Colorado Court of Appeals Views Case Involving UIM Benefits After a Car Accident With a Negligent Driver

In Bailey v. State Farm Mutual Automobile Insurance Company, the Court of Appeals of Colorado reviews an opinion between Bruce Bailey and State Farm. The plaintiff, Bailey, appeals the trial court’s order granting a motion for a judgment entry in favor of the defendant, State Farm. The appeals court is asked to examine if an underinsured motorist (UIM) policy is triggered under Colorado’s UIM statute if the negligent driver’s insurance company agrees to pay the full amount of a jury’s verdict. The appeals court believes the answer is “no” because the legislature did not permit the plaintiff to recover UIM benefits from the damages awarded by the jury. In addition, the statute does not prevent an insurer from increasing liability coverage by offering to pay damages awarded at trial.

A car accident involving the plaintiff and another driver resulted in this case. Bailey sued the other driver for negligence and State Farm for UIM benefits. When the accident occurred, the other driver’s insurance company provided him $100,000 for damages caused by an underinsured motorist. Right before the trial began, this other driver showed a letter from his insurance company, which stated that he is “fully protected from any compensatory damage award which may be awarded at trial, regardless of amount.”

At the trial, State Farm gave evidence that the plaintiff had not cooperated with the claims adjusters and had been guilty of fraud by giving false information to them about his income. State Farm stated that the plaintiff’s actions had voided the insurance contract, and that Bailey therefore was not entitled to UIM benefits.

The jury ruled in favor of Bailey and awarded him $300,000, and the jury also rejected State Farm’s affirmative fraud and failure to cooperate defenses. After the trial, State Farm moved for entry of judgment and asserted that the insurance company’s letter provided unlimited liability insurance coverage for the other driver. For that reason, the other driver’s insurance would cover the complete amount of damages and the plaintiff was therefore not entitled to UIM benefits. The other driver did not dispute State Farm’s motion.

The trial court granted the motion, and the other driver’s insurance company paid the entire judgment. The appeals court disagrees with the plaintiff’s argument that the trial court was wrong in granting State Farm’s motion for entry of judgment.

The appeals court was required to examine the UIM statute, section 10-4-609. The plaintiff first disputes that the trial court abused its discretion by permitting State Farm to control an affirmative defense that it didn’t present until the trial was over. If this argument doesn’t work, the plaintiff plans to dispute that the trial court was wrong in examining section 10-4-609’s provision for two reasons. First, the other driver’s decision to pay the whole judgment doesn’t constitute “legal liability coverage.” Second, even if it does, the other driver’s “underinsured motorist” status is decided at the time of the accident.

Our appeals court disagrees with both of these contentions from the plaintiff, and we conclude that the trial court did not wrongly grant State Farm’s motion for entry of judgment. We reject the plaintiff’s argument that State Farm presented a new affirmative defense, because an affirmative defense must be “in the nature of confession and avoidance.” In this case, State Farm’s motion asked that the trial court enter a judgment that recognized it did not owe Bailey UIM benefits. The trial court properly entertained this motion.

It was also found that Section 10-4-609 does not allow a party to recover underinsured motorist benefits in excess of actual damages. The plaintiff contended that he should be permitted to recover an additional $100,000, even after he already recovered the full amount of the jury’s verdict. The appeals court disagrees, because the plain language of the statute specifically states a plaintiff cannot recover benefits “in excess” of the total amount of actual damages, and the plain language does not prevent an insurer from raising an insured’s “legal liability coverage” by promising to protect the insured from any compensatory damage award, which can be awarded at trial.

It was also found that plaintiff is not entitled to UIM benefits because there is no clear difference between the amount of his damages and the legal liability coverage. The court also disagrees with the plaintiff’s contention that the letters from the other driver’s insurer did not “constitute legal liability coverage.”

Lastly, the court is not persuaded by the plaintiff’s dispute that the determining of whether a driver is underinsured is made “at the time of the accident.” And so, the judgment is affirmed by the appeals court.