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Del Valle v. California Casualty Indemnity Exchange.

2022 COA 138. Nos. 21CA1916 & 22CA0285. Automobile Insurance Policies—Medical Payments Coverage—Workers’ Compensation Exclusions—MedPay Statute.

December 1, 2022

Del Valle was injured in a car accident while acting in the course and scope of his employment, and he subsequently received workers’ compensation benefits. At the time of the accident, Del Valle had a personal automobile insurance policy with defendant California Casualty Indemnity Exchange (the policy), which included medical payments coverage for bodily injuries. The medical payments coverage was subject to an exclusion for injuries occurring during the course of employment if workers’ compensation benefits were required or available for such injury (the exclusion). Del Valle continued to receive medical treatment after he settled his workers’ compensation claim, and he filed a claim for medical payments benefits under the policy to cover additional medical expenses. Based on the exclusion, defendant denied the claim. Del Valle then filed this action for breach of insurance contract, common law bad faith breach of insurance contract, statutory bad faith, and declaratory relief. As to the latter claim, Del Valle asked the court to declare the exclusion invalid because, among other reasons, it violates public policy. Defendant moved to dismiss the complaint for failure to state a claim, arguing that the exclusion is valid and enforceable. The district court concluded that the exclusion is valid and that Del Valle wasn’t entitled to medical payments benefits under his automobile insurance policy. The district court denied defendant’s motion for attorney fees and costs.

On appeal, Del Valle argued that the exclusion violates public policy by conditioning and limiting statutorily mandated coverage and is therefore unenforceable. However, the plain language of CRS § 10-4-635 (the MedPay statute) makes medical payments coverage optional at the insured’s discretion, so the exclusion doesn’t attempt to condition or limit statutorily mandated coverage. Further, no authority supports Del Valle’s contention that because he elected medical payments coverage, the workers’ compensation exclusion violates public policy; and the exclusion does not conflict with the MedPay statute, which does not prohibit limitations on medical payments coverage. And Del Valle’s contention that the exclusion is void because it narrows coverage that he purchased fails because narrowed coverage is the point of a coverage exclusion. Therefore, the exclusion is valid and enforceable and does not violate public policy. Accordingly, the district court properly dismissed the complaint.

On cross-appeal, defendant argued that the district court erred by denying its attorney fees request. However, (1) the essence of Del Valle’s action didn’t sound in tort, so the district court correctly denied the attorney fees request under CRS § 13-17-201; and (2) Del Valle presented good faith arguments to support his position, so the statutory bad faith claim was not frivolous, and the district court properly denied the attorney fees request under CRS § 10-3-1116(5). Because the district court properly denied attorney fees, the court of appeals necessarily rejected defendant’s request for appellate attorney fees that relied on the same arguments. However, defendant is entitled to costs under C.A.R. 39.

The judgment and order were affirmed.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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