2015 CO 11
Colo.2015Background
- Dean Craft, a former officer/shareholder of C-Ment Contracting, was sued in July 2010 for alleged misrepresentations; he did not know his company had a directors-and-officers (D&O) claims-made policy covering that period.
- The D&O policy covered Nov. 1, 2009–Nov. 1, 2010 and required notice “as soon as practicable” and also required notice “not later than 60 days” after policy expiration (a date-certain reporting requirement unique to claims-made policies).
- Craft learned of the policy in March 2012 (≈16 months after the policy expired), notified the insurer, received no timely response, settled the underlying suit in June 2012, and later sued the insurer for breach of contract and related claims.
- The federal district court dismissed Craft’s suit because he failed to provide notice within the 60-day date-certain reporting period; it rejected Craft’s argument that Colorado’s notice-prejudice rule applied to excuse late notice.
- The Tenth Circuit certified to the Colorado Supreme Court whether (1) the notice-prejudice rule applies to claims-made liability policies generally and (2) whether it applies to both types of notice provisions in such policies; the Colorado Supreme Court limited the certified question to the date-certain reporting requirement.
- The Colorado Supreme Court held that the notice-prejudice rule does not apply to a claims-made policy’s date-certain notice requirement because that requirement defines the scope of coverage and excusing late notice would rewrite the contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Colorado’s notice-prejudice rule applies to claims-made liability policies generally | Apply the rule to claims-made policies (to avoid forfeiture and protect insured expectations) | Friedland involved occurrence policies; claims-made date-certain requirements are coverage-defining and should not be subject to the rule | Court reframed to whether rule applies to date-certain requirement and held it does not apply |
| Whether the notice-prejudice rule applies to prompt notice vs. date-certain notice in claims-made policies | The rule should excuse late reporting in some renewal/gap scenarios | Prompt notice serves investigation purposes (might still implicate prejudice), but date-certain reporting is a material condition precedent that defines coverage | Court limited analysis to date-certain requirement: rule does not apply to date-certain reporting; did not decide prompt-notice here |
Key Cases Cited
- Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223 (Colo. 2001) (adopted notice-prejudice rule for underinsured motorist claims)
- Friedland v. Travelers Indem. Co., 105 P.3d 639 (Colo. 2005) (extended notice-prejudice rule to liability/occurrence policies and overruled Marez to the extent applicable)
- Marez v. Dairyland Ins. Co., 638 P.2d 286 (Colo. 1981) (earlier rule enforcing strict forfeiture for late notice; partially overruled by Friedland)
- Bailey v. Lincoln Gen. Ins. Co., 255 P.3d 1039 (Colo. 2011) (discussed limits on voiding unambiguous policy terms and the reasonable-expectations doctrine)
- Ballow v. PHICO Ins. Co., 875 P.2d 1354 (Colo. 1993) (discussed claims-made policy features like retroactive dates and tails)
- St. Paul Fire & Marine Ins. Co. v. Estate of Hunt, 811 P.2d 432 (Colo. App. 1991) (explains how claims-made notice provisions let insurers fix reserves and define the insured risk)