Opinion ID: 166884
Heading Depth: 2
Heading Rank: 2

Heading: Reformation to provide extended PIP benefits at the P4 level

Text: 29 The district court concluded that in light of our decision in Clark I, Mr. Clark was entitled to extended PIP benefits beginning on the day of reformation. 292 F.Supp.2d at 1268. It determined that the appropriate remedy is to include coverage that should have been offered and later specified that reformation should include extended PIP benefits under P4 coverage. Id. at 1268-69. This level of coverage provides wage-loss payments up to an aggregate limit of $200,000. Id. at 1269. 30 State Farm now contends that the district court erred in its reading of Clark I. The insurer argues that the proper reformation remedy is simply to strike the Pedestrian Limitation from the Madrid policy and permit Mr. Clark to receive the same level of coverage, P1, that the Madrids purchased for themselves. 31 Generally, the purpose of reformation of an insurance contract is to make the policy express the true intent of the parties. However, when a policy is violative of a statute, reformation is also required to assure that coverage will meet the statutory minimums. Thompson v. Budget Rent-A-Car Sys., Inc., 940 P.2d 987, 990 (Colo.Ct.App.1996). The Colorado Court of Appeals held in Brennan that when... an insurer fails to offer the insured optional coverage that satisfied [CAARA], additional coverage in conformity with the offer mandated by statute will be incorporated into the policy. 961 P.2d at 554. We stated in Clark I that under Brennan, [Mr.] Clark is entitled as a matter of law to reformation of the Madrid policy to include extended PIP benefits. 319 F.3d at 1241. 32 The district court's decision comports with our decision in Clark I and the Colorado law regarding reformation of insurance policies. The district court noted that it is undisputed that State Farm did not offer Mrs. Madrid the option of purchasing extended PIP benefits which included extended coverage for pedestrians. Clark II, 292 F.Supp.2d at 1268. As in Brennan, the insurer here offered extended coverage that excluded pedestrians. See Clark I, 319 F.3d at 1237 (Before Hortencia Madrid purchased the policy, State Farm offered her extended PIP benefits for herself, her resident relatives, and passengers in her insured vehicle with her consent, but not for pedestrians. ) (emphasis added). Brennan clearly held that the type of policy offered to Mrs. Madrid does not satisfy subsection 710(2)(a) of CAARA. See 961 P.2d at 554. 33 Further, as the district court noted, Brennan and Thompson reformed those insurance policies to include extended pedestrian coverage that insurers should have offered under section 710. When an insurance policy is reformed to conform to a statutory minimum, such term is deemed to be incorporated by reference into the policy. Brennan, 961 P.2d at 556; see also Thompson, 940 P.2d at 990-91 (incorporating unlimited PIP benefits because the insurer failed to offer supplemental pedestrian coverage to the driver). Thus, the district court did not abuse its discretion when it reformed the Madrid policy to provide Mr. Clark with extended PIP benefits under the P4 level of coverage.