Christoffersen v. United Parcel Service, Inc., 2014 WL 1303361 (10th Cir. Apr. 2, 2014)

In the context of underinsured motorist (“UIM”) coverage, the Tenth Circuit held that UPS was not a self-insurer under Utah law, despite the fact that UPS maintained a “fronting” insurance policy where its deductible equaled its policy limits, essentially limiting the insurer’s obligation to pay any claim unless UPS was insolvent. The heirs of a deceased UPS driver argued that this type of policy constituted self-insurance because they could not gain UIM coverage from UPS if UPS was self-insured. The Court first held that the issue of whether a company is self-insured is an issue of law, not fact, an issue both parties missed. Next, the Court held that even though UPS’s deductible equaled its policy limits, it still qualified as an insured under Utah law. In reaching this conclusion, the Court looked to the definition of insurance under Utah Code § 31A-1-301(82), and concluded that because the agreement between UPS and its insurer involved “an arrangement for the distribution of a risk,” it qualified as insurance. Accordingly, because status “as an ‘ insured’ and ‘ self-insurer’ are mutually exclusive,” UPS could not be considered a self-insurer because it was an insured under its “fronting” policy.