Court Opinion

ID: 9542568
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:35:55.74345+00
Date Added: 2024-06-11T15:08:16.704481
License: Public Domain

Chief Justice VOLLACK
dissenting:
The majority holds that a consent to sue clause in an uninsured motorist provision of an automobile insurance policy is void as against public policy. The majority also holds that the insurer in this case waived its right to arbitrate by not intervening in litigation brought by its insured against an uninsured motorist. I disagree with both of these conclusions. In my view, the issue of the validity of the consent to sue clause is not before this court. Nevertheless, I believe that consent to sue clauses are valid and enforceable because they do not dilute, condition, or limit statutorily mandated insurance coverage. I also believe that the insurer in this case did not waive its right to arbitrate and was not obligated to intervene in litigation between the insured and an uninsured motorist. Accordingly, I dissent.
I.
On October 27, 1990, Doris and John Pe-terman, along with their adult daughters Sally Joseph and Penny Hardrick (the Peter-mans), were traveling on 1-70 near Palisade, Colorado, when they were involved in an automobile accident. The Petermans’ vehicle was insured under a policy issued by State Farm Mutual Insurance Company (State Farm). According to the accident report filed by the investigating officer, the Peter-mans’ vehicle struck a spare tire which had fallen off a truck owned by DEKA Constructors, Inc., and driven by Bruce Malonson (jointly, the uninsured motorist). The accident report also indicated that the vehicle was insured under a “pending” insurance policy with Ohio Casualty Insurance Company and observed “no obvious damage” to the Petermans’ vehicle and no injuries except Doris Peterman’s soreness.1
On February 25, 1993, the Petermans filed suit against the uninsured motorist seeking damages for injuries sustained in the accident. Although the Petermans notified State Farm of the complaint, State Farm was not named as a party. On March 25, 1993, the Petermans sent State Farm a letter which provided in part that
[t]o date, we have been unable to determine if there is insurance coverage on the trucks which caused this accident. If no coverage is found, we will be making a claim against State Farm for uninsured motorist protection.
After the uninsured motorist did not respond to the Petermans’ complaint, a written order of default was entered. Following a hearing to determine damages in which the Peter-mans, a treating physician and a treating chiropractor testified, judgment was entered in favor of the Petermans for $924,954.20. On December 15,1993, counsel for the Peter-mans sent State Farm a letter “demanding payment of the $300,000.00 underinsured benefits which are available under the Peter-*496mans’ policy.”2 The letter was forwarded to State Farm’s legal counsel for an opinion, and, on January 21, 1994, he responded that State Farm was not bound by the default judgment and that the Petermans’ claim could be submitted to arbitration to determine issues of liability and damages.
On March 10, 1994, the Petermans filed suit against State Farm in Mesa County District Court (the district court), claiming, inter alia, that State Farm was bound by the default judgment and that State Farm acted in bad faith by withholding uninsured motorist benefits. Both parties moved for partial summary judgment on the question of whether the default judgment was binding on State Farm. On April 11, 1994, the Petermans sent State Farm a written demand for arbitration “[i]n the event the Court rules that [State Farm] is not bound by” the default judgment. On May 31, 1994, State Farm moved the district court to compel arbitration.
The district court granted the Petermans’ motion for partial summary judgment, concluding that State Farm was bound by the default judgment and that
insofar as the arbitration provision requires a party to relitigate the same issues which have been decided by a court of law wherein that party had notice of the proceedings and an opportunity to defend its interests therein, such is void as against public policy.
After the trial court refused to reconsider this ruling and rejected the Petermans’ claims for bad faith and exemplary damages, both parties appealed. The court of appeals reversed, concluding that
even though an insurer may have had notice of a judicial proceeding that leads to a judgment in favor of its insured and against an uninsured motorist, the insurer is not bound by that judgment and may enforce a provision requiring that its obligation for [uninsured motorist] benefits be determined by arbitration.
Peterman v. State Farm Mut. Auto. Ins. Co., 948 P.2d 63, 68 (Colo.App.1997).
II.
The State Farm insurance policy provides uninsured motor vehicle coverage as follows:
We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle. The bodily injury must be caused by an accident arising out of the operation, maintenance or use of an uninsured motor vehicle.
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Deciding Fault and Amount
Two questions must be decided by agreement between the insured and us:
1. Is the insured legally entitled to collect damages from the owner or driver of the uninsured motor vehicle; and
2. If so, in what amount?
If there is no agreement, these questions shall be decided by arbitration upon written request of the insured or us.
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We are not bound by any judgment against any person or organization obtained without our written consent.
Even though the issue has not been raised on certiorari and was not ruled upon by either the district court or court of appeals,3 the majority concludes that the consent to sue clause in the State Farm policy, providing that State Farm is not bound by another judgment without State Farm’s written consent, is contrary to public policy and, as a consequence, is unenforceable. This holding essentially affirms the outcome in Briggs v. American Family Mutual Insurance Co., 833 P.2d 859, 862 (Colo.App.1992), where the *497court of appeals struck down a similar provision on public policy grounds.4 In my view, this question is not before the court and should not be addressed. Nevertheless, I disagree with the majority that the consent to sue clause is void on public policy grounds.
In the absence of ambiguity, an insurance policy must be given effect according to the plain and ordinary meaning of its terms. See Farmers Ins. Exch. v. Dotson, 913 P.2d 27, 30 (Colo.1996). However, a provision may be void and unenforceable if it violates public policy by attempting to “dilute, condition, or limit statutorily mandated coverage.” See Aetna Cas. & Sur. Co. v. McMichael, 906 P.2d 92, 100 (Colo.1995).
Here, the consent to sue clause does not dilute, condition, or limit statutorily mandated coverage, it merely reflects State Farm’s unwillingness to be bound by a judgment it did not have a sufficient opportunity to contest. See Aetna Casualty, 906 P.2d at 100. Similarly, requiring arbitration after the insured obtains a default judgment does not clearly limit the insured’s ability to receive full compensation for injuries sustained in an accident with an uninsured motorist. See Terranova v. State Farm Mut. Auto. Ins. Co., 800 P.2d 58, 63 (Colo.1990). Finally, the Petermans could have easily avoided a second proceeding by submitting their uninsured motorist claim to arbitration pursuant to the clear and unambiguous terms of the State Farm policy. See Mountain Plains Constructors, Inc. v. Torrez, 785 P.2d 928, 930 (Colo.1990) (explaining that “[sjubmission of the dispute to arbitration is a condition precedent to the commencement of a suit on an issue covered by an arbitration agreement”). Instead, the Petermans chose to ignore the arbitration clause, filed suit against the uninsured motorist without naming State Farm as a party, and sent State Farm vague correspondence indicating that they might file an uninsured motorist claim in the future. Under these circumstances, public policy does not support invalidating the consent to sue clause. See Wales v. State Farm Mut. Auto. Ins. Co., 38 Colo.App. 360, 364, 559 P.2d 255, 258 (1976); see also Victor v. State Farm Fire & Cas. Co., 795 F.Supp. 300, 302 (D.Alaska 1992) (requiring arbitration even though the insured obtained a default judgment against an uninsured motorist because of the Alaska’s “strong public policy” in favor of arbitration).
After striking down the consent to sue clause, the majority holds that even though the arbitration clause in the State Farm policy is enforceable, State Farm waived its right to arbitrate by not intervening in the litigation between the Petermans and the uninsured motorist. I disagree with this conclusion as well.
A waiver is an intentional relinquishment of a known right or privilege. See Duran v. Housing Auth. of City & County of Denver, 761 P.2d 180, 183 (Colo.1988); Department of Health v. Donahue, 690 P.2d 243, 247 (Colo.1984). A waiver can be shown by unequivocal conduct or statements showing an intent to relinquish known rights. See Jelen & Son, Inc. v. Bandimere, 801 P.2d 1182, 1185 (Colo.1990). Although an intention to waive a benefit may be implied by conduct, the conduct itself should be free from ambiguity and clearly manifest the intention not to assert the benefit. See Duran, 761 P.2d at 183.
In my view, State Farm did not waive its right to arbitrate. By filing suit against the uninsured motorist without designating State Farm as a party, the Petermans did nothing to trigger State Farm’s contractual duty to pay uninsured motorist benefits. Similarly, the Petermans’ did not make an explicit demand for uninsured motorist coverage until *498after the default judgment was entered.5 Therefore, State Farm was under no obligation to intervene in the litigation between the Petermans and the uninsured motorist. See C.R.C.P. 24. In fact, State Farm was prohibited from participating in this litigation by the clear and unambiguous terms of the policy, which requires arbitration of all uninsured motorist claims. Once State Farm was aware of the Petermans’ uninsured motorist claim, it moved to compel arbitration. Under these facts, no waiver took place.
III.
By invalidating the consent to sue clause and holding that State Farm was obligated to intervene in litigation involving the Peter-mans and the uninsured motorist, the majority holds that State Farm, without proper notice or any level of participation, is bound by a large default judgment in a case involving apparently minor injuries. Besides the obvious due process implications raised by such a result, the majority has rewritten a simple and cost-effective arbitration procedure to authorize litigation as a condition precedent to arbitration. See State Farm Mut. Auto. Ins. Co. v. Stein, 940 P.2d 384, 387 (Colo.1997) (explaining that “[wjhen a contractual provision is clear and unambiguous, courts should neither rewrite it nor limit its effect by a strained construction”). Such a procedure does violence to the terms of the contract and weakens the effectiveness of arbitration as an alternative to litigation. Accordingly, I dissent.
I am authorized to say that Justice SCOTT joins in this dissent.

. Six months later, Doris Peterman contacted the investigating officer to report further injuries and property damage resulting from the accident,

. Although the Petermans were apparently seeking payment of uninsured motorist benefits, the reference to underinsured benefits in this letter is especially problematic because both uninsured and underinsured benefits are covered by the same section of the State Farm policy.

. The majority asserts that the court of appeals in this case held that the consent to sue clause was valid. See maj. op. at 491. I disagree. The court of appeals merely relies upon the validity of the consent to sue clause in dismissing the Peter-mans' arguments that State Farm waived its right to arbitrate. See Peterman, 948 P.2d at 68. In other words, the court of appeals, apparently recognizing that the enforceability of the consent to sue clause was not at issue, accepted its validity. In my view, this court should do the same.

. This case is distinguishable from Briggs in several respects. First, the insurance contract at issue in Briggs did not involve a mandatory arbitration clause as is the case here. Rather, the policy in Briggs permitted the insured to file lawsuits against both the uninsured motorist and the insurance company simultaneously. Briggs therefore concerned whether the insurer could enforce the consent to sue clause to require a second judicial proceeding after the entry of default against the uninsured motorist. Additionally, in Briggs there was no question that the defendant was uninsured and that a claim was being asserted pursuant to the terms of the insurance policy, whereas here the Petermans’ correspondence indicates that the status of the uninsured motorist was unclear and no claim was filed until after the default judgment was obtained. While the insurance company in Briggs was clearly on notice that its insured was asserting a claim under the policy, the issue of notice is far more questionable here.

. The majority asserts that "the district court ... concluded that State Farm had notice that the defendants in the underlying action were uninsured” and that we are bound by this factual determination. See maj. op. at 490 n.2. However, the district court only determined that State Farm was provided with "adequate notice of their potential liability and could have sought intervention.” (Emphasis added.) The issue therefore was not whether State Farm had notice that the uninsured motorist was uninsured, but whether it had sufficient notice to compel its intervention into the judicial proceedings. Contrary to the majority, I do not view this question as one of fact to which we are bound. Furthermore, although the majority relies upon statements made to the Petermans' counsel in affidavits to establish State Farm’s notice, these statements are inadmissible because they are clearly self-serving. See Stone v. Union Fire Ins. Co., 106 Colo. 522, 529, 107 P.2d 241, 244 (1940).