Members of the Colorado Supreme Court appeared skeptical on Tuesday that an insurance company’s specialty policy applying only to classic cars amounts to a violation of the court’s past directive that coverage follows people, not vehicles.
In the case before the justices, another driver struck Beverly Hughes while she was in her vehicle. The at-fault driver was underinsured, meaning their policy did not fully cover Hughes’ injuries. As a result, Hughes sought and received benefits under the uninsured and underinsured motorist provisions of her own Travelers Insurance policy.
However, Hughes and her husband also owned two classic cars: a 1967 Ford Mustang and a 1930 Ford Model A. Those cars also had a separate policy through Essentia Insurance Company. Even though Hughes was not in either antique vehicle at the time, she attempted to use the underinsured motorist coverage in her Essentia policy for her injuries.
Last year, the state’s Court of Appeals ruled that under the Supreme Court’s precedent, Essentia’s restriction on coverage to the classic cars was a violation of state law. During oral arguments before the Supreme Court, the justices were not so sure.
“Under your reading of Colorado law, would there be any way for them to provide a policy like the one they say they’re trying to provide? One that just covers an antique car and does not provide coverage beyond that?” asked Justice Melissa Hart. “Or is that just not possible?”
“I don’t think that’s possible,” responded attorney Corey A. Holton, representing Hughes.
As part of its classic car policy, Essentia required Hughes to have other insurance coverage for her regular use vehicle, including uninsured and underinsured motorist provisions. The company’s rationale was to enable classic car owners to buy far cheaper insurance policies on vehicles that are only used minimally, like for parades and exhibitions. No one contested at oral arguments that if Hughes had been injured in her classic car, both sets of policies would cover her.
Hughes anchored her case, however, in a 2001 decision of the Supreme Court, DeHerrera v. Sentry Insurance Company. The court concluded that under state law, uninsured and underinsured motorist coverage applies to people, regardless of what vehicle they are in at the time of an accident.
Applying DeHerrera, a three-judge panel for the Court of Appeals agreed Essentia could not turn away Hughes’ claim under her classic car policy because her injuries occurred in her regular use vehicle.
“Indeed, we concede and fully recognize that what Hughes is seeking is more than she bargained for,” wrote Judge Craig R. Welling, but “the Essentia policy doesn’t meet the coverage requirements.”
Essentia appealed, arguing the Court of Appeals’ decision would lead to increased prices for antique car policies, which were never intended to be a “second layer” of protection for non-classic vehicles.
Justice Richard L. Gabriel observed Essentia was fundamentally contending the “package of coverage” — a regular use policy and a classic car policy — ensured Hughes would receive benefits no matter her vehicle, in potential compliance with DeHerrera.
Other members of the court suggested Hughes’ view that classic car policies can be extended to regular use vehicles would undermine the goal of keeping antique car coverage inexpensive.
“I guess it’s a form of: ‘Is this what you wish for? Be careful what you wish for?'” asked Justice Monica M. Márquez.
“Do you concede that Ms. Hughes is seeking coverage for more than what she bargained for?” Justice Carlos A. Samour Jr. asked Holton.
Under DeHerrera, “Colorado law is that when you pay a separate premium for UM/UIM coverage, you get that coverage,” Holton responded. He added that a less-restrictive mandate on insurers would allow for the creation of minimalist policies — including for “a kid who’s at college who’s only coming home occasionally to drive a car.”
“Speaking as a person who has a kid at college who only comes home occasionally to drive a car,” interjected Hart, “all four of us are covered, our cars are covered. But we call the insurance company and say, ‘We now only have two drivers living in the state of Colorado.’ And our premiums go down.”
Therefore, she continued, there are already ways for insurers to adjust policies “for special circumstances.”
Even so, countered Holton, the problem with Essentia’s classic car policy is that it excludes certain vehicles from coverage.
“That directly violates what this court’s well-settled holding was in DeHererra,” he said.
The case is Essentia Insurance Company v. Hughes.