2018 COA 82
Colo. Ct. App.2018Background
- In Nov. 2014 Arline was injured by an underinsured motorist; her insurer, American Family, paid $5,000 in MedPay to providers and negotiated a $27,000 UIM payment (reflecting a $5,000 subtraction).
- In Nov. 2015 Arline, represented by counsel, accepted $27,000 and executed a release and trust agreement that discharged American from further UIM claims arising from the accident.
- In Nov. 2016 the Colorado Supreme Court decided Calderon, holding that insurers may not reduce UIM benefits by a MedPay setoff under § 10-4-609(1)(c).
- After Calderon, Arline sued American seeking additional UIM recovery and class certification, alleging the prior release was unenforceable because the insurer’s setoff violated law/public policy.
- American moved to dismiss, arguing the release bars Arline’s claim; the district court granted dismissal for lack of jurisdiction (C.R.C.P. 12(b)(1)) because the release was valid.
- The court of appeals affirmed, holding that a voluntarily negotiated settlement and release executed with counsel is enforceable and not invalidated by Calderon or public policy in these circumstances.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Arline has standing / claim despite prior release | Release is unenforceable because insurer’s MedPay setoff violated § 10-4-609(1)(c) and public policy (per Calderon) | Release is a valid, voluntary bar to further claims; settlement precludes suit | Release is enforceable; dismissal affirmed |
| Whether Calderon voids preexisting settlement releases that reflected MedPay setoffs | Calderon’s rule renders such releases contrary to statute/public policy and thus unenforceable | Calderon addressed policy terms, not settlement agreements; settlement is not regulated by § 10-4-609(1)(c) | Calderon does not automatically invalidate earlier, counsel-represented settlements |
| Whether the settlement was procured unfairly or coerced | Arline contends, later on appeal, she was not made whole and was "forced" to accept less | American points to counsel representation and written compromise language showing voluntary settlement | Court finds no factual basis of coercion or failure to be made whole; settlement appears fair and voluntary |
| Whether public policy favors voiding such releases to remedy statutory violations | Public policy protects statutorily mandated coverage, Arline argues | Public policy equally favors finality of settlements and compromise when fairly reached | Court balances interests: enforcing voluntary settlements not clearly outweighed by public policy; release stands |
Key Cases Cited
- Ainscough v. Owens, 90 P.3d 851 (Colo. 2004) (standing requires injury-in-fact to a legally protected interest)
- Neves v. Potter, 769 P.2d 1047 (Colo. 1989) (a release relinquishes vested rights or claims)
- Fox v. I-10, Ltd., 957 P.2d 1018 (Colo. 1998) (insured may settle and release claims so long as terms do not violate statute or public policy)
- Bailey v. Lincoln Gen. Ins. Co., 255 P.3d 1039 (Colo. 2011) (standard for invalidating contract provisions as contrary to public policy)
- Kral v. Am. Hardware Mut. Ins. Co., 784 P.2d 759 (Colo. 1989) (release-trust agreements enforceable only insofar as they do not prevent insured from being made whole)
- Ireland v. Wynkoop, 539 P.2d 1349 (Colo. App. 1975) (claims encompassed by a valid release may be dismissed)