Successful Underinsured Motorist Claim – Appellate Decision

whom liability coverage must be extended was codified at section 10-4-703(6). Finizio, 967 P.2d at 190; Winscom, 843 P.2d at 128; see Wiglesworth v. Farmers Ins. Exch., 917 P.2d 288, 290 (Colo. 1996).Under section 10-4-703(6), insureds were defined, as pertinent here, as “relatives of the named insured who reside in the same household as the named insured.” Accordingly, the No-Fault Act required liability coverage for this class of individuals. See Finizio, 967 P.2d at 190 (insurers cannot contractually limit statutorilymandated coverage).
Yet in all three policies of the American Family defendants, the insurers contractually limited the class of persons who would qualify as a ‚”relative.” The pertinent provisions of the American Family defendants’policies all stated as follows: “Relative means a person living in your household, related to you by blood, marriage or adoption. . . . It excludes any person who, or whose spouse, owns a motor vehicle other than an off-road motor vehicle.”

These provisions “improperly narrow the class of insureds” to whom the American Family defendants were required to provide liability coverage under the No-Fault Act. See Finizio, 967 P.2d at 190 (because statute mandated coverage for permissive users, policy improperly limited coverage to those permissive users who did not have liability coverage of their own or who had other liability insurance available less than statutory minimum limits under No-Fault Act). The American Family policies improperly excluded from statutorily mandated liability coverage those otherwise qualified relatives who own, or whose spouses own, vehicles. Because this definition diluted, conditioned, and limited statutorily mandated liability coverage under the No-Fault Act, it is void and unenforceable. Massingill, 176 P.3d at 820; see Finizio, 967 P.2d at 190 (insurer cannot limit statutory obligation by contractual provision contrary to requirements of No-Fault Act).

Because liability coverage is legally required for relatives residing in the named insured’s household, UM/UIM coverage mustextend to these relatives as well. The only permissible limitation is where a policyholder expressly contracts for narrower UM/UIM coverage than that mandated under his liability coverage. See Bernal v. Lumbermens Mut. Casualty Co., 97 P.3d 197, 200 (Colo. App. 2003) (the policyholder may reject or limit UM/UIM coverage). Such is not the case here. By their terms, the American Family policies provided UM/UIM coverage coextensive with liability coverage. But because the liability coverage in the policies improperly limited statutorily mandated coverage, the policies likewise improperly limited UM/UIM coverage of relatives based on the ownership of a vehicle. Because the policies limited statutorily mandated coverage and thus violate public policy, the “relative” exclusion is void. Massingill, 176 P.3d at 820; see Winscom, 843 P.2d at 128 (insurers may limit coverage only if public policy is not violated).
The American Family defendants contend that the definition of “relative” in the policies is akin to the valid named driver exclusion in Massingill. We disagree. The exclusion there was allowed by statute for named individuals based on their driving records. Massingill, 176 P.3d at 820 (named driver exclusions permitted in motor vehicle insurance policies under former § 10-4-721 and under § 10-4-630, C.R.S. 2007). Here, the limitation placed on the class of people covered by the liability provisions is not provided for by statute.

We also note that the fact that the legislature expressly placed limits on liability coverage in certain circumstances suggests that the General Assembly did not so intend here. See Nat’l Farmers Union Property & Casualty Co. v. Estate of Mosher, 22 P.3d 531, 534 (Colo. App. 2000) (court not at liberty to read additional terms into or modify plain language of statute where General Assembly has elsewhere enacted limitation urged upon the court). Also, the American Family defendants’ reliance on section 42-7-4 13, C.R.S. 2007, as codifying the class of persons to whom liability coverage must extend, is misplaced. That statute by its own terms limits itsapplication to the Motor Vehicle Responsibility Law. See also Wheeler, 814 P.2d at 10 (motor vehicle insurance agreements are governed by No-Fault Act).

In addition, we distinguish the American Family defendants’ supplemental authority, Pacheco v. Shelter Mut. Ins. Co., (D. Colo. No. 06-cv-01 165-JLK-BNB, Jan. 23, 2008) (unpublished order on pending motions). There, the court reasoned that because the
claimant was not an insured under either the UM/UIM or liability provisions of the policy, the exclusion in the UM/UIM policy did not violate the statutory intent that UM/UIM coverage be coextensive with the coverage provided in the liability provision of the policy. The court did not analyze the enforceability of the liability exclusion.

Finally, we conclude the foreign authorities relied on by the American Family defendants are not instructive here. Several of the cases are inapposite because the applicable statutes either did not mandate coverage of relatives, mandated narrower coverage than the Colorado statute, or did not define the class to which coverage must extend. American Family Mut. Ins. Co. v. Cranston, 1989 WL 58963 (D. Kan. No. Civ. A. 88-403 1, May 9, 1989) (unpublished memorandum and order); Middlesex Ins. Co. v. Quinn, 622 A.2d 572(Conn. 1993); Indiana Lumbermans Mut. Ins. Co. v. Vincel, 452 N.E.2d 418 (Ind. Ct. App. 1983); Lewis v. American Family Ins. Group, 555 S.W.2d 579 (Ky. 1977); Washington v. Travelers Ins. Co., 284 N.W.2d 754 (Mich. Ct. App. 1979); Malo v. Aetna Casualty & Surety Co., 459 A.2d 954 (R.I. 1983); Farmers Ins. Co. v. Miller, 549 P.2d 9 (Wash. 1976). In the remaining cases, the issues presented to the court were substantially different from the issue presented here. American Family Mut. Ins. Co. v. Kittinger, 498 N.E.2d 256 (Ill. App. Ct. 1986) (UM coverage does not extend to financially irresponsible relative who cancelled her own car insurance policy); Ellis v. American Family Mut. Ins. Co., 750 N.E.2d 1287 (Ill. App. Ct. 2001) (effect of judicial admission that claimant owned vehicle); Burkett v. American Family Ins. Group, 737 N.E.2d 447 (Ind. Ct. App. 2000) (court’s holding relied on whether definition of ‚relative₤in policy was ambiguous); Smitke v. Travelers Indem. Co., 118 N.W.2d 217 (Minn. 1962), (objective of UM statute was to provide coverage to resident relatives who could not obtain such coverage inany other way); McKee v. American Family Mut. Ins. Co., 932 S.W.2d 801 (Mo. Ct. App. 1996) (issue was whether van owned by resident relative was motor vehicle under insurance policy).

In light of our conclusion, we need not decide whether the trial court erred in characterizing the exclusion as a “vehicle exclusion.”

We affirm the order of the trial court, albeit on different grounds. Steamboat Springs Rental & Leasing, Inc. v. City & County of Denver, 15 P.3d 785, 786 (Colo. App. 2000) (appellate court may affirm a trial court’s correct judgment based on different reasoning).

Order affirmed.

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