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State Farm Mutual Automobile Insurance Co. v. Broadnax3/23/1992
State Farm Mutual Automobile Insurance Company (State Farm) appeals from two district court orders in two unrelated actions. In each action, State Farm challenged the constitutionality of section 10-4-708(1.5), 4A C.R.S. (1990 Supp.), which requires binding arbitration of disputes arising under no fault insurance contracts. We simultaneously address both appeals, since the constitutional challenges to section 10-4-708(1.5) in each are substantially the same. We affirm the district court's finding that section 10-4-708(1.5) is constitutional.
State Farm Mutual Automobile Insurance Co. v. Broadnax
No. 90CV11678
State Farm issued a car insurance policy to Earle Broadnax (Broadnax) prior to December 18, 1988. On December 18, 1988, and on September 7, 1989, Broadnax was involved in car accidents. Broadnax submitted claims to State Farm for personal injury protection benefits under his policy. A dispute regarding payment of benefits ensued, and Broadnax served State Farm with a Demand for Arbitration on April 3, 1990.
On November 6, 1990, State Farm filed a Petition to Stay Arbitration and sought a declaration that section 10-4-708(1.5) was unconstitutional. The district court denied the stay and found the statute to be constitutional.
Gaal v. State Farm Mutual Automobile Insurance Co.
No. 90CV9218
State Farm issued a car insurance policy to Rashel Engholm prior to October 14, 1988. On that date, Philipp Gaal (Gaal) was involved in an accident with Rashel Engholm and qualified for personal injury protection benefits under the policy. State Farm paid benefits to or on behalf of Gaal, but a dispute arose and Gaal served a Demand for Arbitration on State Farm.
An arbitration hearing was held in July 1990, at which State Farm argued that section 10-4-708(1.5) was unconstitutional. State Farm later filed an Application to Vacate the Arbitration Award in district court.
On March 25, 1991, the district court relied on its finding in State Farm Mutual Automobile Insurance Company v. Broadnax that section 10-4-708(1.5) was constitutional, and denied State Farm's application. State Farm now seeks review of the district court's determination in each case.
Section 10-4-708(1.5) provides, in pertinent part, that in "any action for breach of contract brought pursuant to subsection (1) of this section shall proceed to binding arbitration." Section 10-4-708(1.5) is part of the Motor Vehicle ("No Fault") Insurance Act (No Fault Act). §§ 10-4-701 to -724, 4A C.R.S. (1991 Supp.).
The No Fault Act requires automobile owners to have insurance policies which provide coverage to insureds for personal injuries sustained in automobile accidents. § 10-4-706, 4A C.R.S. (1987 & 1991 Supp.). Insurers are obligated under the No Fault Act to provide direct benefits to insureds. Id. When the benefits sought exceed $2,500, insureds may bring an action in tort against another automobile owner or operator. § 10-4-714(1)(e), 4A C.R.S. (1987). When an insured is liable for benefits paid by another insurer, the No Fault Act requires insurers to resolve reimbursement issues through mandatory, binding arbitration. § 10-4-717, 4A C.R.S. (1987).
The disputes thus governed by section 10-4-708(1.5) arise from the statutory right of insureds to recover benefits directly from insurers. § 10-4-708(1), 4A C.R.S
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