By Debra Sutton & Jacquelyn Booker, Shareholders, Sutton | Booker | P.C.

The Colorado Supreme Court affirmed the Court of Appeals Opinion in Fisher v. State Farm Mut. Auto. Ins. Co., holding, in the context of an Underinsured Motorist claim, that an insurer could be liable for treble damages under C.R.S. § 10-3-1115 if it refuses to pay a covered benefit that is not in dispute, even though the payment would not settle the entire claim.

Section 10-4-609 of the Colorado Revised Statutes governs UM/UIM insurance and requires coverage for damages the insured is “legally entitled to collect” from the tortfeasor that caused the accident. Those damages are collectible only via settlement or trial. On the other hand, C.R.S. § 10-3-1115 provides penalties for unreasonable delay or denial of payment of a “covered benefit” owed to the insured under the terms of the insurance contract.

The Supreme Court relied upon the testimony of the insurance adjuster that $61,000 of Mr. Fisher’s medical expenses was undisputed, but was not to be paid until the entire claim was settled. The insurer argued that Mr. Fisher was not entitled to collect those medical expenses from the tortfeasor until there was a settlement or judgment. However, the Court relied upon the term “covered benefit”, which appears in both C.R.S. §§ 10-3-1115 and 10-3-1116. The Court reasoned that the UM/UIM statute does not define the word “covered benefit” and declined to define it as referring to a final lump sum payment of the entire claim as that would require it to ignore the plain language of the penalty statute.

The effect of the decision on an individual UIM case will vary depending upon the facts of the case. A partial payment should result in an offset of or credit against a judgment for UIM benefits under the contract and stop the accumulation of interest on that amount. Unfortunately, the case does not distinguish between economic and noneconomic damages nor does it mention damages for physical impairment or disfigurement, which also could theoretically be “undisputed.” The case also does not provide guidance regarding the fact that Mr. Fisher already received $25,000 from the tortfeasor and how the insurer should calculate the “undisputed” amount of UIM benefits in light of the underlying settlement.