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Fear v. GEICO Casualty Co.

2023 COA 31. No. 21CA2023. Motor Vehicles—Uninsured/Underinsured Motorist Coverage—Improper Denial of Claims—Damages Calculation.

March 30, 2023

Fear was injured when an underinsured motorist crashed into his car. His economic losses totaled $21,761, and he settled with the at-fault driver’s auto insurer, with his insurer GEICO Casualty Company’s (GEICO) consent, for the policy limit of $25,000. Fear then filed a claim with GEICO under his policy that had $100,000 in uninsured/underinsured motorist (UIM) coverage. He asserted that he was entitled to UIM benefits because the sum of his economic and noneconomic damages exceeded $25,000, and his settlement with the tortfeasor had thus not made him whole. GEICO conducted an internal evaluation and set an internal “negotiation range” of $2,500 to $9,000 for the UIM claim. Fear did not accept GEICO’s offers or otherwise attempt to negotiate. He filed suit in district court, asserting a claim for unreasonable delay under CRS § 10-3-1115. In its written closing, GEICO asserted that Fear’s noneconomic damages were between zero and $9,000 without conceding that any particular amount was undisputed. The court awarded Fear $9,000 in noneconomic damages and, based on the low end of the adjuster’s internal evaluation, concluded that $7,200 of that amount was, and had been, undisputed since the time that the evaluation was created. The trial court found that GEICO had unreasonably delayed paying Fear $3,961 in UIM benefits. It ruled that GEICO violated CRS §§ 10-3-1115 and -1116 by conditioning payment of the “undisputed” portion of Fear’s noneconomic damages on his release of any remaining claims for UIM benefits. The court also ruled that Fear was entitled to a penalty of double that amount, along with an award of attorney fees and costs. Accordingly, after offsetting the $25,000 settlement, the court awarded Fear a total of $13,683, and later added approximately $46,000 in attorney fees and costs to the judgment.

On appeal, GEICO contended that the trial court erred by relying on its internal settlement evaluation as a basis for concluding that part of Fear’s claimed noneconomic damages was undisputed. An insurer’s internal evaluation of a first-party claimant’s noneconomic damages does not establish an undisputed amount of benefits owed and is therefore not subject to immediate payment. Here, GEICO’s internal evaluation of Fear’s economic and noneconomic damages was created to facilitate GEICO’s settlement efforts and sheds no light on the actual noneconomic damages that Fear suffered. Accordingly, GEICO’s internal evaluation was inadmissible as evidence of undisputed benefits owed to Fear, and the court erroneously relied on it to measure Fear’s “undisputed” noneconomic damages. Further, because the court’s ruling depended heavily on the values assigned in that internal evaluation, the error was not harmless.

The court of appeals left undisturbed the award of $9,000 to Fear for his noneconomic damages, the award of costs to Fear as a prevailing party, and the award of pre- and post-judgment interest on the noneconomic damages award. The award of statutory penalties under CRS § 10-3-1116 and the accompanying award of attorney fees and costs were reversed, and the case was remanded for recalculation of the judgment as needed.

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

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