Nicholas Horton and Taishara Abeyta were injured in a motorcycle collision in 2018. While the motorcycle was insured under a separate Progressive policy, Horton also held automobile policies with USAA and Garrison that did not list the motorcycle on their declarations pages. Following a $42 million verdict against Horton in a state court lawsuit, the insurance companies filed a declaratory judgment action to confirm they owed no coverage. The district court granted summary judgment for the insurers, ruling the motorcycle was excluded and dismissing the appellants' bad faith counterclaims. The appellants appealed, arguing that exceptions to other exclusions created an ambiguity requiring coverage, and that the insurers' delay in denying coverage constituted waiver or bad faith.
The Tenth Circuit applied Colorado law, which mandates that unambiguous insurance contract provisions be enforced according to their plain meaning. The court analyzed Exclusion B.1, which denies liability for any vehicle not listed on the declarations page unless it falls into specific categories like farming vehicles or moving vans. The motorcycle did not fit these categories. Appellants argued that exceptions in Exclusions B.2 and B.3, which restore coverage for vehicles owned by family members or available for regular use, conflicted with Exclusion B.1. The court rejected this, distinguishing the precedent of Simon v. Shelter Gen. Ins. Co. The court noted that in Simon, conflicting provisions were in separate documents covering the same subject matter, whereas here, Exclusion B.1 addresses vehicle type while B.2 and B.3 address ownership type. The court found the provisions operate independently and that reading them as a whole reveals no conflict. Regarding waiver and estoppel, the court reiterated that these doctrines cannot create coverage where none exists under the policy terms. Finally, the court addressed bad faith claims, citing Colorado law that a duty to settle or defend arises only when benefits are owed under the policy. Since the court found no coverage, the insurers had no duty to settle or defend, and the bad faith claims necessarily failed.
The decision reinforces that insurance policies with clear, explicit exclusions for unlisted vehicles will be enforced strictly under Colorado law. It clarifies that exceptions in one exclusion do not automatically create ambiguity that overrides a separate, distinct exclusion regarding vehicle type. Practically, this limits the ability of insureds to argue for coverage based on conflicting policy language when the exclusion for unlisted vehicles is unambiguous. It also confirms that bad faith claims cannot succeed if the underlying claim for coverage is properly denied, regardless of the insurer's delay or the insured's argument that coverage was 'arguable.' The case is remanded to the district court with instructions to enter judgment consistent with the affirmation of summary judgment.
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