State Farm Mutual Automobile Insurance Co. v. Johnson, 2017 CO 68

Background

Johnson and a friend bought, financed, and titled a car together; the friend primarily arranged insurance because Johnson deferred insurance matters.
The friend called State Farm, learned she already had $100,000 UM/UIM on her primary vehicle that covered household members, and signed a written rejection of additional UM/UIM coverage for the new car to avoid duplicate premiums.
Johnson was later seriously injured by an underinsured motorist while driving the new car and sought UM/UIM benefits; State Farm denied the claim based on the rejection his friend signed.
The district court found the friend had been delegated authority to purchase insurance, concluded she had implied authority to reject UM/UIM coverage for Johnson, and entered judgment for State Farm after a bench trial on coverage.
A division of the court of appeals reversed, holding the statute’s phrase “the named insured” meant all named insureds must personally waive UM/UIM and that only express actual authority could bind one named insured to another’s waiver.
The Colorado Supreme Court granted certiorari, held the UM/UIM statute did not abrogate common-law agency principles, found the friend had implied actual authority to reject coverage for Johnson, reversed the court of appeals, and reinstated the trial court’s coverage ruling.

Issues

Issue	Plaintiff's Argument (Johnson)	Defendant's Argument (State Farm)	Held
Whether section 10-4-609 requires each named insured to personally waive UM/UIM	Statute’s phrase “the named insured” means all listed named insureds must expressly waive; one named insured’s rejection cannot bind another	One named insured’s rejection can bind others if it is attributable by agency principles	Court did not decide this question because agency rules resolved the case; assumed statute did not abrogate agency law and agent’s waiver binds principal
Whether the UM/UIM statute abrogates common-law agency (implied/apparent authority)	Statute requires express actual authority; thus abrogates implied/apparent authority	Statute does not clearly or expressly abrogate common-law agency principles	Statute did not abrogate common-law agency; implied and apparent authority remain available bases to bind a principal
Whether the friend had apparent authority to waive coverage for Johnson	Johnson argued friend lacked authority to bind him	State Farm argued friend was authorized as Johnson delegated insurance procurement to her	Court held friend lacked apparent authority (no conduct by Johnson led insurer to believe she had authority)
Whether the friend had actual (implied) authority to waive coverage for Johnson	Johnson argued he never expressly authorized a waiver	State Farm argued Johnson delegated purchasing authority and the waiver was incidental to that task	Court held friend had implied actual authority to reject UM/UIM on Johnson’s behalf and her written rejection bound him

Key Cases Cited

Willey v. Mayer, 876 P.2d 1260 (Colo. 1994) (explains express and implied actual authority principles in agency law)
Van Waters & Rogers, Inc. v. Keelan, 840 P.2d 1070 (Colo. 1992) (legislative abrogation of common law requires express or clear implication)
Mt. Emmons Mining Co. v. Town of Crested Butte, 690 P.2d 231 (Colo. 1984) (bench-trial judgments present mixed questions of law and fact)
E-470 Pub. Highway Auth. v. 455 Co., 3 P.3d 18 (Colo. 2000) (standard of review for mixed questions: factual findings deferential, legal conclusions de novo)
Ridgway v. Shelter Insurance Cos., 913 P.2d 1231 (Kan. Ct. App. 1996) (agent with authority to procure insurance had implied authority to waive UM and PIP coverage)
Zions First Nat’l Bank v. Clark Clinic Corp., 762 P.2d 1090 (Utah 1988) (apparent authority flows only from principal’s manifestations)
Jehly v. Brown, 327 P.3d 351 (Colo. App. 2014) (bench-trial findings and mixed-question framework)