Colorado Supreme Court Takes on Offsets vs. Double-Dipping

In Arnold Calderon, Petitioner v. American Family Mutual Insurance Company, Respondent, Supreme Court Case No. 14SC494, Supreme Court of Colorado, En Banc (Nov. 7, 2016), Arnold Calderon was injured in a car accident by an uninsured motorist. Fortunately, Calderon had been paying premiums to American Family Mutual Insurance Company (“AFM”) for two policies: MedPay Coverage (“MedPay”), with a $5000 policy maximum for medical bills, and an Uninsured/Underinsured Motorist Coverage (“UM/UIM”) with a $300,000 policy maximum. The facts in the case are not in question.  After the accident, AFM paid the $5000 MedPay policy limit to Calderon’s doctors. AFM disputed its responsibility under the UM/UIM coverage, so Calderon filed suit. A jury awarded him $68,338. The trial court reduced the award by the $5000 already paid by MedPay, pursuant to a policy provision. Calderon appealed the setoff. The appeals court affirmed. The Colorado Supreme Court reversed, saying the setoff was prohibited.

This case turns on the majority’s interpretation of section 10-4-609(1)(c), C.R.S. (2016) which states: “The amount of the UM/UIM coverage available pursuant to this section shall not be reduced by a setoff from any other coverage, including but not limited to, legal liability insurance, medical payments coverage, health insurance, or other uninsured or underinsured motor vehicle insurance.” The majority reads “the amount of coverage available pursuant to this section…shall not be reduced…” as the amount awarded by the jury. Therefore, the setoff of money paid by MedPay would clearly be prohibited according to this section. The court believes the UM/UIM insurance is designed to put an injured party into the same position that party would be in had the accident occurred with an insured motorist. The court believes the petitioner, Calderon, should not have rightful compensation taken away because he was hit by an UM/UIM driver. Had he been hit by an insured motorist, there would be no setoff, because the court will not ease the burden on the tortfeasor just to prevent potential double recovery.

The court reversed and remanded for further proceedings.

The dissent read the section language “coverage available” as the policy maximum—an abstract amount, rather than the amount awarded by the jury in the instant case. The dissenting judges stated the offset would be prohibited only if it prevented the insured from receiving the maximum benefit he had paid for. The dissent also discussed the Collateral Source Rule, and analyzed whether AFM could be considered a third-party source seeing as it was the source for both policies.

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