Colorado Court of Appeals Reinforces Key Insurance Exception

People pay for insurance so they’ll have a safety net should disaster strike. However, insurance companies need to ensure the claims against them are valid. They can’t afford to overpay or pay for every sort of injury, including those excluded by their contracts.

This is a truth reinforced by a recent opinion from the Colorado Court of Appeals. Near the end of 2022, it heard the arguments made by an injured driver and the insurance company, California Casualty.

Del Valle v. California Casualty Indemnity Exchange

Del Valle suffered an injury while driving for work. He later filed for workers’ compensation. After he and his employer reached a settlement, he continued to receive medical treatment. Del Valle believed his workers’ compensation would not have covered all these costs, so he filed a claim against his personal automobile insurance policy. This was with California Casualty.

The problem was that Del Valle’s policy excluded injuries covered by workers’ compensation. Per the policy, it would not cover injuries “[o]ccuring during the course of employment if workers’ compensation benefits are required or available for the ‘bodily injury.’”

California Casualty denied Del Valle’s claim, and Del Valle sued. He said that California Casualty had breached its contract, acted against Colorado’s MedPay law and violated public policy by refusing to pay his medical expenses.

Del Valle’s Arguments

Del Valle made several arguments, but the court focused mostly on his last claim. Had the workers’ compensation exclusion violated public policy? Del Valle said it had because it “conditions and limits statutorily mandated coverage.”

This argument builds on the language from a previous case with the Court of Appeals. In that case, the court explained how insurance clauses might violate public policy:

“An unambiguous clause may be void and unenforceable if it violates public policy by attempting to ‘dilute, condition, or limit statutorily mandated coverage.”

Notably, Del Valle never claimed the exclusion was ambiguous or confusing. That meant his arguments all relied upon one key point: That medical payments were statutorily mandated coverage under section 10-4-635.

If this MedPay statute mandated medical payments, then California Casualty could not limit or condition those payments. That was the heart of Del Valle’s arguments.

The Court’s Response

The Court of Appeals disagreed. It reviewed the statutory language and noted the statute directly addressed the possibility that coverage would not include medical payments:

“[O]nly if the named insured rejects medical payments coverage in writing or in the same medium in which the application for the policy was taken.”

The fact that the statute allowed people to select coverage without medical payments means the medical payments coverage is optional, not mandatory. Thus, the court said, the exclusion did not impose improper limits on “mandated” coverage.

In fact, the court noted that the exclusion functioned exactly as exclusions are meant to function. It narrowed the coverage that Del Valle purchased. Additionally, because Del Valle never claimed the policy was unclear or ambiguous, the court noted the exclusion met the two key requirements for enforceable policy exclusions: It was both “clear” and “specific.”

A Win For Insurance Policy Exclusions

The appellate court’s ruling is certainly not earth-shattering. Rather, it reaffirms current expectations for insurance policy exceptions. Even so, it’s a reassuring reminder that insurance companies can uphold their rights in court, and it’s a good reminder of how the courts may view such disputes.

The appellate court reviews matters of public policy de novo and relies on the statutory language. In this case, the statutory language was clear, and the court had little need to review arguments and precedent. Instead, it looked back to the language of the exception and found that it adhered to the law and introduced clear and specific conditions. Accordingly, the court upheld its validity.