UM/UIM Demand Letter - Colorado

UM/UIM (UNINSURED/UNDERINSURED MOTORIST) POLICY LIMITS DEMAND

State of Colorado

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION — CRE 408 / C.R.S. section 13-25-135
TIME-LIMITED POLICY LIMITS DEMAND

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [________________________________]

Date: [__/__/____]

[INSURANCE_COMPANY_NAME]
[________________________________]
[________________________________]
[CITY], [STATE] [ZIP]

Attention: [________________________________], UM/UIM Claims Supervisor

Re: FORMAL DEMAND FOR UM/UIM POLICY LIMITS — COLORADO LAW
Insured/Claimant: [________________________________]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
Location of Loss: [________________________________], Colorado
UM/UIM Policy Limits: $[____] per person / $[____] per accident
Tortfeasor: [________________________________]
Tortfeasor's Carrier: [________________________________]
Tortfeasor's Liability Limits: $[____] per person / $[____] per accident
Response Deadline: [__/__/____] at 5:00 p.m. Mountain Time

Dear [________________________________]:

I. INTRODUCTION AND NATURE OF DEMAND

This firm represents [________________________________] ("our client" or "the Insured") in connection with a first-party claim for uninsured/underinsured motorist benefits arising from a motor vehicle collision that occurred on [__/__/____] in [________________________________], Colorado. This letter constitutes a formal, time-limited demand for payment of the full UM/UIM policy limits of $[____] available under the above-referenced policy issued by [INSURANCE_COMPANY_NAME] ("the Carrier").

Colorado's uninsured/underinsured motorist statute, C.R.S. section 10-4-609, was enacted precisely to protect responsible drivers like our client from the financial devastation caused by uninsured or underfunded tortfeasors. The Carrier's UM/UIM obligations in Colorado are not ordinary contract obligations — they are statutorily mandated first-party protections triggered when, as here, the tortfeasor's liability coverage is insufficient to fully compensate the Insured for the covered loss. See DeHerrera v. Sentry Ins. Co., 30 P.3d 167 (Colo. 2001).

Our client's damages substantially exceed both the tortfeasor's liability limits and the available UM/UIM limits. This is an unambiguous policy limits case. The Carrier must tender the full UM/UIM limits of $[____] on or before [__/__/____], or it will expose itself to tort damages, statutory double damages under C.R.S. section 10-3-1116, and exemplary damages under C.R.S. section 13-21-102.

II. COLORADO UM/UIM STATUTORY FRAMEWORK

A. Colorado's Mandatory UM/UIM Coverage Statute — C.R.S. section 10-4-609

Colorado is one of the strongest UM/UIM-protective jurisdictions in the country. Under C.R.S. section 10-4-609(1)(a), no automobile liability policy may be issued in Colorado unless the insurer offers UM/UIM coverage "in limits equal to the insured's bodily injury liability limits." The statute is remedial and must be construed liberally in favor of the insured.

The statutory minimum liability (and available UM/UIM) limits in Colorado are $25,000 per person / $50,000 per accident bodily injury, and $15,000 property damage, under C.R.S. section 10-4-620. Any higher limits purchased under C.R.S. section 10-4-609 must be applied at their full purchased value.

B. Colorado's Expansive Definition of "Underinsured" — C.R.S. section 10-4-609(4)

In 2008, the Colorado General Assembly amended C.R.S. section 10-4-609(4) to eliminate the "gap" or "excess" rule that had previously allowed insurers to offset the full amount of the tortfeasor's limits against UIM coverage. Under the current statute, an "underinsured motor vehicle" is defined broadly as one "with respect to the ownership, maintenance, or use of which the sum of the limits of liability under all bodily injury liability bonds and insurance policies applicable at the time of the accident is less than the limits of uninsured motorist coverage available to the injured person under the policies covering such injured person." C.R.S. section 10-4-609(4).

This means that our client is entitled to the full UM/UIM policy limit on top of what has been recovered from the tortfeasor's liability carrier, without any dollar-for-dollar offset. The only statutory offset is to prevent double recovery for the same element of loss.

C. Colorado's Anti-Anti-Stacking Rule — C.R.S. section 10-4-609(2)

Colorado statutorily prohibits anti-stacking clauses as applied to policies not issued to the Insured. C.R.S. section 10-4-609(2) provides that UM/UIM coverage "shall apply to bodily injury, sickness or disease, including death" up to the limits of each policy, and an insurer may prohibit stacking only of policies that the insurer itself issued to the named insured. The Colorado Supreme Court has consistently enforced this protection in favor of insureds, beginning with DeHerrera v. Sentry Ins. Co., 30 P.3d 167 (Colo. 2001), and reaffirmed in subsequent UM/UIM decisions.

Our client is accordingly entitled to stack UM/UIM coverage across all [____] vehicles on the subject policy and any additional household policies covering him/her as a resident relative.

D. Coverage Analysis

E. Tortfeasor Qualifies as Underinsured Under C.R.S. section 10-4-609(4)

The tortfeasor, [________________________________], qualifies as an "underinsured motorist" under Colorado law because:

• ☐ Tortfeasor carried only statutory minimum limits of $25,000/$50,000;
• ☐ Tortfeasor's liability limits of $[____] are less than our client's UM/UIM limits of $[____];
• ☐ Our client's compensable damages exceed the tortfeasor's available liability coverage; and/or
• ☐ The tortfeasor was an unidentified hit-and-run driver (qualifying as "uninsured" under C.R.S. section 10-4-609(5)).

III. THE COLLISION AND COLORADO LIABILITY ANALYSIS

A. Facts of the Collision

On [__/__/____] at approximately [____] [AM/PM], our client was [________________________________] on [________________________________] in [________________________________], Colorado, when the tortfeasor [________________________________].

[DETAILED_FACTUAL_NARRATIVE]

B. Tortfeasor's Negligence Per Se and Common Law Negligence

The tortfeasor was negligent and/or negligent per se under Colorado law:

• ☐ Violation of C.R.S. section 42-4-1101 (speeding);
• ☐ Violation of C.R.S. section 42-4-703 et seq. (failure to yield right-of-way);
• ☐ Violation of C.R.S. section 42-4-1301 (driving under the influence);
• ☐ Violation of C.R.S. section 42-4-1008 (following too closely);
• ☐ Violation of C.R.S. section 42-4-239 (distracted driving / texting);
• ☐ Violation of C.R.S. section 42-4-604 (disregarding traffic control device);
• ☐ Common law negligence — failure to keep proper lookout;
• ☐ Other: [________________________________].

C. Our Client's Freedom from Comparative Fault — C.R.S. section 13-21-111

Colorado is a modified comparative negligence jurisdiction under C.R.S. section 13-21-111, with a 50% bar rule: a plaintiff may recover only if his/her fault is less than that of the combined negligence of the defendants. Our client bears zero percent comparative fault for this collision. The [________________________________] Police Department (Report No. [________________________________]) assigns full fault to the tortfeasor. [WITNESS_COUNT] independent witnesses corroborate the tortfeasor's negligence.

Even if the Carrier were to argue any comparative fault (which the facts do not support), our client's recovery would be reduced but not barred, and the tortfeasor's overwhelming fault percentage would still trigger full UM/UIM exposure.

IV. OUR CLIENT'S INJURIES AND TREATMENT

A. Injury Summary

As a direct and proximate result of the tortfeasor's negligence, our client sustained the following injuries:

• ☐ [________________________________]
• ☐ [________________________________]
• ☐ [________________________________]

B. Treatment Providers and Timeline

C. Permanent Impairment (AMA Guides)

D. Prognosis

[________________________________]

V. DAMAGES

A. Past Medical Expenses (Colorado Allows Full Billed Amounts — No Collateral Source Reduction at Demand Stage)

Colorado follows the collateral source rule for admissibility purposes but permits post-verdict reductions for certain paid amounts under C.R.S. section 13-21-111.6. At the demand stage, our client's reasonable and necessary billed medical expenses are:

B. Future Medical Expenses (Present Value)

C. Past and Future Lost Earnings / Earning Capacity

• Past lost wages: $[____]
• Future lost earning capacity (PV): $[____]

D. Non-Economic Damages — Subject to C.R.S. section 13-21-102.5

Colorado caps non-economic damages under C.R.S. section 13-21-102.5. For causes of action accruing on or after January 1, 2020, the standard cap is $613,760 (the statutory $468,010 cap as adjusted biennially for inflation — attorney must confirm current amount at filing), which may be raised to $1,227,530 upon clear and convincing evidence justifying a higher amount. These caps do not apply to physical impairment or disfigurement, which are awarded separately under Preston v. Dupont, 35 P.3d 433 (Colo. 2001).

E. Damages Summary

VI. SETTLEMENT WITH TORTFEASOR AND CONSENT-TO-SETTLE

A. Status of Liability Settlement

We [HAVE REACHED / ARE FINALIZING] a tentative settlement with [TORTFEASOR_CARRIER] for the tortfeasor's available liability limits of $[____]. Colorado courts require the Insured to give the UM/UIM carrier a reasonable opportunity to protect its subrogation rights before releasing the tortfeasor. We hereby provide such notice.

B. Consent to Settle / Substitution of Payment

Pursuant to Colorado law and the policy's cooperation clause, we request written consent to settle with [TORTFEASOR_CARRIER] within thirty (30) days of this letter. If the Carrier wishes to preserve subrogation, it may substitute payment in the amount of the tortfeasor's liability limits and preserve its own rights of recovery.

Failure to respond within thirty (30) days will be deemed consent and waiver of any subrogation defense.

VII. UM/UIM POLICY LIMITS DEMAND

A. Calculation of UIM Benefits Due (No Gap Offset Under 2008 Reforms)

Because our client's uncompensated loss of $[____] exceeds the available UM/UIM limits of $[____], this is a textbook policy limits case.

B. Formal Demand

Pursuant to C.R.S. section 10-4-609 and the terms of Policy No. [________________________________], our client hereby demands payment of the FULL UM/UIM policy limits of $[____] within [____] days of this letter.

VIII. NOTICE OF STATUTORY AND COMMON LAW BAD FAITH EXPOSURE

A. Colorado Recognizes Both Common Law and Statutory Bad Faith

Colorado is unusual in that it recognizes two parallel bad faith remedies — and the statutory remedy is less onerous to prove than common law bad faith:

(1) Common Law Bad Faith — Travelers Ins. Co. v. Savio, 706 P.2d 1258 (Colo. 1985)

Under Savio, a first-party insured may sue the insurer in tort when the insurer acts unreasonably and with knowledge of or reckless disregard for the fact that no reasonable basis existed for denying or delaying the claim. Damages include all foreseeable consequential losses, emotional distress, and exemplary damages under C.R.S. section 13-21-102.

(2) Statutory Bad Faith — C.R.S. sections 10-3-1115 and 10-3-1116 (2008)

In 2008 the Colorado General Assembly enacted C.R.S. sections 10-3-1115 and 10-3-1116, creating a statutory cause of action that requires only proof that the insurer "delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action." C.R.S. section 10-3-1115(2). The knowing/reckless element of common law bad faith is not required. Kisselman v. American Family Mut. Ins. Co., 292 P.3d 964, 970-72 (Colo. App. 2011) (holding statutory bad faith standard "less onerous" than common law standard).

B. Available Remedies — The Colorado "Double Damages Plus Fees" Rule

Under C.R.S. section 10-3-1116(1), a first-party claimant whose covered benefit has been unreasonably delayed or denied is entitled to:

1. Two (2) times the covered benefit (i.e., the policy amount owed is multiplied, not just supplemented);
2. Reasonable attorney's fees;
3. Court costs; and
4. Pre- and post-judgment interest.

Crucially, the Colorado Supreme Court has confirmed that the two-times-covered-benefit remedy is in addition to (not in lieu of) the policy benefit itself. That means an insurer that unreasonably delays or denies a $500,000 UIM benefit exposes itself to $1,500,000 in covered-benefit recovery (the $500,000 benefit plus $1,000,000 as the statutory doubling), plus common law compensatory damages, plus attorney's fees, plus exemplary damages.

The statute further provides that "the fact that an insurer had a reasonable basis to contest a portion of the claim shall not be a defense to the unreasonable delay or denial of any other portion of the claim." C.R.S. section 10-3-1115(1)(b).

C. Exemplary Damages Under C.R.S. section 13-21-102

If this matter proceeds to litigation, our client will seek exemplary damages under C.R.S. section 13-21-102 based on the Carrier's "willful and wanton" conduct. Exemplary damages are capped at 1x compensatory damages initially, but may be trebled (3x) if the Carrier continues the wrongful conduct during litigation. C.R.S. section 13-21-102(3).

D. Any Delay Beyond This Demand Will Be Deemed Unreasonable

Given the clarity of liability, the breadth of documented damages, and the unambiguous policy language, any refusal to tender the policy limits will be presumptively unreasonable under C.R.S. section 10-3-1115 and will trigger the full panoply of bad faith remedies described above.

IX. ARBITRATION / LITIGATION POSTURE

A. Policy Arbitration Clause

The subject policy [CONTAINS / DOES NOT CONTAIN] a UM/UIM arbitration clause. Under C.R.S. section 13-22-201 et seq. (the Colorado Revised Uniform Arbitration Act), any such clause will be enforced, but the Carrier's statutory bad faith exposure is preserved regardless of arbitration and is not arbitrable as a matter of public policy. See Goodson v. American Standard Ins. Co., 89 P.3d 409 (Colo. 2004).

B. Notice of Intent to Proceed

If the Carrier fails to tender the full UM/UIM limits by the deadline set forth herein, we will:

1. Demand arbitration under the policy (if applicable);
2. File suit in the District Court of [____] County, Colorado, seeking:
   - Breach of contract (UM/UIM benefits);
   - Common law bad faith under Savio;
   - Statutory bad faith under C.R.S. sections 10-3-1115 and 10-3-1116 (2x benefit plus fees);
   - Exemplary damages under C.R.S. section 13-21-102; and
3. File a regulatory complaint with the Colorado Division of Insurance.

X. RESPONSE DEADLINE

THIS DEMAND EXPIRES AT 5:00 P.M. MOUNTAIN TIME ON [__/__/____].

Failure to accept by that date constitutes an unreasonable denial within the meaning of C.R.S. section 10-3-1115 and waiver of any "reasonable basis" defense the Carrier might otherwise have.

XI. DOCUMENT PRESERVATION NOTICE

The Carrier is on notice to preserve the entire claim file including (but not limited to): claim notes, activity logs, reserve history and changes, all internal and external correspondence, adjuster/supervisor approvals, underwriting file, policy file, claim handling manuals, audit reports, training materials, and all ESI related to Claim No. [________________________________]. Any destruction will be addressed through spoliation remedies under Colorado Rule of Civil Procedure 37.

XII. CONCLUSION

Colorado's UM/UIM statute exists to ensure that innocent, responsible drivers are not left financially ruined by the wrongdoing of underfunded tortfeasors. Our client paid premiums for exactly this contingency. The Carrier now has a clear opportunity to honor its first-party obligation, avoid statutory double damages and exemplary liability, and pay the policy limits its insured purchased.

We look forward to prompt resolution.

Respectfully submitted,

[LAW_FIRM_NAME]

By: _______________________________
[ATTORNEY_NAME], Esq.
Colorado Reg. No. [________________________________]
[ADDRESS]
[CITY], CO [ZIP]
Telephone: [________________________________]
Email: [________________________________]

Counsel for [CLIENT_NAME]

ENCLOSURES:
- ☐ Policy declarations page and UM/UIM endorsement
- ☐ [________________________________] Police Department Traffic Crash Report
- ☐ Complete medical records and itemized bills
- ☐ Wage loss documentation
- ☐ Photographs of vehicles and injuries
- ☐ Expert reports (accident reconstruction / life care plan / vocational)
- ☐ Declaration of client as to non-economic loss

CC:
- [CLIENT_NAME]
- [TORTFEASOR_CARRIER] (re: consent to settle)

COLORADO UM/UIM QUICK REFERENCE

SOURCES AND REFERENCES

• C.R.S. section 10-4-609 — https://law.justia.com/codes/colorado/title-10/insurance/article-4/part-6/section-10-4-609/
• C.R.S. section 10-3-1115 — https://law.justia.com/codes/colorado/title-10/insurance/article-3/part-11/section-10-3-1115/
• C.R.S. section 10-3-1116 — https://law.justia.com/codes/colorado/title-10/insurance/article-3/part-11/section-10-3-1116/
• C.R.S. section 13-21-102 — https://codes.findlaw.com/co/title-13-courts-and-court-procedure/co-rev-st-sect-13-21-102/
• C.R.S. section 13-21-111 — https://law.justia.com/codes/colorado/title-13/damages-and-limitations-on-actions/article-21/part-1/section-13-21-111/
• Travelers Ins. Co. v. Savio, 706 P.2d 1258 (Colo. 1985) — https://law.justia.com/cases/colorado/supreme-court/1985/83sc316-0.html
• Goodson v. American Standard Ins. Co., 89 P.3d 409 (Colo. 2004) — https://caselaw.findlaw.com/court/co-supreme-court/1058662.html
• Kisselman v. American Family Mut. Ins. Co., 292 P.3d 964 (Colo. App. 2011) — https://caselaw.findlaw.com/court/co-court-of-appeals/1587867.html
• Colorado Division of Insurance — https://doi.colorado.gov/
• Colorado Courts Civil Jury Instructions Ch. 25 (Bad Faith) — https://www.courts.state.co.us/userfiles/file/Court_Probation/Supreme_Court/Committees/Civil_Jury_Instructions_Committee/Chapter%2025.pdf