Does a Provision of an Insurance Policy Allowing for Recovery for Damages from an Uninsured Motorist Apply When a Third Party’s Insurer Denies Liability but not Coverage?

In Pena v. American Family, No. 17CA0098, (2018COA56) the Colorado Court of Appeals looks into this complicated question.

Marisa Pena (“Peña”) sued American Family Mutual Insurance Company (“American Family”) after a car accident in 2013. Peña was involved in a three-car collision. When it happened, she was insured by American Family. One of the other drivers involved in the accident, Herman Garner (“Garner”) was also insured by American Family. In November 2013, Peña sent a letter to American Family asserting a claim under the uninsured motorist provisions (“UIMP”) of her policy.

Peña sued American Family for the unreasonable delay and denial of benefits under the UMPD provisions of her policy. She alleged that her UMPD coverage applied because it expressly included vehicles that were insured by a policy at the time of the accident, but the insurer denies coverage. American Family moved to dismiss, arguing that Peña’s complaint failed to state a claim upon which relief could be granted. The district court dismissed Peña’s case.

On appeal, Peña contends that the district court erred in dismissing her case. There was a question as to jurisdiction, at first. This Court had to determine if the lower court’s decision was appealable. The district court dismissed the complaint because the complaint was prematurely brought.

Peña’s complaint did not assert a claim against American Family in its role as Garner’s insurer; it asserted a claim against American Family as her insurer. Peña says under the terms of her policy, she is entitled to pursue her claim because the police report generated after the accident cited Garner as “100% liable” for the accident; and despite the report, American Family denies that Garner is liable. Peña’s claims her UMPD coverage was applicable because Garner’s insurer (American Family) was denying liability.

Because Garner’s insurer, American Family, denied liability but not coverage for the accident, the UMPD coverage of Peña’s policy with American Family was inapplicable. And because there was no applicable UMPD coverage here for Peña, there were no benefits which could have unreasonably been delayed or denied. Peña had no claim, as a matter of law. The district court did not reach this conclusion, determining instead that Peña’s lawsuit was premature because Garner’s liability had not yet been established. This determination was in error: Peña will never have a claim against American Family under her policy for unpaid UMPD benefits in connection with this accident. Garner’s insurer (American Family) has not denied coverage, the circumstance which would trigger the applicability of Peña’s UMPD coverage. If Garner is ultimately found liable, Peña will have a claim against American Family under the liability provisions of his policy, not under the UMPD provisions of hers. And if he is not, she has no claim. The judgment is affirmed.