Colorado law requires insurers to provide an insured with uninsured/underinsured motorist coverage (“UM/UIM coverage”) unless the insured specifically rejects it. UM/UIM coverage must cover bodily injury or death and may cover property damage if requested by the insured.

UM/UIM often contain consent to settle and anti-stacking clauses, which Colorado courts have held are valid and enforceable. However, Colorado courts have held that consent to sue, trial de novo, and physical contact (phantom vehicle) clauses are void as against public policy.

Many, if not most, UM/UIM policies contain notice clauses requiring the insured to give the insurer notice of a UM/UIM claim as soon as possible. Previously, an insurer could rely on such clauses to bar claims by insureds who fail to give timely notice, whether or not this failure prejudiced the insurer. However, in January, 2001, the Colorado Supreme Court reversed the rule and now requires insurers to prove that they were prejudiced by the late notice, i.e., that the insured’s ability to investigate or defend the insured’s claim was compromised by the late notice.

Once and insurer is notified by the insured of a UM/UIM claim, the insurer must take prompt action to either approve the settlement or notify the insured that it is pursuing subrogation rights. In the event the insurer proceeds with subrogation, the insurer will most likely be required to pay the insured the settlement amount. In the event an insured does not take prompt action upon notice, the insured may be relieved of his or her duty under the UM/UIM policy to seek advance consent from the insurer.

In order to recover UM/UIM benefits for accidents involving an uninsured motorist, an insured must prove his or her damages. In such cases, the insured is subject to the standard defenses to a bodily injury suit, such as comparative fault, causation, mitigation, and fault of the uninsured motorist. Note, however, that the defense of failure to meet the threshold for suits contained in the PIP statute does not apply to UM/UIM cases because uninsured motorists do not have complying policies of insurance.

An insurer who provides UM/UIM coverage can only be held liable up to the lesser of: (1) the difference between the amount of UM/UIM coverage and the amount paid to the insured by the uninsured motorist; or (2) the amount of damage sustained by the insured that is not recovered from the uninsured motorist.

Note that Colorado courts favor arbitration and will enforce an insurer’s right to proceed to arbitration.

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