After the Sunset-colorado Motor Vehicle Insurance Post-july 1, 2003

• Publication year: 2003
• Pages: 111
• Citation: Vol. 32 No. 7 Pg. 111

32 Colo.Law. 111 Colorado Lawyer 2003.

2003, July, Pg. 111. After the Sunset-Colorado Motor Vehicle Insurance Post-July 1, 2003

---

111

Vol. 32, No. 7, Pg. 111

The Colorado Lawyer
July 2003
Vol. 32, No. 7 [Page 111]

Specialty Law Columns
Tort and Insurance Law Reporter
After the Sunset - Colorado Motor Vehicle Insurance Post-July 1, 2003
by Richard W. Laugesen

This column provides information concerning current tort law issues and insurance issues addressed by practitioners representing either plaintiffs or defendants in tort cases In addition, it addresses issues of insurance coverage regulation, and bad faith

Column Editor:

William P. Godsman of the Law Office of William Godsman, Denver - (303) 455-6900

Richard W. Laugesen

About The Author:

This month's article was written by Richard W. Laugesen, Denver, an attorney and adjunct professor at the University of Denver College of Law - (303) 300-1006, laugesen@ indra.com.

Colorado's "no-fault" motor vehicle insurance law went out of force by Sunset repeal on July 1, 2003, after being in effect for thirty years. This article discusses the implications of that momentous change, including the transition from the previous system to the new insurance system

For thirty years before July 1, 2003, Colorado operated under a "no-fault" motor vehicle reparations system. The basis of that system was the Colorado Auto Accident Reparations Act ("Reparations Act").1 The no-fault system began phasing out on July 1, 2003. The change resulted from the "Sunset" repeal2 of the entirety of CRS §§ 10-4-701 et seq. on that date. The Sunset repeal came about because the Colorado legislature was unable to agree on reform measures for the then-existing statutory system.3

Because of the nature of the former no-fault system and the manner of its termination, Colorado will operate under dual systems for a number of years into the future. Everyone will be dealing with both the pre- and post-repeal systems for some time to come.4 Thus, practitioners should have an understanding of the operation of both systems, as well as the necessary transition between them.

This article provides an overview and comparison of the pre- and post-Sunset repeal systems. It also addresses implications that are likely to result from the change.

The Pre-Sunset Repeal System: "No-Fault"

Under the pre-July 1, 2003 system, no-fault personal injury protection ("PIP") and "liability" insurance to certain specified levels were compulsory.5 Insurers were required to offer "collision" insurance.6 In addition, "uninsured/underinsured" motorist ("UM/UIM") coverage was required to be offered to a certain level.7 Other coverages in typical motor vehicle policies were "voluntary." However, once a policy issued, it was difficult for the insurer to end the relationship.8

The pre-Sunset repeal system also imposed tort modification features. This meant that a person injured in a motor vehicle accident could not sue in tort for non-economic damages unless the injury met one of the statutory suit thresholds.9 Further, even when permitted to sue, a claimant could not recover any economic loss within PIP eligibility again in tort.10 Similarly, there were restrictions on subrogation,11 which gave the injury claimant greater potential recovery from available liability and UM/UIM coverages.

The no-fault system was an exchange of certain rights of a motor vehicle accident victim to sue in tort in return for guaranteed, prompt payment of certain economic losses without regard to fault. The system thus restricted the accident victim's right to sue for minor injuries by establishing certain suit "thresholds."12 Sub-threshold injury victims recovered only certain economic losses by way of direct no-fault PIP benefits from their own insurers. PIP benefits were required to be promptly paid by the insurer regardless of fault.13

Victims of more serious injury also recovered PIP benefits from their own insurers. In addition, if a "threshold" was reached, they had the right to sue in tort for non-economic losses and unreimbursed economic losses. The pre-July 1, 2003 system thus provided for a blending of fault and no-fault benefits, coupled with tort modification. Thus, a complying policy under the law was required to contain both minimum PIP benefits and liability insurance coverage. By this method, motorists and persons insured under their policies recovered most of their economic losses from their own insurer on a no-fault basis and were protected from liability claims of others in more serious accidents where the fault system remained.

The pre-July 1, 2003 statutory system also contained its own eligibility,14 primacy,15 and coordination16 rules. Other features of the system included restrictions on insurers' cancellation,17 non-renewal,18 refusal to write,19 and changes to the required coverages.20

Under the pre-Sunset repeal system, the minimum (usual) PIP package consisted of:

$50,000 medical PIP within five years of the date of the accident

Another $50,000 in rehabilitation PIP within ten years of the accident

Work income loss PIP of up to $400 per week for a period of a year from the date of the accident

Substituted essential services PIP of up to $25 per day for a year

PIP death benefit of $1,000 payable to the decedent's estate in the event of death resulting from a motor vehicle accident.21

The PIP rehabilitation benefit was oriented to "treatment," "procedures," or "training."22 It could be invaded to pay medical expenses at the option of the injured person.23

The system also required that optional enhanced benefits be offered to the named insured when coverage was initially purchased.24 The elective enhanced benefits were: (1) PIP medical without time or amount limitation; and (2) up to 85 percent of lost gross income without time limitation. Such optional enhanced benefits could be made subject to a $200,000 "aggregate" limit on all PIP benefits incurred, including the minimum limit PIP, in whatever combination, as a result of injury or death of any one person in any one accident.25

Persons entitled to PIP under the prior system were referred to as Eligible Injured Persons ("EIPs"). The EIPs under this system were: (1) the "named insured" in any motor vehicle accident in any of the United States, U.S territories, and Canada (except the named insured's own non-insured motor vehicle); (2) "resident relatives" of the named insured in any vehicle in any of the United States, U.S. territories, and Canada (except the resident relative's own non-insured vehicle); (3) for accidents occurring in Colorado, anyone occupying the vehicle described in the policy "with consent of an insured"; and (4) for accidents occurring in Colorado, any "pedestrian" injured in an accident involving the vehicle...