Free Reply to Response to Motion - District Court of Colorado - Colorado

Case 1:00-cv-02098-REB-MJW

Document 199-3

Filed 06/26/2006

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DISTRICT COURT, CITY AND COUNTY OF DENVER, COLORADO Court Address: 1437 Bannock Street Denver, Colorado 80202

DREXEL HUDGINS, Plaintiff v.
COURT USE ONLY

FINANCIAL INDEMNITY COMPANY. Defendant. Case Number: 03 CV 1295 Courtroom: 7

ORDER

This matter is before the Court pursuant to Motions to Reconsider and Clarify the Court's previous rulings. The Court has reviewed the Motions and exhibits submitted by counsel, the case file and applicable case and statutory authority and rules as follows: Reformation of the FIC Policy 1. As previously stated, the Court finds that the case is governed by Brennan v. Farmers Alliance Mut. Ins. Co., 961 P.2d 550 (Colo. App. 1998) and Clark v. State Farm Mutual Automobile Insurance Co., 422 F.3d 703 (2005). The Colorado Auto Accident Reparation Act requires that a policy include a minimum level of PIP benefits. C.R.S. Section 10-4-707 defines the categories of people who receive coverage as "1) the named insured, 2) resident relatives of the named insured, 3) passengers occupying the insured's vehicle with the consent of the insured, and 4) pedestrians who are injured by the covered vehicle." Under C.R.S. § 10-4-710(2)(a) of the No-fault Act, insurers were required to offer, in addition to the minimum statutorily required PIP coverage, optional supplemental coverage in exchange for a higher premium. In Brennan, the Court stated that "an insurer must offer extended coverages listed in § 10-4-710 which apply to all categories of persons specified in § 10-4-707." When an insurer failed to offer the statutorily mandated optional coverage, such coverage was deemed incorporated into the policy by operation of law, and the policy was to be reformed. See Brennan.

Case 1:00-cv-02098-REB-MJW

Document 199-3

Filed 06/26/2006

Page 2 of 3

The Defendant's policy provides for enhanced PIP coverage for only named insureds and resident relatives. The policy does not comply with the requirements of C.R.S. 10-4-710 as it does not contain the statutorily mandated language. 2. There is no dispute that the FIC policy does not comply with the statutory requirements of CARRA. In Brennan, the Colorado Court of Appeals stated that "when an insurer fails to offer the insured optional coverage that satisfied [CARRA], additional coverage in conformity with the offer mandated by statute will be incorporated into the policy." 961 P.2d at 554. Therefore, the Court determines that the Plaintiff is entitled as a matter of law to reformation of the insurance policy to include extended PIP benefits. 3. The Defendant urges the Court to apply a totality of the circumstances test in evaluating whether the FIC policy was compliant with CARRA. The Court notes that no enhanced PIP case mentions or applies the totality of the circumstances test where the policy did or was assumed to have the coverages required by law. As the Tenth Circuit made clear, quoting Brennan, in Clark III, the starting point in the analysis of a situation like that presented in this case is the question of whether the coverage offered to the policyholder satisfies the requirements of CARRA. The analysis begins and ends with the policy contract itself and in the instant case the FIC policy is non compliant and a totality of the circumstances analysis cannot remedy the defect. Limitations on Coverage 1. The Court reiterates its previous ruling that the reformed FIC policy is subject to a $200,000 cap. 2. C.R.S. § 10-4-710 mandated that insurers in Colorado offer or make available for purchase to its insureds No Fault benefits unlimited in time for medical and lost wage reimbursements, but subject to an aggregate cap of $200,000. The seminal case interpreting this statute, Fazio v. State Farm Mutual Auto Ins., Co., 55 P.3d 229 (Colo. App. 2000), instructed that insurers must afford a reasonable opportunity to their insureds to purchase such coverage to satisfy the statutory requirement. 3. Insurers who neglect to make this offer have been required to reform their policies to provide these benefits. Brennan v. Farmers Alliance Mutual Ins. Co., supra. Insurers or self insurers who never had this coverage available for purchase have been directed to provide unlimited medical and lost wage benefits while those insurers who did have such coverages available but neglected to offer them to a particular insured were required to reform their policies to provide such benefits subject to the $200,000 cap. Thompson v. Budget Rent-A-Car Systems, Inc., 940 P.2d 987 (Colo. App. 1996). Since the FIC policy in the instant case did provide a $200,000 cap, specified in Additional Personal Injury Protection Coverage, the available APIP limits, after reformation, are limited by the $200,000 cap. 4. As stated in Snipes v. American Mutual Insurance Co., 2006 WL 560962 (Colo. App. 2006) An insurance policy, like any contract, is construed to give effect to the intent of the parties. An insurance policy must be enforced as written unless the policy is ambiguous,

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Case 1:00-cv-02098-REB-MJW

Document 199-3

Filed 06/26/2006

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in which event it is construed in favor of providing coverage to the insured. Cary v.United of Omaha Life Insurance Co., 108 P.3d 288 (Colo. 2005). Because an insurer cannot be held liable beyond the scope of risks clearly covered in the policy, courts may not force an ambiguity in order to resolve it against the insurer. Nor are courts at liberty to raise doubts when there are none or to make a new contract between the insured and the insurer. Snipes, supra. In this case, it is clear that FIC offered enhanced PIP coverage capped at $200,000 and the reformation, to include the omitted categories for APIP coverage, does not alter nor negate that stated cap. FIC is not attempting to add a limitation that was never contemplated when the policy was issued. Reconsideration of Class Certification This issue is not properly before the Court for review or reconsideration. Effective Date of Reformation As agreed by the parties, both sides will have ten days from the date of this Order to submit a brief (limited to five pages) and citations of authority in support of their respective positions.

DONE this 25th day of April 2006.

Judge Sheila A. Rappaport Movant shall serve copies of this Order on any pro se parties, pursuant to CRCP 5, and file a certificate of service with the Court within 10 days.

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