Compton v. State Farm Mutual Automobile Insurance Co
In Compton v. State Farm Mutual Automobile Insurance Co., 870 P.2d 545 (Colo. App. 1993), the insured was a pedestrian who was struck by a car. The insured was covered by three UM/UIM policies: a State Farm policy with a $ 100,000 limit, and two other policies with limits of $ 25,000 each. After the accident, the tortfeasor's insurer paid its policy limit of $ 25,000. The insured's own $ 25,000 policies each paid $ 20,833.33. State Farm then contended that its limit of liability should be reduced by the amounts the insured had already received.
The State Farm policy contained a "limit of liability" provision which provided in relevant part that:
The most we will pay under this coverage will be . . . the difference between the limits of liability of this coverage and the amount paid to the insured by or for any person or organization who may be held legally liable for the bodily injury . . . .
The policy also contained an "other insurance" provision which provided that:
If the insured sustains bodily injury as a pedestrian and other uninsured motor vehicle coverage applies:
a. the total limits of liability under all coverages shall not exceed that of the coverage with the highest limit of liability; and b. we are liable only for our share. Our share is the per cent of the damages that the limit of liability of this coverage bears to the total of all uninsured motor vehicle coverage applicable to the accident.
State Farm contended that under its policy's "limit of liability" provision, the full amount contributed by the tortfeasor's insurer had to be offset against State Farm's liability.
The Compton panel disagreed. That panel specifically declared only sections (a) and (b) of the "other insurance" provision to be in conflict, thus making the policy ambiguous.
However, the Compton panel went on to state that, "for similar reasons," the "limit of liability" provision had to be construed together with the "other insurance" provision. Compton v. State Farm Mutual Automobile Insurance Co., supra, 870 P.2d at 548.
The Compton panel held that the two provisions, when construed together, required the offset for the tortfeasor's payment to be proportionally shared among the three carriers of UM/UIM coverage. Otherwise, the panel concluded, the offset could be applied to each policy individually, defeating the plaintiff's reasonable expectations of obtaining coverage when she paid her premiums. Compton v. State Farm Mutual Automobile Insurance Co., supra.