Chapter 2 - § 2.5 • WHO IS AN "INSURED" FOR PURPOSES OF UM|UIM COVERAGE? — WHAT IS AN "UNINSURED MOTOR VEHICLE"?

• Jurisdiction: Colorado

§ 2.5 • WHO IS AN "INSURED" FOR PURPOSES OF UM/UIM COVERAGE? — WHAT IS AN "UNINSURED MOTOR VEHICLE"?

In order to be eligible to recover uninsured motorist (UM) or underinsured motorist (UIM) benefits under a policy of automobile insurance, the person seeking benefits must be an "insured" within the meaning of the policy. Typically, UM/UIM coverage provides that the company is obligated to pay benefits for damages an insured is legally entitled to recover for bodily injury arising from the operation, maintenance, or use of a motor vehicle by an uninsured motorist. If the person seeking benefits is not an "insured," then no benefits are recoverable, even if bodily injury was caused by an uninsured motorist. Likewise, benefits are not recoverable by a person who is an insured unless bodily injury has resulted from the use or operation of an uninsured vehicle. The cases discussed in the subsections below illustrate these principles and review the public policy underlying the uninsured motorist statute.

§ 2.5.1—Minor Child, Who Was Not a Resident of Her Father's Household, Was Not an Insured Entitled to UM Coverage Under Father's Automobile Insurance

Where minor child was walking along road and was struck by an uninsured motorcyclist, and parents were divorcing at time of accident, and mother had temporary custody of child, who had expressed an intent to reside with mother, child was not a "family member" under father's automobile insurance policy, and was not an "insured" entitled to UM coverage under the father's policy. Midwest Mutual Insurance Co. v. Titus, 849 P.2d 908 (Colo. App. 1993).

Midwest Mutual Insurance Co. v. Titus, 849 P.2d 908 (Colo. App. 1993), arose out of an accident involving Denise Titus, who was then 17 years old, and an uninsured motorcyclist. The motorcycle struck Denise as she was walking along a road. At the time of the accident, her father, Verle Titus, was the named insured under an automobile policy issued by Midwest Mutual Insurance Co. The policy provided UM coverage to the named insured and any "family member." The policy defined the term "family member" to include any "'person related to you by blood, marriage or adoption who is a resident of your household.'" Id. at 909. When the accident occurred, Denise's parents were obtaining a divorce, and Denise's mother had had sole physical custody of her for more than a year. In addition, Denise had expressed an intent to live with her mother on a permanent basis. Asserting that Denise did not meet the definition of a "family member," Midwest Mutual denied her claim for UM benefits. She then initiated a declaratory judgment action, and the trial court granted summary judgment, determining that she was not an insured entitled to UM benefits under her father's policy. The court of appeals affirmed.

The court of appeals noted that although the policy did not define the term "household," "its generally accepted meaning is 'those who dwell under the same roof and compose a family.'" Id. In addition, the court pointed out that there are several important factors a court should consider in determining whether an individual is a "resident of a household," including "the subjective or declared intent of the individual, the relation between the individual and the members of the household, the existence of a second place of lodging, and the relative permanence or transient nature of the individual's residence in the household." Id. at 910. Furthermore, the court indicated that a child of divorced or separated parents "is considered to be a resident of the household in which he or she actually lives," although a child who spends substantial time in each parent's home under joint custody or visitation arrangements may be considered to be a resident of both households. Id.

In this case, the court of appeals found that all of these factors supported the trial court's conclusion that Denise was not a resident of her father's household at the time of the accident. The court therefore affirmed the trial court's decision that Denise was not an insured entitled to UM benefits under her father's policy. Id.

§ 2.5.2—Wife of Owner of Closely Held Corporation, Who Was Designated Driver Under Commercial Auto Policy, Was an "Insured" Entitled to UM Coverage, Even Though Policy Defined the Corporation as the Only Insured

Wife of owner of small, closely held corporation received injuries caused by an uninsured motorist while she was operating a vehicle not owned by the corporation. Wife sought UM coverage under commercial auto policy issued to the corporation, which provided liability, PIP, and UM coverage. Policy defined the corporation as the only named insured, but stated that UM coverage would apply to a "family member." Under these circumstances, literal reading of the policy would result in no UM coverage, which would be unfair and contrary to public policy, since premium would have been paid for no meaningful coverage. Therefore, wife was considered a "family member" entitled to UM coverage under these circumstances. Hawkeye-Security Insurance Co. v. Lambrecht & Sons, Inc., 852 P.2d 1317 (Colo. App. 1993).

In Hawkeye-Security Insurance Co. v. Lambrecht & Sons, Inc., 852 P.2d 1317 (Colo. App. 1993), Paulette Lambrecht and Lambrecht & Sons, Inc., appealed from a declaratory judgment holding that Paulette Lambrecht was not entitled to UM coverage under a commercial auto policy issued to the corporation by Hawkeye-Security Insurance Co.

Paulette Lambrecht was the wife of the sole shareholder of the corporation. She was also a corporate employee and was listed as a designated driver of the corporation's vehicles. While she was driving a vehicle not owned by the corporation, she suffered bodily injury caused by an uninsured motorist, and then presented a claim to Hawkeye for UM benefits. The terms "you" or "your" in the policy referred solely to the corporation, which was the only named insured. However, the UM provisions of the policy stated that any "family member" was also an "insured." The term "family member" was defined to include any person related to "you" by blood, marriage, or adoption who was a resident of "your" household. Further, the UM provisions of the policy stated that Hawkeye was obligated to pay benefits for damages for bodily injury sustained by an insured as a result of an accident caused by an uninsured motorist. Interpreting these provisions literally, Hawkeye denied UM coverage because the corporation had not sustained bodily injury, and the corporation did not have any "family member" who had sustained bodily injury. Hawkeye filed an action seeking a declaratory judgment that no UM coverage existed for Paulette Lambrecht under the terms of the policy, and the trial court granted summary judgment in its favor. However, the court of appeals reversed the judgment, and held that UM coverage existed under the circumstances here.

The court of appeals recognized that under a literal reading of the policy, no coverage existed. "This is so because plaintiff has agreed to pay only for damages resulting from 'bodily injury,' and only the corporation ('you') or a person who is 'related' to the corporation by 'blood, marriage or adoption,' and is a resident of the corporation's 'household,' may recover damages under these provisions." Id. at 1318-19. Literally read, the policy would never provide UM coverage, since a "corporation can itself never sustain "bodily injury," and since it also can have no relatives by 'blood, marriage or adoption' . . . ." Id. at 1319.

The court of appeals pointed out that if these provisions were literally applied, the result would be that the insurer would receive a premium but provide no consideration in exchange. Therefore, the court of appeals concluded that "the relevant terms used in this policy cannot be interpreted literally without violating public policy." Id. The court held that Paulette Lambrecht must be considered a "family member" for purposes of UM coverage. Id. Since the corporation was a small, closely held business, the court of appeals found that the purpose "to be fulfilled by providing uninsured motorist coverage in this policy was to protect the family members who were engaged in the corporation's business." Id.

§ 2.5.3—Owner and Officer of Corporation, Who Was Injured While Riding a Bicycle for Personal Reasons, Was Not an "Insured" Entitled to UIM Coverage Under Automobile Policy Issued to Corporation

Where owner and officer of a corporation was injured while riding his bicycle for personal reasons, he was not entitled to UIM benefits under an automobile policy issued to the corporation. The corporation was designated as the named insured under the policy, and the owner/officer did not qualify as a named insured under the policy. Nor did he qualify for coverage as a "family member," since the named insured was a corporation, not an individual. General Insurance Co. of America v. Smith, 874 P.2d 412 (Colo. App. 1993).

General Insurance Co. of America v. Smith, 874 P.2d 412 (Colo. App. 1993), arose out of an accident between a motor vehicle and a bicycle. Michael Smith, who was an officer and half-owner of Flatirons Surveying, Inc., was riding his bicycle for personal reasons when he was struck by the vehicle. He brought a claim against the driver of the vehicle, which was settled. However, asserting that the settlement did not fully compensate him for his damages, he also brought a claim for UIM benefits against General Insurance Co., which had issued a policy to Flatirons that included UM and UIM coverage. Flatirons was the only named insured under the policy, which provided coverage for bodily injury sustained by an "insured" as a result of the actions of an uninsured or underinsured motorist. The policy defined the term "insured" to encompass several categories of persons or entities, including the named insured and a "family member," if the named insured was an individual. General denied...