Shelter Mutual Insurance Co. v. Mid-Century Insurance Co.
2011 Colo. LEXIS 39
| Colo. | 2011Background
- Accident in September 2004: driver (non-owner operator) borrowed his father's car and collided with another vehicle.
- Driver carried Mid-Century auto liability insurance as a non-owner operator; owner carried Shelter policy covering permissive drivers.
- At renewal, Shelter sent a renewal packet with a general notice but did not disclose changes or reductions in permissive-driver coverage.
- Shelter added a step-down provision reducing permissive-driver coverage to state-minimum limits, but renewal notice did not clearly alert this change.
- Shelter also added an excess clause shifting liability to other insurance when available; Mid-Century policy contained an excess clause as well.
- Trial court granted summary judgment for enforceability of step-down and validity of excess clauses; court of appeals held step-down unenforceable for inadequate notice but agreed excess clauses were mutually repugnant and void; Colorado Supreme Court affirmed all aspects.]
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Shelter's step-down notice was adequate. | Shelter argues notice was adequate. | Shelter claims renewal notice adequately disclosed changes. | Step-down unenforceable for lack of adequate notice. |
| Whether Shelter's excess clause is valid under Colorado law. | Mid-Century argues excess clause erodes mandatory coverage. | Shelter contends excess clause is valid as a contract term. | Shelter's excess clause valid; excess clauses not prohibited; no primary-insurer requirement read into statute. |
| Effect of competing excess clauses when both are valid. | Both clauses should apply as primary. | If both apply, insured has no coverage; one insurer must be primary. | Clauses are mutually repugnant and void; insurers are co-primary and share losses equally. |
Key Cases Cited
- Allstate Ins. Co. v. Huizar, 52 P.3d 816 (Colo. 2002) (contract interpretation; no reading of a primary-insurer requirement into statute)
- Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294 (Colo. 2003) (renewal-notification adequacy; clear and unequivocal notice required)
- Gov't Employees Insurance Co. v. United States, 400 F.2d 172 (10th Cir. 1968) (adequate notification prevents limiting liability; greater coverage binding)
- Tepe v. Rocky Mountain Hosp. & Med. Servs., 893 P.2d 1323 (Colo. App. 1995) (renewal notice must clearly negate reasonable expectation of unchanged coverage)
- Sanchez v. Conn. Gen. Life Ins. Co., 681 P.2d 974 (Colo. App. 1984) (reasonable expectations in context of incomplete notices)
- Barnes v. Travelers Indem. Co., 191 Colo. 278, 552 P.2d 300 (Colo. 1976) (industry custom; contract language governs primary vs excess)
- Allstate Ins. Co. v. Freeman?, 947 P.2d 341 (Colo. 1997) (Allstate No-Fault context; excess clauses and primary-insurer policy)