobile Insurance Company under an automobile insurance policy issued to David Unruh with uninsured/underinsured motorist (UM/UIM) limits of $100, 000 per person and $300, 000 per accident. The Unruhs were also covered under an umbrella insurance policy issued to them by State Farm Fire & Casualty Company, with UM/UIM coverage limits of $1, 000, 000. The Unruhs presented claims for UIM benefits under the State Farm automobile and umbrella policies, and recovered the full available limits of UIM coverage in the amount of $1, 200, 000.

         The Unruhs, who are husband and wife and reside in the same household, are the co-owners, stockholders, and officers of The Car Show, Inc. (The Car Show), which operates a used car dealership in Colorado Springs. Plaintiff Auto-Owners Insurance Company (Auto-Owners) issued a “garage liability” policy, with other related coverage, Policy No. 44-605-881-01 (the Policy), to The Car Show, with effective dates of July 1, 2014 through July 1, 2015. The Policy includes uninsured/underinsured motorist (UM/UIM) coverage with limits of $1, 000, 000.

         On approximately August 3, 2016, nearly two years after the accident, the Unruhs' attorney first notified Auto-Owners of the accident and their injuries and demanded payment of the Policy's UIM coverage limits. Auto-Owners seeks summary judgment on its claim for declaratory relief, asserting that the Unruhs are not entitled to UIM benefits. The principal issue on summary judgment is one of policy interpretation focusing on whether the Unruhs are “insureds” under the Policy issued to The Car Show. Alternatively, Auto-Owners argues that the Unruhs' coverage claims are barred because they settled their liability claims against Ms. Allison without obtaining Auto-Owners' consent, allegedly resulting in prejudice to Auto-Owners.

         The Declarations Pages in this 217-page Policy, including those concerning the UIM endorsement, uniformly identify only The Car Show, Inc. as the “Insured, ” and do not directly name the Unruhs as additional “Insureds.” See Policy (Doc. 20-2) at Bates Nos. 000212-217, 000318-324.

         However, the Policy also contains an endorsement titled “Drive Other Cars - Broad Form” (also referred to as “DOC - Broad” coverage). The Declarations page for that endorsement states “DOC - Broad: DAVID R. UNRUH.” Id. at 000320. The DOC - Broad Form coverage page provides an additional definition “as it applies to this endorsement only”:

         Named individual means:

a. The person shown in the Declarations under DOC-Broad;
b. The spouse of such person if a resident of the same household; and
c. Anyone who resides with such person and who is related to such person by blood, marriage or adoption. This also includes a ward or foster child who resides with such person.

Id. at 000424 § 1. The DOC - Broad coverage then provides that “Coverages provided by this policy and shown in the Declarations under DOC - Broad for the named individual are extended to such named individual as if they were the first named insured.” Id. § 2.a (underlining added).

         These provisions of the DOC - Broad endorsement unambiguously extend coverage to both David Unruh and Kendall Unruh “as if they were the first named insured” because David is named in the DOC - Broad Declarations and Kendall is his spouse and a resident of the same household. Thus, unless coverage is otherwise excluded, each of the Unruhs is a “you” as defined by the Policy: “You or your means the insured shown in the Declarations and if an individual, your spouse who resides in the same household.” Id. at 000374 ...


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