Uninsured and Underinsured Coverage

With uninsured (UM) and underinsured (UIM) coverage, it is absence or insufficiency of liability coverage that triggers first-party coverage under whatever policy is available to tort victim. C.R.S. §10-4-609, Since 1983, uninsured motorist (UM) coverage in Colorado has included underinsured coverage. C.R.S. §10-4-609(4). Determining fact of insurance in auto accident claims is no longer enough. Amount of liability coverage must also be discovered, for comparison to insured’s UM/UIM limit, in order to determine whether UM coverage is available. C.R.S. §10-4-609(2). UM/UIM insurance must provide coverage in addition to the at-fault driver’s bodily liability coverage. Id. Also, UM/UIM coverage must be in addition to medical payments coverage and health insurance and cannot be used to offset any other health care benefits. C.R.S. §10-4-609(c).

Colorado Revised Statutes (C.R.S.) §10-4-609(1)(a) provides that no automobile liability policy shall be issued without Uninsured/Underinsured Motorist coverage, unless the named insured rejects such coverage in writing. If a carrier is unable to produce the signed rejection, the carrier must provide coverage in the amount equal to the insured’s liability limits. C.R.S. § 10-4-609(2).

An “insurer’s obligation to pay [UIM] benefits is . . . triggered by exhaustion of the tortfeasor’s limits . . . not necessarily any payment from or judgment against the tortfeasor.”  Jordan v. Safeco Insurance Company of America, Inc.,  2013 WL 1240872 (Colo.App., 2013), cert den. 2014 WL 1465025 (Colo.)

On the other hand, an UM/UIM insurer does not have a per se  “prompt pay” obligation  under C.R.S. § 10-3-1115 to pay an the insurer’s initial settlement offer. Dale Fisher v. State Farm Mutual Automobile Ins. Co., 2015 COA57, (Colo. App. 2015) (deeming such offers as privileged under CRE 408).  However, if there are undisputed elements of a  UM/UIM demand,   e.g.,  for reasonable medical bills that were not paid by the negligent underinsured driver, the UIM/UM carrier must promptly pay the undisputed damages.

UM/UIM insurers cannot withhold payment until it is determined, by final judgment or otherwise, what the underinsured tortfeasor’s liability is to the UM/UIM insured, without being exposed to “unreasonably delay” penalties under C.R.S. § 10-3-1115.  Dale Fisher v. State Farm Mutual Automobile Ins. Co

“Under the plain language of sections 10-3-1115(1)(a) and 10-3-1116(1), a plaintiff can argue that benefits were unreasonably denied when an insurer denies a claim outright, and the plaintiff can assert unreasonable delay when the insurer pays on a claim but disputes the value of that claim, thereby delaying payment of the claim’s full value. Soicher v. State Farm Mutual Automobile Insurance Co., 2015 COA 46, 13CA2305.