Levy v. American Family Mutual Insurance Co.
2011 WL 322527
Colo. Ct. App.2011Background
- Levy, a passenger in Gouge-Richardson's car insured by American Family, received $18,838 in medical payments from American Family for treatment after a December 7, 2004 accident.
- Fink, the at-fault driver, was insured by USAA; Levy settled with Fink and USAA for $23,763.77 after American Family waived subrogation rights in a letter.
- Levy pursued uninsured/underinsured motorist (UM/UIM) arbitration under the policy; the panel awarded $77,500 total damages, including $25,000 in medical expenses.
- The arbitration award was later modified to conform to the insurance contract's terms; American Family sought a district court declaration that it could reduce the award by $18,838 paid for medical expenses, Levy opposed.
- The district court granted the reduction and also awarded Levy prejudgment interest and costs; Levy appealed the reduction; American Family cross-appealed the prejudgment interest and costs orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May insurer deduct medical payments from UM/UIM award | Levy: waiver of subrogation prevents setoff; no deduction allowed | American Family: waiver does not prevent setoff; no double payment | Yes; deduction allowed; setoff permitted to avoid double recovery. |
| Collateral source rule and contract exception apply | Levy: contract exception and collateral source rule bar deduction | American Family: contract exception allows offset; collateral source rule not controlling here | Contract exception permits offset; collateral source rule not controlling in this context. |
| Anti-subrogation rule prevents insurer from pursuing insured | Levy: anti-subrogation blocks insurer's deduction | American Family: not applicable since insured's risk was covered and insurer seeks to avoid duplicative payments | Anti-subrogation rule does not bar deduction in this circumstance. |
| Reduction of UM/UIM benefits and double recovery policy | Levy: setoff would cause double recovery; policy supports full UM/UIM benefits | American Family: setoff necessary to prevent duplicative payments | Setoff allowed; no double recovery in this context. |
| Cross-appeal about prejudgment interest and costs | Levy: prejudgment interest and costs appropriate | American Family: district court misapplied procedures; no prejudgment interest or additional costs | Prejudgment interest and costs reversed; remanded for correct handling. |
Key Cases Cited
- Newton v. Nationwide Mut. Fire Ins. Co., 197 Colo. 462 (Colo. 1979) (double recovery concerns under UM/UIM; setoff against PIP not allowed in Newton)
- Kral v. American Hardware Mut. Ins. Co., 784 P.2d 759 (Colo. 1989) (release-trust/offsets to avoid excess recovery; not enforceable to create double recovery unless limited by release-trust terms)
- Barnett v. American Family Mut. Ins. Co., 843 P.2d 1302 (Colo. 1993) (insurer may not reduce UM/UIM liability by separate benefits if it would deprive insured of intended coverage; double recovery concerns)
- Quinones v. Pennsylvania General Insurance Co., 804 F.2d 1167 (10th Cir. 1986) (collateral source rule and double recovery where insurer pays duplicate medical benefits)
- Evans v. Colorado Permanente Med. Group, P.C., 926 P.2d 1218 (Colo. 1996) (contract exception to collateral source; distinctions when physician/insurer relationships exist)