MarkWest Energy Partners, L.P. v. Zurich American Insurance Company
2016 COA 110
| Colo. Ct. App. | 2016Background
- MarkWest purchased a Zurich commercial general liability policy with a limited pollution endorsement covering incidents from Nov. 1, 2012 to Nov. 1, 2013.
- On Nov. 4, 2012, a drilling chemical escaped at a pipeline site in Ohio and contaminated surrounding property; local authorities oversaw and approved cleanup completed by Feb. 2013.
- MarkWest notified Zurich of the contamination and submitted a claim on Mar. 28, 2013—outside the Endorsement’s 60-day reporting window but within the policy period.
- Zurich denied coverage, asserting MarkWest failed to comply with the Endorsement’s sixty-day notice condition precedent and therefore had no coverage entitlement.
- MarkWest sued for coverage and bad-faith denial; the district court granted Zurich summary judgment, holding the untimely notice (a condition precedent) barred recovery regardless of prejudice.
- The Colorado Court of Appeals reversed, holding the notice-prejudice rule applies to occurrence policies even when the notice requirement is framed as a condition precedent, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether late notice (60-day requirement) bars coverage absent proof of prejudice | MarkWest: Colorado’s notice-prejudice rule controls; insurer must prove prejudice from untimely notice | Zurich: Notice is a date-certain, material condition precedent; failure precludes coverage regardless of prejudice (like Craft/claims-made logic) | Held: Notice-prejudice rule applies to occurrence policies even when notice is labeled a condition precedent; insurer must prove prejudice |
| Whether the notice clause here functions like claims-made date-certain clause | MarkWest: It does not; this is an occurrence policy and the clause serves investigation/defense purposes | Zurich: Clause is a material gatekeeper to coverage, akin to Craft’s date-certain clause | Held: Clause serves investigatory/defensive purpose in occurrence policies; Craft’s reasoning limited to claims-made/date-certain contexts |
| Whether public-policy concerns justify requiring insurer to show prejudice | MarkWest: Public-policy (avoid forfeiture, compensate victims, avoid insurer windfall) supports notice-prejudice | Zurich: Contract terms should be enforced as written; labeling as condition precedent matters | Held: Public-policy considerations support applying notice-prejudice despite contractual label |
| Whether MarkWest can recover appellate attorney fees now under § 10-3-1116(1) | MarkWest: Entitled to fees incurred on appeal | Zurich: Opposes | Held: Premature—no determination yet that benefits were unreasonably delayed or denied; fees may be considered later if MarkWest prevails on that claim |
Key Cases Cited
- Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223 (Colo. 2001) (adopted notice-prejudice rule for uninsured motorist context and set out public-policy reasons to require insurer to prove prejudice)
- Friedland v. Travelers Indemnity Co., 105 P.3d 639 (Colo. 2005) (applied notice-prejudice rule to occurrence liability policy and created a rebuttable presumption of prejudice in extreme delay)
- Brakeman v. Potomac Ins. Co., 371 A.2d 193 (Pa. 1977) (applied notice-prejudice rule to a notice clause framed as a condition precedent to coverage; influential for public-policy analysis)
- Marez v. Dairyland Ins. Co., 638 P.2d 286 (Colo. 1981) (overruled by Friedland to the extent it precluded notice-prejudice treatment for liability policies)
- Hanson Production Co. v. Americas Ins. Co., 108 F.3d 627 (5th Cir. 1997) (observed that failure to give notice often poses less risk of prejudice than other breaches like unauthorized settlements)