Court Opinion

ID: 6337957
Source: CourtListenerOpinion
Date Created: 2022-05-05 14:01:49.012516+00
Date Added: 2024-06-11T09:25:09.256115
License: Public Domain

The summaries of the Colorado Court of Appeals published opinions
  constitute no part of the opinion of the division but have been prepared by
  the division for the convenience of the reader. The summaries may not be
    cited or relied upon as they are not the official language of the division.
  Any discrepancy between the language in the summary and in the opinion
           should be resolved in favor of the language in the opinion.

                                                                   SUMMARY
                                                                  May 5, 2022

                                2022COA49

No. 20CA1356, Hughes v Essentia Ins. — Insurance — Motor
Vehicles — Automobile Insurance Policies —
Uninsured/Underinsured

     In this appeal from a trial court’s grant of summary judgment

in an automobile insurance coverage dispute, a division of the court

of appeals rejects the proposition that a vehicle-based restriction on

uninsured/underinsured motorist (UM/UIM) coverage is consistent

with section 10-4-609, C.R.S. 2021. Instead, the division concludes

that the supreme court’s holding in DeHerrera v. Sentry Ins. Co., 30

P.3d 167 (Colo. 2001), prohibits a limitation of UM/UIM coverage

that purports to tie protection against an uninsured or

underinsured motorist to the insured’s occupancy or use of a

specific vehicle or type of vehicle. To the extent that this conclusion
is inconsistent with the holding in Cruz v. Farmers Ins. Exch., 12

P.3d 307 (Colo. App. 2000), the division declines to follow it.
COLORADO COURT OF APPEALS                                     2022COA49

Court of Appeals No. 20CA1356
Boulder County District Court No. 19CV30790
Honorable Thomas F. Mulvahill, Judge

Beverly Hughes,

Plaintiff-Appellant,

v.

Essentia Insurance Company,

Defendant-Appellee.

                       JUDGMENT REVERSED AND CASE
                        REMANDED WITH DIRECTIONS

                                  Division V
                         Opinion by JUDGE WELLING
                          Dunn and Yun, JJ., concur

                           Announced May 5, 2022

Bachus & Schanker, LLC, Corey A. Holton, Scot Kreider, Denver, Colorado, for
Plaintiff-Appellant

Sutton|Booker P.C., Jacquelyn S. Booker, Rachel T. Jennings, Denver,
Colorado, for Defendant-Appellee
¶1    This is an appeal from a trial court’s grant of summary

 judgment in an automobile insurance coverage dispute. The

 plaintiff, Beverly Hughes, was injured in a car accident and sought

 to recover uninsured/underinsured motorist (UM/UIM) benefits

 under her auto insurance policy from defendant, Essentia

 Insurance Company (Essentia), which insured her two classic cars.

 At the time of her injury, Hughes wasn’t driving either of the classic

 cars and was, instead, driving her “regular use vehicle” — a vehicle

 she was required to have and separately insure in order to maintain

 her classic car insurance policy.

¶2    The classic car insurance policy explicitly excepted “regular

 use vehicles” from UM/UIM coverage, and therefore Essentia

 refused to provide Hughes with UM/UIM benefits for her injuries

 because she wasn’t using one of the classic cars at the time of the

 accident. Hughes filed suit, alleging that she was entitled to the

 UM/UIM benefits under the Essentia classic car insurance policy

 regardless of what vehicle she was driving at the time of the

 accident.

¶3    Relying on Cruz v. Farmers Insurance Exchange, 12 P.3d 307

 (Colo. App. 2000), the trial court concluded that a “regular use

                                     1
 vehicle” exclusion in a classic car insurance policy adheres to both

 section 10-4-609, C.R.S. 2021, and the supreme court’s

 interpretation of section 10-4-609, because Hughes was still

 protected through her “regular use vehicle” insurance policy.

¶4    This case raises an issue of first impression: whether an

 automobile insurance policy restriction that insureds can only

 access their UM/UIM benefits when they are injured in the covered

 vehicle is valid under section 10-4-609. We conclude that it isn’t.

¶5    We reject the proposition that a vehicle-based restriction is

 consistent with section 10-4-609. Instead, we conclude that the

 trial court erred by failing to apply our supreme court’s holding in

 DeHerrera v. Sentry Insurance Co., 30 P.3d 167 (Colo. 2001), which

 provides that UM/UIM benefits cover persons injured by uninsured

 or underinsured motorists and can’t be tied to the occupancy or use

 of a particular vehicle or type of vehicle.

¶6    Therefore, we reverse the summary judgment and remand the

 case to the trial court for further proceedings consistent with this

 opinion.

                                     2
                          I.    Background

¶7    Hughes alleged that she was seriously injured in an

 automobile accident caused by another driver. At the time of the

 accident, Hughes was driving a Ford Edge owned by her employer

 but provided to her for her regular use. The driver who caused the

 accident was insured by an auto policy with bodily injury limits of

 $25,000. Hughes alleged that her injuries and losses substantially

 exceeded the negligent driver’s insurance coverage limit.

¶8    At the time of the accident, Hughes was insured by two

 automobile insurance policies: one issued by Travelers Insurance

 (Travelers) and another issued by Essentia. Both policies provided

 for UM/UIM coverage. Hughes filed suit against both Travelers and

 Essentia for UM/UIM benefits. Hughes settled her claim against

 Travelers.

¶9    The Essentia policy insures two classic cars — a 1967 Ford

 Mustang and a 1930 Ford Model A. Under the Essentia policy,

 Hughes’ husband is the named insured and Hughes is a named

 driver. The Essentia policy requires that the policy holder own a

 “regular use vehicle,” which must be “insured by a separate

                                   3
  insurance policy which must be in effect for the entire time [the

  Essentia classic car] policy is in effect.”

¶ 10   Essentia moved for summary judgment on Hughes’ claims,

  arguing that Hughes wasn’t entitled to UM/UIM benefits under the

  Essentia policy because, at the time of the accident, she wasn’t

  driving one of the covered cars (the 1967 Ford Mustang or the 1930

  Ford Model A) but was driving her “regular use vehicle.”

¶ 11   The trial court granted summary judgment in favor of

  Essentia, concluding that enforcing the Essentia policy as written is

  consistent with section 10-4-609 and Colorado public policy, and

  protects Hughes’ interest in two ways.

¶ 12   First, the trial court found that the Essentia policy is

  specifically for classic cars, and the Essentia policy states that the

  insured cars are not considered “regularly used vehicles.” Thus,

  the clear language of the policy states that the insured classic cars

  wouldn’t be regularly used, lowering the likelihood and risk of an

  accident and, in turn, lowering the insurance rates and premiums

  for cars in this category.

¶ 13   Second, the trial court reasoned, Hughes’ interest was

  protected through the Essentia policy’s requirement that she

                                      4
  maintain a separate and more substantial insurance policy for her

  regularly used vehicle.

                              II.   Analysis

¶ 14   Hughes contends that the trial court erred by granting

  Essentia’s motion for summary judgment based on an erroneous

  application of Colorado law. Specifically, Hughes contends that the

  policy’s exclusion of coverage when the insured is using a “regular

  use vehicle” (1) directly contradicts the plain language of section 10-

  4-609 and (2) violates Colorado public policy. We agree that the

  trial court erred.

                        A.    Standard of Review

¶ 15   Because we are reviewing the trial court’s grant of summary

  judgment, we review each contention de novo, applying the same

  standard as the trial court. Poudre Sch. Dist. R-1 v. Stanczyk, 2021

  CO 57, ¶ 12. A court may grant a motion for summary judgment

  when the pleadings and supporting documents establish that there

  is no genuine issue as to any material fact and that the moving

  party is entitled to judgment as a matter of law. See C.R.C.P. 56(c);

  Gibbons v. Ludlow, 2013 CO 49, ¶ 11.

                                    5
                           B.    Legal Principles

¶ 16   An insurer must offer UM/UIM coverage in an automobile

  liability or motor vehicle liability policy. § 10-4-609(1)(a);

  DeHerrera, 30 P.3d at 173–74. If the insured purchases UM/UIM

  coverage, then an insurer must provide those UM/UIM benefits

  when an insured person is “legally entitled to recover damages from

  owners or operators of uninsured [or underinsured] motor vehicles.”

  § 10–4–609(1)(a), (4). In other words, an insured is entitled to

  recover UM/UIM benefits when the at-fault driver either doesn’t

  have any liability insurance or is underinsured. § 10–4–609(4);

  DeHerrera, 30 P.3d at 173–74.

¶ 17   UM/UIM coverage is “in addition to any legal liability coverage

  and shall cover the difference, if any, between the amount of the

  limits of any legal liability coverage and the amount of the damages

  sustained . . . up to the maximum amount of the [UM/UIM]

  coverage obtained pursuant to this section.” § 10-4-609(1)(c); see

  Mullen v. Metro. Cas. Ins. Co., 2021 COA 149, ¶ 30. Put differently,

  UM/UIM coverage fills the gap between a tortfeasor’s insurance

  liability limit and the amount of damages sustained by the insured,

  up to the amount of the UM/UIM coverage purchased. Mullen,

                                      6
  ¶ 31; see also Jordan v. Safeco Ins. Co. of Am., Inc., 2013 COA 47,

  ¶ 30.

¶ 18      By enacting section 10-4-609, the General Assembly’s purpose

  was to guarantee the widespread availability to the insuring public

  of insurance protection against financial loss caused by motorists

  who are financially irresponsible by failing to carry adequate

  liability insurance. Bernal v. Lumbermens Mut. Cas. Co., 97 P.3d

  197, 201 (Colo. App. 2003). Put differently, the purpose of the

  UM/UIM statute is to ensure that individuals injured in an

  automobile accident will be compensated for their losses even if the

  other motorist is underinsured or uninsured. Peterman v. State

  Farm Mut. Auto. Ins. Co., 961 P.2d 487, 492 (Colo. 1998).

¶ 19      Our supreme court interpreted the breadth of section 10-4-

  609 in DeHerrera. In that case, the named insured — DeHerrera —

  had a Sentry insurance policy that provided UM/UIM coverage to

  DeHerrera, her spouse, and her son who lived with her. 30 P.3d at

  169. DeHerrera’s son, while riding his off-road motorcycle, was

  injured in an accident involving a pickup truck driven by a third

  party. Id. The motorcycle wasn’t a vehicle covered by the Sentry

  policy. Id. The third-party driver paid the limit of his automobile

                                     7
  liability policy, and DeHerrera made a claim for underinsured

  motorist benefits under the Sentry policy. Id. at 168. Sentry

  denied coverage, asserting that its policy excluded from coverage

  persons occupying a vehicle other than a car. The trial court

  granted summary judgment in favor of Sentry, and DeHerrera

  appealed. Id. at 169. A division of this court affirmed the trial

  court’s decision, concluding that the Sentry policy unambiguously

  denied UM/UIM coverage to an insured who is neither a pedestrian

  nor an occupant of a car.

¶ 20   Our supreme court reversed, determining that section 10-4-

  609 mandated coverage irrespective of the vehicle occupied by the

  insured at the time of injury because the statute provides coverage

  for persons, not vehicles. Id. at 175. In reaching this conclusion,

  the supreme court noted that “[t]he UM/UIM statute contains no

  provisions excluding protection for an insured based on the kind of

  vehicle an insured occupies at the time of injury.” Id. DeHerrera

  goes on to say that

            UM/UIM coverage, if not waived by the named
            insured, must protect “persons insured
            thereunder who are legally entitled to recover
            damages from owners or operators of
            uninsured motor vehicles.” § 10–4–609(1).

                                    8
             This phrase, “‘persons insured thereunder’
             means that insurers must provide UM/UIM
             coverage for the protection of persons insured
             under the liability policy that the insurer is
             issuing.” Aetna Cas. & Sur. Co. [v. McMichael],
             906 P.2d [92,] 97 [(Colo. 1995)] (emphasis
             added). Thus, the statute provides coverage for
             persons; it does not place geographical limits on
             coverage and does not purport to tie protection
             against uninsured motorists to occupancy in
             any kind of vehicle.

  Id. (emphasis added).

¶ 21   Against this backdrop, we turn to the Essentia policy at issue

  in this case.

                    C.    Essentia’s UM/UIM Provision

¶ 22   The UM/UIM provision in the Essentia policy states that

  Essentia will pay for damages resulting from an accident with an

  uninsured or underinsured motorist that the “insured” is legally

  entitled to recover. “Insured” is broadly defined as including

  (1) “[y]ou or a ‘family member’ while using or ‘occupying’ ‘your

  covered auto’”; (2) “[y]ou or a ‘family member’ while not ‘occupying’

  a motor vehicle”; (3) “[a]ny other person while ‘occupying’ ‘your

  covered auto’ with permission from you”; and (4) “[a]ny person, for

  damages that person is legally entitled to recover because of ‘bodily

  injury’ to a person described in this definition in 1., 2., or 3. above.”

                                      9
  The policy also contains an exception that provides that “insured”

  shall not mean and does not include “you” or “any other person”

  while operating or using “any vehicle . . . available for the regular

  use of you, or any person related to you who resides with you, if

  that vehicle is not ‘your covered auto’.” In other words, the policy

  broadly includes members of a household as insured, but excludes

  them when they are occupying, operating, or otherwise using a

  “regular use vehicle.” We will refer to this as the “regular use

  vehicle exclusion.”

   D.   The Regular Use Vehicle Exclusion Violates Section 10-4-609

¶ 23    The regular use vehicle exclusion is squarely contrary to

  DeHerrera’s central holding: that section 10-4-609 provides

  coverage for persons and doesn’t tie protection against uninsured

  motorists to the insured’s occupancy of any particular type of

  vehicle. DeHerrera, 30 P.3d at 175.

¶ 24    Similarly, cases decided post-DeHerrera demonstrate that the

  regular use vehicle exclusion found in the definition of “insured” in

  the UM/UIM provision of the Essentia policy violates section 10-4-

  609. In Jaimes v. State Farm Mutual Automobile Insurance Co., 53

  P.3d 743, 744 (Colo. App. 2002), for example, a division of this

                                     10
  court invalidated an “owned but not insured provision” of an

  automobile insurance policy. The Jaimes court recognized that

            [u]nder [section 10-4-609], the status of the
            insured at the time of the accident, whether
            the occupant of the insured motor vehicle as
            operator or passenger, the occupant of a
            nonowned motor vehicle as operator or
            passenger, a pedestrian, or the operator of an
            owned but not insured vehicle, is not germane
            to the insurer’s obligation to provide UM/UIM
            benefits.

  Id. at 746-47.

¶ 25   In Bernal, a division of this court voided a restriction in a

  business automobile policy purporting to limit UM/UIM coverage to

  persons occupying owned private passenger automobiles while

  excluding UM/UIM coverage for persons occupying a company

  vehicle. 97 P.3d at 203.

¶ 26   Essentia argues that because Hughes was able to recover

  under her Travelers policy — a policy that Essentia required

  Hughes to have for her “regular use vehicle” — Hughes was

  essentially protected by Essentia, and therefore Essentia’s policy is

  in line with section 10-4-609. We reject this logic. Even though

  Essentia required a second policy, Essentia can’t escape its own

  statutorily mandated duty to provide UM/UIM benefits (if the

                                    11
  policyholder elects to purchase them) to persons, rather than cars,

  by attempting to tie its provided UM/UIM coverage to the

  occupancy of “your covered auto” (in this case, one of the classic

  cars). Essentia’s urged interpretation is contrary to the central

  holding of DeHerrera — namely, that UM/UIM benefits cover people

  and can’t be tied to the occupancy of a certain vehicle.

¶ 27   We aren’t persuaded otherwise by Essentia’s reliance on Jacox

  v. American Family Mutual Insurance Co., 2012 COA 170, and

  Rivera v. American Family Insurance Group, 2012 COA 175, for the

  proposition that a different outcome is warranted or that DeHerrera

  is subject to a narrower reading. The facts of Jacox and Rivera are

  similar, and both cases hold that it is a valid and enforceable limit

  of uninsured motorist coverage for a policy to cover an insured

  vehicle for liability while excluding it from UM/UIM coverage.

¶ 28   In Jacox, the plaintiff was a passenger in a vehicle when the

  driver fell asleep at the wheel, resulting in a one-car accident in

  which the plaintiff was injured. Jacox, ¶ 2. The plaintiff filed a suit

  against the driver that was ultimately settled, and she was able to

  collect the policy limit for bodily injuries under the driver’s

  automobile insurance policy. Id. The plaintiff also sought UM/UIM

                                     12
  coverage under that same policy. The driver’s policy contained a

  UM/UIM exclusion that applied to vehicles “insured under the

  liability coverage of this policy.” Id. A division of this court held

  that the plaintiff wasn’t entitled to recover UM/UIM benefits under

  the driver’s policy because the exclusion of a vehicle insured under

  the liability terms of a policy from uninsured motor vehicle coverage

  was a valid and enforceable limit of uninsured motorist coverage.

  Id. at ¶¶ 8-29.

¶ 29   Similarly, in Rivera, the plaintiff was a passenger in a vehicle

  when she was injured in a one-car accident in which the driver of

  the vehicle she was in lost control. Rivera, ¶ 2. The driver’s

  automobile insurance policy provided a $100,000 liability limit and

  $100,000 in UM/UIM coverage. Id. The policy in Rivera contained

  an exclusion similar to the one in Jacox. Id. The driver’s insurance

  carrier paid the plaintiff the liability limit. Id. at ¶ 3. But that

  didn’t cover the plaintiff’s losses, so she sued to recover under the

  UM/UIM provisions of the driver’s policy, contending that the

  exclusion wasn’t enforceable and she was also covered under the

  UM/UIM section of the driver’s policy. Id. at ¶¶ 6-7. The division in

  Rivera rejected the plaintiff’s effort, holding that “[w]ithin a single

                                      13
  policy . . . an insurer and an insured may contract to restrict what

  types of injury the policy covers — and, thus, may except certain

  events or conditions from coverage in the first instance — without

  flouting [section 10-4-609].” Id. at ¶ 19; see also id. at ¶ 20

  (“[B]ecause a named insured would be bound by such a policy, it

  follows that an injured third-party plaintiff, like Rivera, who is not a

  named insured but who claims entitlement to UM/UIM coverage

  only because she was a passenger in a named insured’s vehicle,

  also would be bound by such a policy.”).

¶ 30   Jacox, Rivera, and our case have one thing in common: all

  three plaintiffs are seeking to obtain coverage they didn’t bargain

  for. Indeed, we concede and fully recognize that what Hughes is

  seeking is more than she bargained for. But there are two reasons

  that we aren’t persuaded to follow Jacox and Rivera in this case.

  First, we are bound by DeHerrera, not Jacox or Rivera; thus, to the

  extent Jacox and Rivera support a different outcome, we decline to

  follow them. See People v. Gladney, 250 P.3d 762, 768 (Colo. App.

  2010). (For reasons unapparent to us, neither Jacox nor Rivera

  discusses or cites — much less distinguishes — DeHerrera.)

                                     14
¶ 31        Second, Jacox and Rivera are factually distinct. The plaintiffs

  in both Jacox and Rivera were seeking to recover UM/UIM benefits

  under the same policy that insured the vehicle in which they were

  injured and from which they had already collected under the

  liability provisions. Here, Hughes isn’t seeking to invoke the

  liability provisions of the Essentia policy, just its UM/UIM benefit.

  And she is doing so because the at-fault driver’s coverage is

  inadequate, not because of any alleged shortcoming of the Essentia

  policy itself.

¶ 32        Simply put, under section 10-4-609, as interpreted by

  DeHerrera, Hughes is entitled to recover UM/UIM benefits under

  the Essentia policy for the injuries she sustained when she was

  involved in an accident with an underinsured motorist. And

  because the regular use vehicle exclusion in the Essentia policy

  violates section 10-4-609, the trial court erred in granting summary

  judgment in Essentia’s favor.

       E.     Public Policy Doesn’t Save Essentia’s Regular Use Vehicle
                                      Exclusion

¶ 33        Essentia argues that Colorado public policy encourages

  freedom of contract and that even within the context of statutorily

                                        15
  mandated insurance, insurance companies must be free to include

  conditions and exclusions that are not inconsistent with Colorado’s

  mandatory insurance laws. Essentia cites to Cruz, 12 P.3d at 312,

  in support of the proposition that certain exclusions in UM/UIM

  insurance contracts are permissible in Colorado, including

  exclusions for a regularly used vehicle that is not insured (and for

  which no premium is paid) under the policy.

¶ 34   In Cruz, the plaintiff was injured in a car accident while on

  duty as a police officer and driving a car that was assigned for his

  regular use by the police department. Id. at 309. Cruz filed a claim

  for UM/UIM benefits under his wife’s insurance policy. Id. The

  insurer denied the claim based on the “regular use exclusion”

  contained in Cruz’s wife’s UM/UIM endorsement, which provided

  that “[t]his coverage does not apply to bodily injury sustained by a

  person: . . . . Arising out of the ownership, maintenance, or use of

  any vehicle other than your insured car . . . which is owned by or

  furnished or available for regular use by you or a family member.”

  Id. A division of this court held that provisions excluding coverage

  for regularly used cars that are not listed on the policy and for

  which premiums are not paid are enforceable in Colorado because

                                    16
  they protect the insurer from a situation in which the insured pays

  only for coverage on one vehicle but regularly drives other vehicles

  not listed on this policy. Id.

¶ 35   However, we aren’t persuaded by the analysis in Cruz for two

  reasons. First, Cruz was decided before our supreme court’s

  decision in DeHerrera, and the portions of Cruz that Essentia relies

  on to support its policy argument conflict directly with DeHerrera,

  which — unlike Cruz — is binding on us. See In re Estate of

  Ramstetter, 2016 COA 81, ¶ 40. We see no way to reconcile the

  holding in Cruz with the broad protections outlined in DeHerrera.

¶ 36   Second, apart from Cruz, it’s clear that the Essentia policy

  limits statutorily mandated coverage under section 10-4-609 by

  tying the UM/UIM coverage to occupancy in certain vehicles,

  something that DeHerrera explicitly precludes. Whether an

  insurance policy is void as against public policy depends on

  whether the provision attempts to “dilute, condition, or limit

  statutorily mandated coverage.” Terranova v. State Farm Mut. Auto.

  Ins. Co., 800 P.2d 58, 60 (Colo. 1990) (quoting Meyer v. State Farm

  Mut. Auto. Ins. Co., 689 P.2d 585, 589 (Colo. 1984)). Because the

  Essentia policy doesn’t meet the coverage requirements under

                                    17
  section 10-4-609, public policy doesn’t dictate that the exclusion

  must be enforced. Whether DeHerrera reflects wise, fair, or prudent

  public policy is a question for the legislature (or the supreme court

  in the event it wishes to revisit DeHerrera); in the meantime, we are

  bound by DeHerrera.

                            III.   Conclusion

¶ 37   For the reasons discussed above, the summary judgment in

  favor of Essentia is reversed and the case is remanded for further

  proceedings consistent with this opinion.

       JUDGE DUNN and JUDGE YUN concur.

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