On June 18, 2015, the Colorado Court of Appeals, in a unanimous decision, made a ruling as to what the word “payment” means. Like many areas of law, the legal effect of that seemingly innocuous definition is leaving in its wake serious concern in personal injury attorney law offices in our state.
The recent appellate decision of Stoesz v. State Farm is an example of how an insurance company can take an undefined term and use it to escape paying a claim on a pure technicality.
Edna Ella Stoesz was injured in a rear-end motor vehicle crash on November 18, 2008. The at-fault driver had Progressive Insurance. Ms. Stoesz had underinsured motorist coverage through State Farm. Nine days before the three year statute of limitations was set to run, Stoesz agreed to a coverage limit settlement of $25,000 with Progressive Insurance, thereby resolving claims against the at-fault driver. Stoesz and Progressive also agreed to toll the statute of limitations for the time period it would take for Ms. Stoesz’s attorney to get permission to settle from State Farm (a contractual requirement that allowed Stoesz to preserve her eventual claim for additional underinsured motorist benefits). Tolling a statute of limitations means that the parties agree to stop the running of the statute of limitations for a period of time. In this case, the attorney for Ms. Stoesz thought that making such an agreement with Progressive, such that she did not have to file lawsuit against the at-fault driver within the three year time period, would preserve all rights for Ms. Stoesz to receive additional compensation from her State Farm carrier. On its face, this seems reasonable. Unfortunately, according to the Court of Appeals this was a fatal error. A month after the running of the statute of limitations, State Farm agreed to permit settlement between Stoesz and Progressive. Progressive then issued a check for that first settlement amount. But then when Stoesz attempted to make an underinsured motorist claim against State Farm, State Farm pointed out for the first time what appeared to them to be a fatal error. The statute of limitations in Colorado to pursue an underinsured motorist claim is found in C.R.S. § 13-80-107.5(1)(b) and states that an action for underinsured motorist insurance claims shall be commenced within three years after the cause of action accrues [the accident] except that if the underlying bodily injury liability claim against the underinsured motorist is preserved by commencing an action [filing a lawsuit] against the underinsured motorist OR by PAYMENT of either the liability claims settlement or judgment within three years, then an action of uninsured motorist claim shall be timely if such action is commenced within two years after the insured received payment of the settlement or judgment on the underlying bodily injury liability claim.
Surprisingly, until June 18, 2015, Colorado Courts had never actually told us what the word “payment” meant. Until now, most personal injury lawyers agreed that your statute of limitations runs two additional years from the time you reach an agreement with the at-fault driver’s insurance for the underlying claim. Apparently, that is not exactly true. The word “payment” actually means receipt of money. In Stoesz, the Court of Appeals ruled that even though the plaintiff and the at-fault party settled in principle, and even though there was a tolling agreement between the at-fault driver’s insurance and the injury victim to stay any requirement to file a lawsuit pending receipt of the payment, State Farm as the underinsured motor carrier, was off the hook for paying any additional benefits because the statute of limitations to pursue underinsured motorist benefits had already passed. So basically, the tolling agreement had no legal effect against State Farm.
Despite the fact that there was a tolling agreement, apparently Plaintiff’s counsel could have fixed the problem by either filing a lawsuit against the at-fault driver within the three year window, or in the alternative, insisting that a check be drawn and issued on or before the three year anniversary of the motor vehicle injury crash to perhaps sit in a file until Plaintiff’s counsel and State Farm were able to reach terms as to permission to settle the case.
While this seems like a technicality, unfortunately Ms. Stoesz has lost potentially thousands of dollars because of such an omission. Perhaps we were all guilty of not fully comprehending what the word “payment” meant until our Court of Appeals clarified. That said, we now know that it is important for any attorney representing an injury victim to make sure that an underinsured motorist claim is properly preserved by assuring that the underlying case is either settled well in advance of the three year time period, such that there is no question that a check will be drawn by the insurance company within three years, or that a lawsuit is filed to preserve the claim against the at-fault driver before the three year time period runs.
In my opinion, the Court of Appeals made a ruling without due consideration of the unfair advantage that insurance companies already have over consumers. While State Farm will consider this a victory, I believe it shows that the insurance industry will happily sidestep paying benefits and will use any technicality or trick possible to take premiums from a policyholder and not provide benefits.
The law is very technical. If you are an injured car crash victim reading this blog, you may not even be aware of even the more basic obligations described above, such as getting permission from your own insurance company before settling with the at-fault party. There are many pitfalls for person who chooses to represent himself/herself. That is why it is very important for you to hire a knowledgeable attorney who knows the law and will preserve your rights. At Anderson, Hemmat & McQuinn, we strive to keep up-to-date on the law so that we can properly preserve your claim and maximize your recovery.If you've been injured by an uninsured or underinsured driver call our experienced motor-vehicle accident attorneys at 303-782-9999 for your free case evaluation today.