The Colorado Supreme Court (the Court) held in Klabon v. Travelers, as a matter of first impression, that in Colorado, “an employee who is injured in the court of their employment by a third-party tortfeasor and who receives workers’ compensation benefits as a result of that injury can also sue to recover benefits for their employer’s separate uninsured/underinsured motorist (UM/UIM) carrier.”
Further, the Court ruled that “when an employee is injured by the negligence of a third party, rather than by an employer or co-employee, a suit to recover UM/UIM benefits does not constitute a suit against the employer or co-employee and, therefore, is not barred by the exclusivity clause of the WCA.”
The Colorado Supreme Court
This decision means that the exclusivity clause of the Colorado Worker’s Compensation Act (“WCA”), C.R.S. §8-41-104 does not reach a separate UM/UIM carrier for the employer, which expands the menu of recovery available to an injured claimant in Colorado.
The claimant worked as a technician at CMI Legacy, LLC – a Denver-area HVAC company (the “Employer”). While working for the Employer and driving a company vehicle, the claimant was struck by a third-party driver who failed to obey a red light. The claimant was severely injured, with medical bills exceeding $500,000. The claimant recovered workers' compensation benefits through the Employer’s coverage with Pinnacol; he also settled a claim against the at-fault driver’s insurance through Progressive. However, the at-fault driver only carried state-minimum coverage worth $25,000. In addition to the WCA coverage with Pinnacol, the Employer carried $1 million in UM/UIM coverage through Travelers.
The claimant made a UIM claim, and Travelers paid $45,766.68 in UIM benefits to him. The claimant sued Travelers, alleging that the carrier unreasonably denied and delayed the tender of benefits; he also brought claims for breach of contract and bad faith under § 10-3-1115, C.R.S.
Travelers removed the case to federal court and moved for summary judgment, arguing that the claimant had already received workers’ compensation benefits under the WCA, which barred the lawsuit under the WCA’s “exclusivity and immunity provisions,” §§ 8-41-102, -104, C.R.S. (2024). Essentially, Travelers contended that the WCA was the claimant’s exclusive avenue for recovery, and by accepting those benefits, he had waived his right to bring a UIM claim. The claimant countered that since the injuries were caused by the negligence of a third party, the WCA was not any bar to his claim for UIM benefits from the carrier. The claimant asserted that the underlying claim was against the third party, and not the Employer, so it was not a claim for workers’ compensation benefits at all.
The magistrate acknowledged that this very question (does the MCA bar UM/UIM claims when the claimant was injured by the negligence of a third party?) had recently been creating some struggle among Colorado district court judges. The magistrate judge certified the question of law to the Colorado Supreme Court, and the Court accepted review.
Because there was no guiding precedent on this issue, the Court embarked on a de novo review. The Court also interpreted the statutory language of §§ 8-41-102, -104, C.R.S. (2024) de novo.The Court reasoned that the WCA was created to protect injured workers and to “assure the quick and efficient delivery of disability and medical benefits to injured workers… without the necessity of any litigation.” citing to § 8-40-102(1), C.R.S. (2024).
Reviewing the two exclusivity clauses, the Court found that: “These provisions do not bar injured employees from asserting all tort claims. Notably, the WCA expressly permits an employee to receive workers’ compensation benefits and pursue a remedy against a third-party tortfeasor. That is, while an employee cannot pursue a remedy for an injury against an employer or a co-employee, an employee can pursue a remedy when the employee is injured by the negligence of a third party. The entire WCA rests on a “mutual renunciation of common law rights and defenses by employers and employees alike.” § 8-40-102(1), C.R.S. (2024).
The Court then compared the language and purpose of the WCA’s exclusivity provisions to § 10-4-609(1)(a)(I), C.R.S. (2024), the Colorado UM/UIM statute. The purpose of that statute is to: “protect the public from the devastating financial loss that a traffic accident victim can incur” and to “provide a mechanism through which an insured could purchase insurance coverage against loss caused by the negligent conduct of a financially irresponsible motorist.” McMichael, 906 P.2d at 98; see also DeHerrera v. Sentry Ins. Co., 30 P.3d 167, 174 (Colo. 2001) (observing that “the important policy behind UM/UIM insurance [is] to protect persons from the often-devastating consequences of motor vehicle accidents”).
The Court held that Travelers was not included in the mutual renunciation described in § 8-40-102(1), because “Travelers does not bear the burden of providing workers’ compensation benefits or of ensuring its compliance with any of the WCA’s insurance requirements. Travelers were thus not an entity pondered in the language of §8-40-102, and thus, Travelers was not immunized from suit in the same fashion that the Employer’s workers’ compensation carrier Pinnacol was immunized.
Finally, the Court determined that as a matter of law, the UIM claim that gave rise to this action was not a claim against the Employer, but rather a third party. The Court explained that “the WCA expressly permits an injured employee to recover both workers’ compensation benefits and to sue the third-party tortfeasor for damages. § 8-41-203(1)(a). When the third-party tortfeasor is uninsured or underinsured, a suit to recover UM/UIM benefits—even from an employer’s UM/UIM carrier—is not a suit against the employer or a co-employee, and, accordingly, does not implicate, let alone violate, the WCA’s exclusivity rule.” Thus, the court concluded that: “By contracting to provide CMI—and, by virtue of his employment, Klabon—with UM/UIM benefits, Travelers agreed to assume liability for injuries caused by an uninsured or underinsured driver. And because Klabon’s UIM claim arises from a third-party tortfeasor’s liability, it does not violate the exclusivity principle as set forth in section 8-41-102.” According to the Court, this result “aligns with the well-established public policy of ‘preventing the dilution of UM/UIM coverage,” including by, for example, prohibiting UM/UIM carriers from reducing their liability by the amount of any workers’ compensation award. State Farm Mut. Auto. Ins. Co. v. Brekke, 105 P.3d 177, 184 (Colo. 2004).” Additionally, the availability of UIM coverage allows the injured claimant to access compensation for noneconomic damage that is intentionally omitted from the purview of the WCA. “While the benefits received under these separate types of coverage may overlap, they are not co-extensive.”
At such an early juncture in this new development in the law, it is tough to say what this new holding means for workers’ compensation and third-party liability cases in Colorado. However, with the clarification that claimants can reach an employer’s UM/UIM in addition to their own coverages and workers’ compensation insurance coverage, we anticipate that there are likely to be future implications for subrogation and how work comp cases are settled. The UIM claim pondered in Klabon is treated effectively as a claim against a third party for negligence, leaving open the possibility of additional subrogation against the claimant’s recovery from that UM/UIM policy.
It is also possible that the availability of these funds may affect the business of plaintiff or claimant-side personal injury firms and their willingness to engage certain types of cases. The overall effect would likely be an uptick in the number of claims in Colorado.
We look forward to applying these new developments in the law and helping our dear clients navigate the changes. Please stay tuned to our newsletter for further updates in the future.
2024 CO 66, Klabon v. Travelers Property Casualty Company of America, No. 23SA142 (Colo. 2024).
Want to know more? Contact Jonny Campbell at [email protected]
