Hansen v. American Family Mutual Insurance Co.
2013 COA 173
Colo. Ct. App.2013Background
- On Dec. 30, 2007 Jennifer Hansen (claimant) was injured as a passenger; she later sought underinsured motorist (UIM) benefits under a policy issued by American Family (insurer).
- Insurer’s underwriting declaration pages named claimant’s parents (William and Joyce Davis) as the named insureds; the insurer requested proof claimant resided with them and initially denied coverage in April 2010.
- The claimant produced agency-issued lienholder statements (appearing similar to declaration pages) that identified the claimant as the named insured; insurer later discovered claimant owned the vehicle and reformed the policy to name her.
- Claimant settled the contract/UIM coverage dispute for the policy limit ($75,000) in mediation; she proceeded to trial on common-law bad-faith and statutory ( Colo. Rev. Stat. §§ 10-3-1115, -1116) claims for unreasonable delay/denial.
- Jury found claimant was a named insured, found no common-law bad faith, but found insurer unreasonably delayed/denied payment under the statute and that claimant had damages; the jury answered that the UIM benefit for which payment was unreasonably delayed/denied was “0.”
- Trial court awarded attorney fees and costs and, on claimant’s motion, entered a statutory penalty of two times the covered benefit ($150,000); insurer appealed.
Issues
| Issue | Hansen's Argument | American Family's Argument | Held |
|---|---|---|---|
| Whether the policy was ambiguous as to the named insured | Lienholder statements conflicted with declaration pages and created ambiguity | Declaration pages maintained by underwriter were controlling and unambiguous | Policy was ambiguous because an April 9, 2007 lienholder statement conflicted with the company’s declaration pages; trial court did not err |
| Whether insurer was entitled to directed verdict/judgment as a matter of law because coverage was "fairly debatable" | Fair-debatability does not automatically defeat statutory claim; insurer’s conduct must still be reasonable | Fair-debatability precludes bad-faith/statutory liability as a matter of law | Fair-debatability does not bar statutory claim as a matter of law; insurer not entitled to judgment on statutory claim (common-law issue moot because jury found for insurer) |
| Whether claimant could recover statutory penalty (2x covered benefit) when jury found the delayed/denied benefit amount was “0” | The covered benefit was $75,000 (determined by settlement); statute awards two times the covered benefit regardless of jury’s “0” answer | Jury’s “0” answer to the interrogatory precludes awarding the statutory multiplier | Court awarded two times the covered benefit ($150,000). The jury’s “0” response was disregarded because the covered benefit had been previously fixed by settlement |
| Whether awarding 2x covered benefit results in double recovery where claimant already received the benefit | Section 10-3-1116 provides discrete statutory remedy (attorneys’ fees + 2x covered benefit) in addition to other claims | Insurer argued claimant cannot get the covered benefit plus 2x the benefit (would be triple) | Statute authorizes two times the covered benefit in addition to other remedies; award affirmed |
Key Cases Cited
- D.C. Concrete Mgmt., Inc. v. Mid–Century Ins. Co., 39 P.3d 1205 (Colo. App. 2001) (conflicting declaration-style documents can create an ambiguity as to named insured)
- Shelter Mut. Ins. Co. v. Mid–Century Ins. Co., 246 P.3d 651 (Colo. 2011) (ambiguities in insurance contracts are construed for the insured)
- Sanderson v. Am. Family Mut. Ins. Co., 251 P.3d 1213 (Colo. App. 2010) (fair-debatability does not automatically defeat bad-faith/statutory claims; insurer defending a fairly debatable claim must still act reasonably)
- Vaccaro v. Am. Family Ins. Grp., 275 P.3d 750 (Colo. App. 2012) (distinguishing common-law bad faith fair-debatability from statutory-unreasonable-conduct inquiry under §§ 10-3-1115–1116)
- Kisselman v. Am. Family Mut. Ins. Co., 292 P.3d 964 (Colo. App. 2011) (statutory interpretation and remedies under § 10-3-1116)
- Rabin v. Fidelity Nat’l Prop. & Cas. Ins. Co., 863 F. Supp. 2d 1107 (D. Colo. 2012) (recognizing § 10-3-1116 claim may be pursued in addition to breach of contract recovery)