Friend or Foe? A Cautionary Tale for Colorado Insureds

Friend or Foe?  A Cautionary Tale for Colorado Insureds

In State Farm Mutual Automobile Insurance Company v. Brian Johnson (2017) 396 P. 2d 651, the Colorado Supreme Court held a named insured has the authority to reject or waive UM/UIM coverage. Similarly, the Court held a named insured may waive or reject the selection of lower limits on behalf of another named insured under the same policy.

Brian Johnson and his friend/roommate decided to purchase a car together.  Although Mr. Johnson was to the be the primary driver, the car was purchased, financed and titled in both of their names.  When Mr.  Johnnson’s insurance lapsed, his friend offered to insure their shared vehicle through State Farm Insurance, her insurance company for her primary vehicle.  State Farm informed the friend UM/UIM coverage for her primary vehicle extended to all members of her household including her roommate Mr. Johnson regardless of which car they were driving.  In order to add UM/UIM coverage to the new shared vehicle the roommate would have to pay a separate premium for double the coverage at $200,000.  Mr.  Johnson’s roommate, however, signed a form rejecting to pay the separate UM/UIM premium on the shared vehicle.

One month later Mr. Johnson was driving the shared vehicle when he was involved in an accident with an underinsured driver and sustained serious injuries.  Mr. Johnson was not at fault and made a demand to State Farm for the $100,000 UM/UIM benefits.  State Farm denied the claim[1] and Johnson brought suit against them for UM/UIM coverage.  State Farm moved for summary judgment arguing Mr. Johnson’s friend was authorized to reject UM/UIM coverage on the subject vehicle, on behalf of both named insured drivers.  The trial court denied summary judgment and held there was a genuine issue of material fact as to whether State Farm had offered UM/UIM coverage to Mr. Johnson’s friend in accordance with statutory obligations and whether the friend’s waiver was fully informed.

State Farm then moved to bifurcate the issues of coverage and damages. After a bench trial, the court found State Farm had offered UM/UIM coverage to Mr. Johnson’s friend in accordance with its statutory obligations and obtained her written rejection of such coverage.  The court further found the rejection of UM/UIM coverage was effective for both Mr. Johnson and his friend and entered judgment in favor of State Farm.

Mr. Johnson appealed and argued the trial court had erred in ruling that one named insured could rejected UM/UIM coverage for another named insured.  A division of the Court of Appeals agreed with Johnson and held the phrase “the named insured” in C.R.S. Section 10-4-609 meant all persons whom the policy lists as named insureds. An agent of the named insured may therefore reject UM/UIM coverage for that named insured only if the agent acts with express authority.  The Court of Appeals reversed the trial court’s judgment and remanded the case.  State Farm petitioned for certiorari.

The Supreme Court held Mr. Johnson’s friend had implied authority to waive and did in fact waive UM/UIM coverage on Johnson’s behalf.  The court further held that although Johnson did not expressly instruct his friend to reject UM/UIM coverage for the vehicle, Johnson expressly authorized his friend to undertake the purchase of the insurance.  The decision to reject or accept UM/UIM coverage, therefore, was necessary to complete the purchase of the insurance policy.

The Supreme Court noted, “[t]he growing trend is that a rejection of UM/UIM coverage or a selection of lower limits by one named insured is binding on all named insureds and all additional insureds, rendering it unnecessary for insurers to obtain additional rejections or waivers from all named insureds and all potential insureds.”  On these principles, the Court held Johnson’s friend had the authority to reject UM/UIM coverage on his behalf. Johnson could therefore not recover any additional UM/UIM benefits under the policy that his friend procured on his behalf.


Friends beware!  One named insured can waive UM/UIM benefits on behalf of  all named insureds listed under the same policy.  In an effort to avoid litigation, however, best practices for insurance companies would be to obtain express rejections or waivers from all named insureds and all potential insureds, when possible.

[1] The Supreme Court noted it was unclear from the lower court’s record the grounds upon which State Farm denied Mr. Johnson’s UM/UIM claim.

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