Opinion ID: 2623130
Heading Depth: 1
Heading Rank: 3

Heading: Coverage Under This Insurance Policy.

Text: As a threshold matter, we address American Family's argument that the court of appeals erred when it concluded that American Family failed to preserve for appeal whether Allen was eligible to receive benefits under Jackson's policy. We agree with American Family that this issue was preserved for appeal. The court of appeals reasoned that American Family did not direct the trial court to policy language that limits coverage to vehicles owned by Jackson. It held that American Family had not made the motion for a directed verdict with sufficient specificity and thus determined that the trial court's denial of the motion was not preserved for appeal. Allen, 80 P.3d at 802. However, our reading of the record indicates that when American Family made its motion for a directed verdict at the close of the plaintiffs' case, it accurately cited the definitions on page two of the PIP endorsement, not page 207 as indicated by the court of appeals. [9] American Family argued that these definitions limited its liability to vehicles owned by the named insured. Thus, we conclude that the motion was made with specific grounds according to C.R.C.P. 50 and was therefore preserved for appeal. [10] Next, we examine the question of whether Jackson's PIP endorsement applies only to vehicles owned by him. Jackson's policy contained two separate sections: one for liability coverage and one for PIP coverage. The liability portion provides benefits to third-parties if a vehicle covered by the policy is involved in an accident and harms someone other than the named insured or damages another's property. In contrast to the liability coverage, the PIP coverage provides benefits to the insureds (first-parties), and other permissive drivers, who are injured in an accident arising from the use of the vehicle. American Family argues that the definitions in the PIP endorsement limit coverage to injuries incurred while operating a vehicle that is owned by the named insured. It claims that Allen, not Jackson, was the owner of the truck and was therefore not eligible to receive PIP benefits even though the vehicle was still listed on Jackson's policy at the time of the accident. Allen first argues that coverage under this policy does not end once the policy holder transfers ownership in a vehicle described in the declarations. Second, she asserts that consent clauses in contracts are to be liberally construed to find coverage. Third, she counters that the conditional sales agreement between Allen and Jackson did not transfer the immediate right of possession in the truck and that Allen was thus not the owner of the vehicle at the time of the accident. We review this policy de novo because the interpretation of a contract is a question of law. Lake Durango Water Co., Inc. v. Pub. Utils. Comm'n, 67 P.3d 12, 20 (Colo.2003). When interpreting an insurance policy we apply principles of contract interpretation. Cotter Corp. v. American Empire Surplus Lines Ins. Co., 90 P.3d 814, 819 (Colo.2004) (citing Thompson v. Md. Cas. Co., 84 P.3d 496, 501 (Colo.2004)). We give words in a policy their plain and ordinary meaning, unless the intent of the parties indicates otherwise. Cotter, 90 P.3d at 819-20. Turning to the policy language on page two of the PIP endorsement, it states that American Family will provide PIP benefits for work loss and losses due to medical and rehabilitation expenses incurred by an eligible injured person who is harmed in an accident while using or operating a motor vehicle. An eligible injured person is defined as the named insured or [a]ny other person who sustains bodily injury while: 1) [o]ccupying the insured motor vehicle with the named insured's consent  (emphasis added). Giving these words their plain and ordinary meaning, we hold that this policy provides PIP benefits to the named insured or a permissive driver if he or she is harmed while operating a vehicle identified in the policy with the consent of the named insured. Having determined that the policy will only provide PIP benefits to someone driving a car with the named insured's consent, we address the next relevant issue: whether Jackson, the named insured, could consent to the use of a vehicle for purposes of providing PIP benefits under the No Fault Act if he did not own the vehicle at the time of the accident. Our cases hold that insurance coverage terminates upon the change of ownership unless the insurer agrees otherwise. See Sachtjen v. American Family Mut. Ins. Co., 49 P.3d 1146, 1149 (Colo.2002); Mid-Century Ins. Co. v. Liljestrand, 620 P.2d 1064, 1067 (Colo.1980); Worchester v. State Farm Mut. Auto. Ins. Co., 172 Colo. 352, 359, 473 P.2d 711, 714 (1970); and United Fire & Cas. Co. v. Perez, 161 Colo. at 35, 419 P.2d at 665. Once ownership transfers, control and the ability to consent to the use of a vehicle ceases in the seller, and the buyer has the full right to decide who may drive the vehicle. Worchester, 172 Colo. at 359, 473 P.2d at 715. Thus, only the owner of a vehicle can provide the consent necessary to trigger benefits under this policy. [11] Here, the trial court construed Jackson's policy to apply to vehicles listed in the policy irrespective of whether he was the owner. The trial court did not consider whether Jackson as a non-owner could consent to Allen's use of the vehicle so that she would be eligible for PIP benefits under his policy. Therefore, the court erred in granting Allen's motion for a directed verdict and in determining that, as a matter of law, this policy provided Allen with PIP benefits. To summarize, we construe the language in this policy to provide PIP coverage to permissive drivers of motor vehicles listed in the policy and owned by the named insured. In order for Allen to be eligible for benefits under this policy, Jackson, as the named insured, must have owned the truck and must have consented to Allen's use of it. On the other hand, if Allen, as the conditional buyer, was the owner of the truck at the time of the accident, then she would not be eligible to receive PIP benefits under Jackson's policy. As to this issue of ownership, both Allen and American Family take opposing views on the extent to which the conditional sales agreement between Allen and Jackson transferred ownership in the truck. Our precedent, Sachtjen v. American Family Insurance Company, 49 P.3d at 1149, provides the test to determine whether a conditional sales agreement transfers ownership to the buyer: Whether or not the right of immediate possession vests in the conditional vendee ultimately depends upon the agreement of the parties. In Sachtjen, like here, the vehicle involved in the accident was the subject of a conditional sale. 49 P.3d at 1147. We held that ownership had not transferred and the seller's insurer remained liable on the insurance contract because the parties' sales agreement maintained the right of possession in the seller. Id. at 1151. The agreement between the parties in Sachtjen was not in dispute and the trial court, as the finder of fact, found that the seller had kept a set of keys for himself, continued to insure the vehicle, and limited the purchaser's use of the vehicle until the purchase price was paid in full. Id. In this case, while the parties do not dispute the existence of the agreement, whether Jackson's control over the truck had ended and whether Allen had the right of immediate possession or if her use of the truck was limited, are disputed. Allen testified she needed Jackson's permission to use the truck. Allen's allegation was supported by her initial statement to American Family's investigators and by the initial claim filed by Jackson's wife. On the other hand, Jackson testified that Allen was not required to obtain his permission before using the truck. The trial court granted a directed verdict, in Allen's favor, ruling that she was eligible for PIP benefits and that ownership was irrelevant before this factual issue could be decided by the jury. Because we hold that this policy provides PIP coverage to permissive drivers of vehicles owned by the named insured, it is necessary to determine whether Allen or Jackson owned the vehicle at the time of the accident. The trial court erred in entering a directed verdict before the jury determined whether Allen or Jackson owned the vehicle. Hence, we return this case to the court of appeals to remand it to the trial court for a new trial to resolve this issue of ownership only.

Next we address whether expert testimony of industry standards is required to establish the reasonableness of an insurer's conduct in a first-party claim for the breach of an insurer's duty of good faith. We begin by discussing basic principles behind this tort claim. An insurer must deal in good faith with its insured. Decker v. Browning-Ferris Indus. of Colorado, 931 P.2d 436, 443 (Colo.1997). The insurance contract imposes a quasi-fiduciary relationship between the insurer and insured that imposes an implied covenant of good faith upon the insurer. Id. This special relationship gives rise to a separate action in tort when the insurer breaches its duty of good faith and fair dealing. Goodson v. American Std. Ins. Co. of Wisconsin, 89 P.3d 409, 414 (Colo.2004) (discussing the requirements for asserting a claim against an insurer for the breach of the duty of good faith and the damages available). An insurer may breach its duty of good faith due to the insurer's conduct with third-parties or with first-parties. The third-party context involves claims against the insurer for its alleged misconduct with third-parties asserting claims against the insured. By contrast, the first-party context involves claims against the insurer for its alleged misconduct with its own insured. To assert a claim for the breach of an insurer's duty of good faith, the tort requires proof of a different standard depending upon whether the insurer's conduct is with a third-party or a first-party. Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1274 (Colo.1985). In the third-party context, an insured's claim is based on general principles of negligence and requires proof that the insurer acted unreasonably under the circumstances. Goodson, 89 P.3d at 415; see also Farmers Group Inc. v. Trimble, 691 P.2d 1138, 1142 (Colo.1984). In a first-party claim, like this one, the insured must prove both that the insurer acted unreasonably under the circumstances and that the insurer either knowingly or recklessly disregarded the validity of the insured's claim. Goodson, 89 P.3d at 415 (citing Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1274 (Colo.1985)). Because this second element is not relevant to the issues raised on appeal, we do not address it here. Thus, the next relevant inquiry is whether the insured, the plaintiff, must rely upon expert testimony to establish industry standards to prove that the insurer breached its duty of good faith  that is, that the insurer acted unreasonably. [12] The reasonableness of an insurer's conduct is measured objectively based on industry standards in both the first-party and third-party context. Goodson, 89 P.3d at 415; Savio, 706 P.2d at 1275. Although we have not specifically decided the need for expert testimony to establish what is reasonable under the circumstances, our court of appeals has. It has held that in the third-party context, expert testimony is not required to establish the reasonableness of the insurer's conduct where the standard of care does not entail specialized knowledge or skill beyond that of the average juror. [13] Surdyka v. DeWitt, 784 P.2d 819, 822 (Colo.App.1989). Expert witnesses can provide additional relevant evidence of the standard of care if the standard is not within the common knowledge of the ordinary juror. Gerrity Oil & Gas Corp. v. Magness, 946 P.2d 913, 931 (Colo.1997). We have stated that in tort claims for professional negligence, expert testimony is often required to establish the industry standard of care when the standard is not within the common knowledge of ordinary people. [14] Goodson, 89 P.3d at 415. On the other hand, in contexts slightly different than the one presented here, this court and the court of appeals have agreed with the Surdyka court's principles that expert testimony is not required where the defendant's standard of care does not require specialized or technical knowledge. [15] Nor is expert testimony required to establish the standard of care when a legislative enactment or administrative rule establishes the standard of care. Giampapa v. American Family Mut. Ins. Co., 919 P.2d 838, 841 (Colo.App.1995) (insurance company employee admitted that statute established standard of care for insurer to pay bills within thirty days), appealed after remand and rev'd on other grounds, 64 P.3d 230 (Colo.2003). But where the legislative enactment or administrative rule is not conclusive of the standard of care, the statute or rule may be used as evidence of the standard of care from which the trier of fact may evaluate the defendant's conduct. Gerrity, 946 P.2d at 932. In such instances, expert testimony is required to establish the standard of care only if the standard is not within the common knowledge and experience of ordinary persons. Id. For example, statutory safety standards under the Occupational Safety and Health Act, 29 U.S.C. § 653(b)(4) (2001), offered in support of expert testimony may be used as some indication of the standard of care owed by the defendant in a negligence claim for failing to follow industry standards in providing safe facilities and equipment. Scott v. Matlack, Inc., 39 P.3d 1160, 1170 (Colo.2002). We find our reasoning in Gerrity instructive for this case. There, the plaintiff claimed that an oil and gas operator engaged in negligent drilling operations in violation of Colorado's administrative rules. Gerrity, 946 P.2d at 920-21. The rules required the surface owner's consent for disposal of waste on the site as well as notice about site reclamation. Id. at 932. We held that these administrative rules did not overrule the common law rule of reasonable surface use, emphasizing that these administrative rules neither established the standard of care for an operator nor created a private right of action in tort. These rules provided the jury with valid, but not conclusive, evidence of the standard of care owed by the operator. And, most importantly here, we held that because the standard of care was within the common knowledge and experience of ordinary persons, the trier of fact was allowed to determine the legal duty owed to the landowner without the aid of expert testimony. Id. at 931. Although Gerrity concerns the standard of care in a negligence claim, its reasoning applies here. Like the rules in Gerrity, the Unfair Claims Practices Act regulates the conduct of the insurance industry but does not create a private right of action. [16] Farmers Group, Inc. v. Trimble, 658 P.2d 1370, 1377-78 (Colo.App.1982), aff'd, 691 P.2d 1138 (Colo.1984). This Act sets forth standards for when the commissioner of insurance may find that an insurance company is engaged in an unfair or deceptive trade practice. Section 10-3-1104(1)(h) of the Act defines an unfair claims settlement practice as, among other things, refusing to pay claims without conducting a reasonable investigation based on all available information, or not providing a reasonable explanation of a denial of a claim. [17] While the Unfair Claims Practices Act does not establish a standard of care actionable in tort, it may be used as valid, but not conclusive, evidence of industry standards just like the administrative regulations in Gerrity. If the reasonable investigation and denial of an insured's claim is within the common knowledge and experience of ordinary people, then expert testimony is not required. See Gerrity, 946 P.2d at 931.
Having decided that in some cases expert testimony may not be required, we address whether in this case expert testimony is required to establish what constitutes a reasonable investigation or denial of an insured's claim in order to prove that American Family breached its duty of good faith. We begin by recognizing that whether the standard of care is a matter of common knowledge is committed to the sound discretion of the trial court. People v. Fasy, 829 P.2d 1314, 1317-18 (Colo.1992). The reasonableness of an insurer's investigation into the underlying events of an automobile insurance claim is not a technical question and does not require additional professional training beyond the knowledge of the average juror. Nor does a determination of what constitutes a reasonable explanation for denying a claim require special knowledge or training. The insurer is corresponding with its insured who is not required to have a particular ability to understand why coverage is denied. Although American Family's employees receive training and handbooks on investigating claims, this does not make expert testimony necessary to establish a standard of care. To hold otherwise would effectively require expert testimony any time a defendant acts pursuant to a manual or industry training. Therefore, we hold that expert testimony with respect to what constitutes a reasonable investigation or denial of a claim was not needed in this case. Here, the Unfair Claims Practices Act also provided the jury with valid, but not conclusive, evidence of what constitutes a reasonable investigation or denial of a claim. American Family conceded that it had adopted the standards in the Act in its policies and procedures. In the terms of this statute, a reasonable investigation is one that is based upon all available information. The Act also states that a denial of an insured's claim must have a basis in the insurance policy or applicable law. This evidence of the standard of care could assist the jury in determining whether American Family had acted unreasonably in investigating or denying Allen's claim. The trial court properly instructed the jury that an insurance company breaches its duty of good faith if it acted unreasonably in either the investigation or denial of Allen's PIP claim, or providing an unreasonable explanation for the denial of the claim. [18] The instructions also incorporated the Unfair Claims Practices Act and allowed the jury to consider [a] violation [of the Act] in determining whether the defendant acted unreasonably in denying payment of the plaintiff's insurance claim. Reviewing the record, we find sufficient evidence for the jury to conclude that American Family's investigation and denial of Allen's claim was unreasonable. Bohrer v. DeHart, 961 P.2d 472, 476-77 (Colo.1998). Testimony showed that American Family had concluded its investigation without exploring the conflicting statements it received from Jackson and his wife or by talking with Allen. American Family's denial of coverage letters to Jackson and Allen referenced non-existent sections of the policy and contained legal misstatements as a basis for denying her claim. Based upon the jury instructions and the evidence presented at trial, a reasonable jury could have evaluated American Family's conduct and reached the conclusion that American Family acted unreasonably under the circumstances. Therefore we affirm the court of appeals on this issue.