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Petition for cert. granted in Fisher v. State Farm
Petition for cert. granted in Fisher v. State Farm.
Whether or to what extent an insurance company has an obligation to pay benefits on undisputed portions of UM/UIM claims remains an unsettled issue of law in Colorado. Earlier this summer, the Colorado Supreme Court announced that it would review the most recent case on this issue, Fisher v. State Farm.
Fisher stems from a February 8, 2010 automobile accident. On February 24, 2010, Plaintiff Dale Fisher advised State Farm that plaintiff intended to make insurance claims for his injuries. Plaintiff’s counsel requested copies of all insurance policies potentially covering plaintiff’s alleged losses, including UIM coverages.
State Farm advised plaintiff that he was eligible for UIM coverage and advised that if plaintiff intended to claim UIM benefits, he needed to obtain State Farm’s written consent before settling with the tortfeasor, Joseph Breithart. In December 2010, plaintiff requested and was granted permission to settle with Mr. Breithart’s carrier for policy limits of $25,000.
In September 2010, Plaintiff presented State Farm with $61,125.16 in accident-related medical bills. According to the Plaintiff, State Farm determined that Plaintiff’s medical expenses were reasonable and necessary in November 2010. In February 2011 State Farm’s offered to settle plaintiff’s UIM claim for $59,572.10 – the amount of plaintiff’s claimed medical expenses after offsetting out-of-pocket expenses and mileage. Plaintiff rejected State Farm’s offer and, on July 7, 2011, filed suit against State Farm for payment of UIM benefits. Relevant here, Plaintiff also brought a claim against State Farm under C.R.S. §10-3-1115 and 1116, C.R.S., which provides for a penalty if the insurer unreasonably delays or denies a covered benefit when owed.
The jury rendered a verdict in plaintiff’s favor. The trial court entered judgment against State Farm for $400,000 (the UIM policy limits), plus $122,250.32 (Fisher’s medical expenses multiplied by two) under § 10-3-1116, C.R.S. for the unreasonable delay of $61,125.16 in medical expenses.
State Farm appealed only the portion of the judgment reflecting the jury’s finding that State Farm had unreasonably delayed payment of medical benefits. State Farm argued that imposing a duty on an insurance company to pay piecemeal benefits while the claim as a whole is in dispute imposes a new obligation on insurance companies, not previously contemplated by Colorado Statute or case law. According to State Farm, this requirement disregards the purpose of UM/UIM coverage – namely to put an injured insured in the same position as if he were injured by a driver who was adequately insured. Motorists who are injured by adequately insured drivers are not entitled to partial payments. Rather, a total settlement is contemplated which includes a combination of special damages (medical expenses and lost wages where applicable) together with general damages (pain and suffering). State Farm argued that UM/UIM claimants should be treated no differently under existing Colorado law.
Additionally, State Farm argued that C.R.S. § 10-3-1115 does not define what benefits are owed under a policy, nor does it change the substantive legal requirements for UM/UIM coverage. Requiring insurers to advance partial payments – according to State Farm’s argument – improperly diminishes the insured’s burden in UM/UIM cases because expenses that appear legitimate at one point in time can later become questionable. For example, in Fisher, medical bills that State Farm accepted as legitimate in making its initial settlement evaluation were claimed to be subsequently rendered questionable when State Farm obtained information regarding similar injuries sustained in an earlier accident.
The Court of Appeals ruled against State Farm and held that State Farm had an obligation to make partial payments of UM/UIM claims under § 10-3-1115, C.R.S. The Court held that failing to make such partial payments constituted an unreasonable delay under § 10-3-1115, C.R.S., subjecting State Farm to statutory damages under § 10-3-1116, C.R.S.
In June 2016, the Colorado Supreme Court stated that it would review the Court of Appeals decision on this issue – namely whether the Court of Appeals incorrectly ruled that automobile insurers have a duty to advance partial payments on undisputed portions of an uninsured/underinsured (“UM/UIM”) claim even though the complete claim has not been resolved. Oral arguments are expected to be heard when the Supreme Court re-convenes for the 2016-2017 term, beginning in October 2016.