Opinion ID: 2453589
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Heading Rank: 4

Heading: Colorado's UM/UIM Statute

Text: With this background in mind, we turn to Colorado's UM/UIM statute. Section 10-4-609(1)(a) provides: No automobile liability or motor vehicle liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle licensed for highway use in this state unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in section 42-7-103(2), C.R.S. [the Motor Vehicle Financial Responsibility Act (MVFRA)], under provisions approved by the commissioner, for the 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; except that the named insured may reject such coverage in writing. [3] In short, this provision requires that any issuer of an automobile liability or motor vehicle liability policy provide UM/UIM coverage in the limits set forth in the MVFRA unless the policyholder expressly rejects such coverage in writing. [4] See Aetna Cas. & Sur. Co. v. McMichael, 906 P.2d 92, 101 (Colo.1995) (stating that [s]ection 10-4-609(1) compels UM/UIM coverage for all those covered under the liability provisions of an automobile insurance policy). The limits set forth in the MVFRA are not less than twenty-five thousand dollars per person and fifty thousand dollars for two or more persons in any one accident. § 42-7-103(2), C.R.S. (2010). By enacting the UM/UIM requirement, the legislature thus chose to ensure that a purchaser of an automobile or motor vehicle liability insurance policy has the opportunity to be compensated to the same extent as one injured by a motorist who is insured in compliance with the [MVFRA]. Terranova v. State Farm Mut. Auto. Ins. Co., 800 P.2d 58, 62 (Colo.1990); see also Alliance Mut. Cas. Co. v. Duerson, 184 Colo. 117, 123, 518 P.2d 1177, 1180 (1974) (explaining that this provision of the UM/UIM statute mandates only that insurance companies make available uninsured motorist coverage in an amount as prescribed by the [MVFRA]). Over time, the General Assembly has increased the amount of UM/UIM coverage that an insured may purchase. Section 10-4-609(2), C.R.S. (2002), states that before issuing or renewing the policy, the insurer must offer UM/UIM coverage in an amount up to the insured's underlying bodily injury liability limits, or $100,000 per person and $300,000 per accident, whichever is less. [5] Thus, insureds may elect UM/UIM coverage in amounts that exceed the minimum limits established in the MVFRA. If an insurer fails to offer the required coverage, or if the policyholder does not reject the offered coverage in writing, the policy will be interpreted to include UM/UIM coverage. McMichael, 906 P.2d at 101 (explaining that [c]ourts faced with insurance policies that violate mandatory coverage requirements have read those requirements into the policy). In this case, it is undisputed that the policyholder purchased UM/UIM coverage in the limits of $100,000 per person and $300,000 per accident in the underlying auto policy. It is also undisputed that Allstate did not offer UM/UIM coverage in the umbrella policy. Thus, whether the policyholder is entitled to UM/UIM coverage in the umbrella policy turns on whether the umbrella policy falls within the type of insurance policies regulated by the UM/UIM statute. We conclude it does not.

We have not found, and the parties have not cited, any Colorado statute that governs umbrella policies. Thus, we turn to the plain language of the UM/UIM statute to address the question before us. The UM/UIM statute requires insurers who issue automobile liability or motor vehicle liability polic[ies] insuring against loss resulting from liability . . . arising out of the ownership, maintenance, or use of a motor vehicle . . . licensed for highway use in Colorado to offer and provide UM/UIM coverage. See § 10-4-609(1)(a). The statute does not purport to apply to all liability policies; it applies only to  automobile liability or motor vehicle liability policies. This language identifies a particular class of insurance policies that are inherently tethered to the ownership of a particular motor vehicle and the activity of driving. Moreover, the statute applies only to policies that are delivered or issued in Colorado  with respect to any motor vehicle licensed for highway use in this state . § 10-4-609(1)(a) (emphasis added). This language similarly instructs that a policy governed by the UM/UIM statute is one that provides liability coverage for specifically identified vehicles licensed for use in the state. The auto policy here designates the four particular vehicles covered and calculates premiums based on considerations specific to that vehicle (e.g., year, make, and model; the factors decreasing or increasing risk; the nature of particular coverages desired; and the vehicle's usage patterns and driver characteristics). The policy has a logical and direct connection to the insured's ownership and use of specific, identified automobiles or motor vehicles. [6] In contrast, the umbrella policy is a general liability policy. The calculation of its basic liability premium is not tethered to specific aspects of the policyholder's automobiles or their use. The declarations page simply notes that the premium includes a charge for 4 automobiles and for a young driver. The umbrella policy at issue here is not inherently tied to particular automobiles or motor vehicles, or even the activity of driving. Instead, the purpose of the policy is to provide a broad umbrella of general excess third-party coverage to protect the insured from catastrophic liability arising from a wide range of activities. With respect to automobiles, the policy provides excess liability coverage should the insured incur legal liability to others beyond $100,000 per person or $300,000 per accident. But an umbrella policy is not transformed into an automobile or motor vehicle liability policy simply because it includes coverage for liability arising from the use of automobiles. An umbrella policy is an inherently different type of policy. As Allstate observes, it would be equally inaccurate to label the umbrella policy an aircraft policy, boat policy, or homeowners policy. In sum, an umbrella policy is not an automobile liability or motor vehicle liability policy under the plain language of section 10-4-609(1)(a). Consequently, the statute does not require an insurer to offer UM/UIM coverage as part of an umbrella policy. [7]
Because section 10-4-609(1)(a) ties the required offer of UM/UIM coverage to the amounts established in the MVFRA, Allstate urges us to follow the minimum liability approach adopted by some appellate courts in states with similar UM/UIM statutes. Under this approach, courts have declined to include umbrella policies within their state's UM/UIM mandate, reasoning that their legislatures intended only to offer the insured the option of matching what he or she would have collected had the other party carried the minimum coverage required under the financial responsibility laws of their state. See Lisa K. Gregory, Annotation, Excess or Umbrella Insurance Policy as Providing Coverage for Accidents with Uninsured or Underinsured Motorists, 2 A.L.R.5th 922 § 2[a] (1992 & 2010 Supp.). Although the court of appeals found this approach persuasive, we decline to view the distinction between minimum liability and full recovery statutes as dispositive of the issue before us. To label Colorado's UM/UIM statute a minimum liability statute based on the reference to the MVFRA in section 10-4-609(1) oversimplifies the interplay between sections 10-4-609(1)(a) and (2). Read together, these provisions make clear that insureds may elect UM/UIM coverage in greater than the MVFRA minimum limits. Thus, we instead rely on the plain language of Colorado's UM/UIM statute to hold that umbrella policies are not included within the UM/UIM mandate of section 10-4-609(1)(a).
The insureds argue that the legislative goal of maximizing coverage requires us to construe automobile liability or motor vehicle liability policy broadly to include UM/UIM coverage. In their view, the fact that UM coverage functions differently from liability coverage is not a reason to exclude personal umbrella policies, but is instead one of the very reasons behind the mandatory offer required by Colorado's statute. We are not persuaded that public policy considerations compel us to reach a different conclusion regarding the scope of section 10-4-609. The insureds correctly note that since the UM/UIM statute was enacted in 1965 the General Assembly has acted several times to expand UM/UIM coverage. The statute originally required insurers only to offer uninsured motorist coverage, and only in the minimum amount required by the MVFRA. In 1983, the legislature expanded the statute to include underinsured motorists. Ch. 92, sec. 1, § 10-4-609(4), 1983 Colo. Sess. Laws 455. In that year, it also acted to require insurers to offer higher limits of coverage up to the insured's bodily injury liability limits, or $100,000 per person and $300,000 per accident, whichever was less. Ch. 92, sec. 1, § 10-4-609(2), 1983 Colo. Sess. Laws 454. In 1992, the legislature enacted provisions permitting insurers to prohibit stacking the limits of more than one UM/UIM policy if such provisions appear in a single policy covering multiple vehicles or in multiple policies issued by a single insurer. Ch. 212, sec. 4, § 10-4-609(2), 1992 Colo. Sess. Laws 1759. More recently, however, the General Assembly removed the anti-stacking provisions enacted in 1992, and expanded the circumstances under which an insured would be legally entitled to collect UM/UIM coverage under his or her auto policy. Ch. 413, secs. 1 & 2, §§ 10-4-609(1)(c), (2) & (4), 2007 Colo. Sess. Laws 1921-22. It also removed the $100,000 and $300,000 cap on UM/UIM coverage, giving policy purchasers the right to obtain coverage in an amount equal to the insured's own bodily injury liability limits. Id. In 2010, the General Assembly added section 10-4-609(6), which makes it easier for insured parties to have an alleged tortfeasor deemed to be uninsured for the purposes of receiving UM/UIM coverage payments. Ch. 196, sec. 1, § 10-4-609(6), 2010 Colo. Sess. Laws 845-46; see also, ch. 196, secs. 2 & 3, §§ 42-7-102(2) & 42-7-414(3), 2010 Colo. Sess. Laws 846-48. Despite these changes, however, the General Assembly has not expanded the class of policies in section 10-4-609(1)(a)specifically automobile and motor vehicle liability policiesto which UM/UIM requirements apply. While we recognize the important policy considerations behind the UM/UIM statute, there is a limit to what was contemplated by Colorado's [UM/UIM] legislation. Terranova, 800 P.2d at 61-62 (explaining that [s]ection 10-4-609 does not require full indemnification of losses suffered at the hands of uninsured motorists under all circumstances). The General Assembly has never redefined this class of policies to support the importation of an entirely different type of insurance policy (i.e., umbrella policies) into the UM/UIM mandate. Rather, the General Assembly's actions to increase an insured's ability to obtain greater levels of UM/UIM protection all have taken place within the framework of traditional auto insurance. The evolution of these provisions only supports our conclusion that wholly distinct classes of liability policies, such as umbrella policies, do not fall within this framework. Accordingly, we decline to read section 10-4-609(1)(a) to include umbrella policies given the legislature's unwavering reference to automobile liability or motor vehicle liability polic[ies] in the 46 years since the UM/UIM statute was enacted. The insureds also urge us to adopt a broad interpretation of automobile liability or motor vehicle liability policy out of concern that insurers will remove many policies from the reach of the UM/UIM statute, thereby frustrating the legislative intent of ensuring that individuals can maximize their options for protecting themselves and their families. They maintain that excluding umbrella policies from the UM/UIM statute will mean that the applicability of the UM/UIM mandate will turn on the label, packaging, or characterization of the policy. Our holding, however, is not predicated on the superficial labeling or packaging of a policy. See, e.g., 4 New Appleman on Insurance Law Library Edition § 24.02[4] (explaining one must analyze the policy language, rather than basing decisions on labels or headings in determining whether a particular policy affords excess or umbrella coverage). Instead, we look to the plain language of the policy to determine whether it is fundamentally an automobile liability or motor vehicle liability policy within the meaning of the UM/UIM statute. An insurer could not, for example, remove an automobile liability policy from the reach of the UM/UIM statute merely by adding some coverage that is unrelated to automobiles, such as identity-theft coverage. Finally, although we hold that the UM/UIM statute does not require insurers to offer UM/UIM coverage in connection with an umbrella policy, nothing in this opinion prohibits insurers from doing so. To date, the General Assembly has left this option to the marketplace. However, if the General Assembly wishes to include umbrella policies within the scope of section 10-4-609(1)(a), it will have to expressly state so. [8]