Beverly Hughes v. Essentia Insurance Company

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
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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.
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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
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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
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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.
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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,
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¶ 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
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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).
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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.”
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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
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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
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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
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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
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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.)
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¶ 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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