Denver Partners Obtain Summary Judgment in UM/UIM Coverage Question

Denver partners Mike Brooks, Cathleen Heintz, and Paul Dinkelmeyer obtained a summary judgment for Farmers Insurance Exchange on all Plaintiffs’ claims, including breach of contract, violation of Colorado’s prompt-payment statute, and common law bad faith breach of an insurance contract. The Court separately denied both of Plaintiffs’ Motions for Leave to File Amended Complaints and denied as moot their motion to exclude expert testimony.

Does an Excluded Driver Create Ambiguity in Coverage?

Plaintiffs were injured in a single-vehicle accident. The car was insured by Farmers under a policy issued to the at-fault driver’s parents. Farmers paid its full $500,000 liability coverage limits, plus additional funds from an umbrella policy, to settle the claims of the injured passengers, including Plaintiffs. Plaintiffs then made a UM/UIM claim, arguing the at-fault driver was “excluded” on the policy’s declarations page and therefore both UM/UIM and liability coverage applied. Farmers denied UM/UIM coverage based on an exclusion that barred such coverage for any vehicle that was insured under the policy’s liability coverage. Plaintiffs sued for UM/UIM benefits, as well as common-law and statutory bad faith. They later moved to amend the complaint to assert fraudulent concealment based on Farmers’ handling of a coverage issue on the umbrella policy, and also sought punitive damages.

The court reviewed whether a reference to an “excluded” driver on an auto policy declarations page creates an ambiguity as to whether liability coverage or UM/UIM coverage both apply, requiring the resolution of that ambiguity in favor of affording both liability and UM/UIM coverage under the same policy.

UM/UIM Exclusion is Reasonable

When a policy’s exclusion for UM/UIM coverage is clear and unambiguous, a court must apply it as written and find UM/UIM coverage does not apply when the policy’s liability coverage applies. Amendments to a complaint should not be allowed after the deadline absent excusable neglect. Amendments should be denied when the proposed amendment is futile.

The Court took a common-sense approach to analyzing the coverage question. Rather than engaging in a hypothetical analysis of what might have been meant by the reference to the driver as “excluded” on the declarations page, the Court focused on the fact that Farmers chose to pay its liability coverage limits as the dispositive factor. The Court also found Farmers didn’t conceal any material facts regarding the umbrella coverage, which it ultimately paid to Plaintiffs. It held that Plaintiffs did not show a reasonable basis for seeking leave to amend the complaint long after the deadline expired.

The policy’s exclusion for UM/UIM coverage for any vehicle insured under the policy’s liability coverage is unambiguous, enforceable, and applicable here. The declaration page’s reference to the driver as “excluded” does not matter given that Farmers found its liability coverage was applicable and paid its policy limits. Farmers’ denial of UM/UIM coverage was reasonable. Farmers did not fraudulently conceal any material facts from Plaintiffs when it settled their bodily injury liability claims.