Liability Claims and Underinsured Motorist Coverage in Colorado

A common misconception is that insurance companies are on the side of their policyholders. The truth of the matter is that many insurance companies will attempt to keep their policyholders from obtaining the funds they need to recover from accidents. Let’s discuss the case of Steffan Tubbs v. Farmers Insurance Exchange to give our argument credibility. The case covers underinsured motorist coverage in Colorado.

In the case, a Colorado motorist (Steffan Tubbs) was injured by an at-fault driver and suffered damages in excess of $100,000. The at-fault driver had $100,000 in liability coverage through his or her insurance company, and Tubbs settled for $30,000 under that policy. Tubbs also had an underinsured motorist policy (UIM) with Farmers Insurance Exchange with a limit of $500,000.

After settling with the at-fault driver for $30,000, Tubbs attempted to recover additional damages through his UIM policy, but was stonewalled by Farmers Insurance. Farmers Insurance argued Tubbs had an ‘exhaustion clause’ which stated he must first exhaust claims against the driver liable for the car accident. According to Farmers Insurance, because Tubbs had settled for $30,000 instead of $100,000, he was not entitled to obtain any additional damages from his UIM policy. That sounds pretty unfair, right? As it turns out, it was unfair, and Colorado law sided with Tubbs.

The Colorado Court of Appeals argued the exhaustion clause went against state law. Under Colorado law, insurance companies are required to pay the difference between the liability coverage policy’s limit and damages suffered by policyholders. Tubbs suffered damages in excess of $100,000 (the liability policy limit), so this means Farmers Insurance was required to pay that remaining excess (up to his $500,000 UIM limit).

Let’s say hypothetically his damages were $125,000. This would mean Farmers Insurance had to provide Tubbs with $25,000 under his UIM policy to be in compliance with Colorado state law. Tubbs would receive $25,000 from Farmers Insurance and keep the $30,000 he recovered from settling with the at fault driver.

Attorneys Will Fight for Policyholders

This case is an important lesson for injured motorists because it shows how insurance companies will attempt to weasel out of paying policyholders what they are owed.

After surviving an accident, it is highly advisable to contact an attorney, as insurance companies will attempt to underpay or not pay at all. A skilled attorney will fight to ensure policyholders are paid what they are owed.

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