The Colorado Supreme Court recently clarified that common law rules of agency still apply to purchasers of insurance when purchasing uninsured/underinsured motorists coverage. Generally, agency law allows an agent to bind their principal when they have the express, implied or apparent authority to do so. The case involved two friends who had jointly purchased a car. Mr. Johnson requested his friend and co-owner purchase insurance on his behalf. The friend did so but rejected uninsured/underinsured motorist coverage for the vehicle. Mr. Johnson argued that her rejection of the coverage did not bind him and he was entitled to coverage. The question before the court was whether her rejection was valid as to Mr. Johnson, that is, whether she had the express, implied or apparent authority to do so on his behalf and as his agent, or whether a rejection of coverage required that Mr. Johnson himself reject coverage.
The Court held that, as Mr. Johnson’s agent, the friend was impliedly authorized to act on his behalf and could reject uninsured/underinsured motorist coverage. It also held that the legislature did not express any intent to void traditional common law principles of agency in the UM/UIM statute. The ruling clarifies this issue for the insurance industry, and also makes it easier for policyholders to purchase insurance without having to take extra steps to reject this coverage if they choose to do so.