Opinion ID: 1438737
Heading Depth: 1
Heading Rank: 3

Heading: changes in conditions

Text: .... 3. OUR RIGHT TO RECOVER FROM OTHERS is changed by adding the following: If we make any payment and the insured recovers from another party, the insured shall hold the proceeds in trust for us and pay us back the amount we have paid. Kral filed a civil action against Englebaugh on December 1, 1980, and determined through discovery that Englebaugh was uninsured. Kral then filed a claim against American Hardware under the uninsured motorist provision of the insurance contract. On December 18, 1980, American Hardware paid Kral $30,000 and Kral executed a release-trust agreement containing the following pertinent language: Further, I state that I have instituted an action against Norman A. Englebaugh (the operator of the uninsured automobile) ... and I agree to withhold 15% of any monies received in such action as the result of settlement or judgment in trust for American Hardware Mutual, to be paid to said company immediately upon the same coming into my hands. I agree to be solely responsible for costs incurred in said action. In the event that an offer of settlement is received from the adverse party, I agree to advise American Hardware Mutual before accepting the same. [1] On May 5, 1981, Kral filed an amended complaint in her pending civil action. The amended complaint added Adams Apple Lounge, Inc., a lounge Englebaugh allegedly visited the night of the accident, as a defendant. In July of 1983, Kral again amended her complaint to include as additional defendants Gary Windom and Don Bates, d/b/a Bates and Windom Insurance Agency. [2] As amended, Kral's complaint alleged that Adams Apple negligently sold alcoholic beverages to Englebaugh and that Windom and Bates negligently misrepresented the status of the liability insurance coverage for Adams Apple's operations. On July 15, 1985, Kral settled her claims against Adams Apple, Windom and Bates for the sum of $177,500. She notified American Hardware of the settlement and advised American Hardware that she intended to dismiss her claims against Englebaugh. American Hardware consented to the dismissal of the claims against Englebaugh but demanded payment from Kral of $26,635, representing fifteen percent of the settlement she had obtained from Adams Apple, Windom and Bates. Kral then filed this civil action in the El Paso County District Court seeking a declaration that the subrogation clause of the insurance contract and the release-trust agreement were unenforceable because they were contrary to public policy. Kral moved for summary judgment on her claim, and American Hardware filed a motion for summary judgment alleging that it was entitled to payment of the $26,635 pursuant to the release-trust agreement. On March 11, 1986, the trial court granted American Hardware's motion and denied Kral's motion. The trial court concluded that although Kral's retention of the settlement proceeds and the $30,000 she had received from American Hardware would not constitute double recovery, the release-trust agreement did not violate public policy and was enforceable. On appeal, the Court of Appeals affirmed the trial court's judgment. Relying on Granite State Insurance Co. v. Dundas, 34 Colo.App. 382, 528 P.2d 961 (1974), it held that the subrogation clause and the release-trust agreement did not violate the public policy of this state because uninsured motorist protection was optional rather than mandatory and because section 10-4-609, 4 C.R.S. (1979 Supp.), [3] does not expressly prohibit subrogation.