Chapter 2 - § 2.3 • STACKING OF COVERAGES

• Jurisdiction: Colorado

§ 2.3 • STACKING OF COVERAGES

A question that used to arise with some frequency in Colorado was whether an insured would be permitted to "stack" UM coverage from multiple policies to increase the limit of available coverage for injuries or damages caused by an uninsured motorist. Most insurance policies used to contain provisions designed to preclude such stacking of coverage. The validity and enforcement of such anti-stacking clauses was often the subject of litigation. Under the former version of the statute, anti-stacking clauses were approved by the legislature in C.R.S. § 10-4-609(2). The former version of the statute stated that a policy may contain anti-stacking provisions "if such provisions are included in a single policy covering multiple vehicles or in multiple policies issued by one insurer or an affiliated insurer, under common ownership or management, to an insured or to a resident relative of such insured." See former C.R.S. § 10-4-609(2). However, the former statute stated that anti-stacking provisions "shall not prohibit stacking of the uninsured or underinsured portions of a policy issued to an insured and a separate policy covering the insured which was not issued to the insured or a resident relative." Id.

As discussed above, the revised statute now precludes most anti-stacking provisions. However, since the former statute may still apply to some pending or future cases, cases applying the former version of the statute are discussed below.

§ 2.3.1—General Rule Under the Former Statute — Anti-Stacking Clauses Included in a Single Policy Covering More Than One Vehicle or in Several Policies Issued by the Same Insurer Do Not Violate Public Policy

a—UM coverage

Policy provision, which prohibited stacking of UM coverage under two policies issued by the same insurer, did not violate public policy. As long as insurance policy assures payment of statutory minimum coverage, anti-stacking limitation in an insurance policy is not repugnant to statute. Arguello v. State Farm Mutual Automobile Insurance Co., 599 P.2d 266, 268 (Colo. App.1979).

In Arguello v. State Farm Mutual Automobile Insurance Co., 599 P.2d 266 (Colo. App. 1979), Alex Arguello and his wife owned two vehicles, a Toyota and an Oldsmobile, each of which was insured under a separate auto insurance policy issued by State Farm. Both policies provided coverage for bodily injury caused by uninsured motorists, and the UM coverage limit of each policy was $15,000. On July 1, 1973, the Arguellos were riding in their Toyota when they were involved in an accident with an uninsured motorist. The accident caused serious injuries to Alex Arguello. The Arguellos then submitted a claim for UM benefits to State Farm, which paid the $15,000 policy limit under the Toyota policy. However, State Farm resisted their attempt to "stack" coverage from the Oldsmobile coverage in order to obtain another $15,000 in UM benefits. The Arguellos brought suit against State Farm to recover additional UM benefits, but the trial court ruled that under the language of the State Farm policies, stacking of UM coverage was not allowed. The court of appeals agreed and affirmed the judgment for State Farm.

The UM coverage in each of the State Farm policies provided that State Farm was obligated to pay an amount an insured was legally entitled to recover for bodily injury caused by an uninsured motorist, but each policy also contained an exception stating that there was no UM coverage "whenever an insured is occupying a vehicle which is owned by the named insured but which is not insured under the policy in question." Id. at 268. Applying this policy language, the court of appeals concluded that "the Oldsmobile policy by its terms does not provide uninsured motorist coverage when plaintiffs are occupying their Toyota (insured under a separate State Farm policy) because the Toyota is not an insured vehicle under the Oldsmobile policy." Id.

The court also rejected the Arguellos' argument that the language in the State Farm policies violated public policy. Citing Alliance Mutual Casualty Co. v. Duerson, 518 P.2d 1177 (Colo. 1974), the court held that "so long as a policy assures payment of the statutory minimum, a limitation is not repugnant to the statute." 599 P.2d at 268. Since each policy issued by State Farm provided for the minimum amount of UM coverage, the policies were not repugnant to the statute. Id. The court pointed out that if the Arguellos had desired more UM coverage, they could have purchased more than the minimum amount. Id.

b—UIM coverage

Where insured had six separate auto policies insuring motor vehicles, and two contained UM limits of $50,000 and other four had UM limits of $25,000, and insured was involved in an accident with another driver who had liability coverage with limits of $50,000, which insured recovered, and insured's policies contained an anti-stacking provision, insured was not allowed to stack limits of all coverages to obtain UM coverage of $200,000 and thus obtain UIM benefits from his insurer. Anti-stacking provisions applicable to UIM coverage do not violate public policy and are not void. As to this issue, there is no distinction between UM and UIM coverage, and previous rulings that anti-stacking provisions in UM coverage do not violate public policy are likewise applicable to UIM coverage. Shelter Mutual Insurance Co. v. Thompson, 852 P.2d 459, 467 (Colo. 1993), reversing Thompson v. Shelter Mutual Insurance Co., 835 P.2d 518 (Colo. App. 1991). In Colorado Farm Bureau Mutual Insurance Co. v. Kehr, 853 P.2d 1155 (Colo. 1993) and in Farmers Insurance Exchange v. Stever, 854 P.2d 1230 (Colo. 1993), the court followed its holding in Shelter v. Thompson and held that anti-stacking clauses applicable to UIM coverage do not violate public policy.

In Shelter Mutual Insurance Co. v. Thompson, 852 P.2d 459 (Colo. 1993), the court granted certiorari to review the opinion of the court of appeals in Thompson v. Shelter Mutual Insurance Co., 835 P.2d 518 (Colo. App. 1991), in which the court had held that anti-stacking language applicable to UIM coverage was void as contrary to public policy. The supreme court reversed and held that the anti-stacking language was not invalid.

The plaintiff, Christopher Thompson, had insurance coverage issued by Shelter for six separate vehicles, including a 1984 Nissan, a 1986 Ford, and four motorcycles. The Ford and the Nissan had UM/UIM coverage with limits of $50,000, and each motorcycle had UM/UIM coverage with limits of $25,000. Thompson was injured in an accident on September 23, 1987, while he was driving the Nissan. The other motorist was insured by State Farm and had liability insurance limits of $50,000. Thompson settled his claim against the State Farm insured for $50,000 and then claimed UIM benefits from Shelter. Thompson argued that the limits under his six policies should be "stacked" to add up to $200,000 in coverage. Relying upon the language of its policies, Shelter rejected this contention and denied Thompson's claim for UIM benefits. In particular, the policies provided that Shelter's total limit of liability under all policies would not exceed the highest limit available under any single policy. Shelter argued that under this provision, its limit of liability for UM/UIM benefits was $50,000. Since Thompson had already received $50,000 from State Farm's insured, Shelter maintained it had no liability for UM/UIM benefits.

After Shelter denied his claim, Thompson brought a declaratory judgment action. The trial court agreed with Shelter that the language of the policies prohibited stacking, but ruled that Thompson had $50,000 in available UIM coverage. Shelter appealed the trial court's ruling that another $50,000 in UIM coverage was available, and Thompson cross-appealed from the trial court's holding that he could not stack the UIM coverage. 835 P.2d at 524. The court of appeals in Thompson v. Shelter held that Thompson could stack the UIM coverage and ruled that the anti-stacking language was void as contrary to public policy. The court of appeals declined to follow previous cases holding that anti-stacking language was valid as applied to UM coverage because it found that UM and UIM coverage were distinct types of coverage. The supreme court granted certiorari to consider the issue "'whether the court of appeals erred in finding that anti-stacking provisions pertaining to underinsured motorist benefits are void as against public policy, particularly as [this court] has found similar provisions regarding uninsured motorist benefits to be valid.'" 852 P.2d at 462.

The supreme court first pointed out that in 1979 the General Assembly had enacted C.R.S. § 10-4-609 in order to require insurers to offer protection against damages caused by uninsured motorists. Moreover, the court noted that in 1983, the statute was amended to include underinsured motorists within the definition of uninsured motorists. By amending the statute in 1983, the "General Assembly intended to enable an injured insured to recover for loss caused by an underinsured motorist to the same extent that the injured insured would recover for damages caused by an uninsured motorist." 852 P.2d at 463. Since 1983, insurers have been required to offer a minimum amount of both UM and UIM coverage, and to offer both UM and UIM coverage in amounts greater than the statutory minimums. Id. Thus, since 1983, the statutory requirements applicable to both UM and UIM coverage have been essentially the same.

Next, the court pointed out that Colorado courts have applied "two principles with respect to the issue of stacking uninsured and underinsured motor vehicle coverage." Id. at 464. First, citing Alliance Mutual Casualty Co. v. Duerson, 518 P.2d 1117 (Colo. 1974) and Arguello v. State Farm Mutual Automobile Insurance Co., 599 P.2d 266 (Colo. 1979), the court noted that "anti-stacking provisions do not violate the public policy underlying the...