“Know the Gaps” – Farmer’s Insurance ad. The Colorado Supreme Court granted review of, and answered in the negative the following certified question from the Tenth Circuit Court of Appeals: “whether the notice-prejudice rule applies to the date-certain notice requirement of claims-made policies.” The notice-prejudice rule (set forth in Friedland v Travelers) allows insureds to avoid the consequence of late notice of a claim under a “prompt-notice” provision if the insurer is not prejudiced. A “claims-made” policy, different from an “occurrence” policy, typically requires that notice of an occurrence be given by a date-certain as a condition precedent to coverage. The date-certain provision is, therefore, a material condition of coverage. Applying the notice-prejudice rule would alter the parties’ agreed allocation of risk, something the Court declined to do.
To read the 10th Circuit’s order following this opinion, click HERE.
“In choosing Boulder, the plaintiffs may well have engaged in ‘forum shopping’ … But Rule 98 (c)(1) does not restrict the plaintiff’s choice of venue when the defendant is a nonresident…” Opinion. Relying on its opinion in Sampson v. District Court, 590 P2d 958 (1979), and approving an exemplar affidavit in Dep’t Highways v District Court, 635 P2d 889 (1981), the Supreme Court reversed three trial court orders transferring venue. It held that Boulder was a proper venue and that Defendant Farmers Insurance did not provide sufficient evidentiary support for its request to change venue. Defendant failed to 1) focus on the convenience of non-moving party witnesses and 2) submitted inadequate affidavits that did not contain in sufficient detail: a) witness identity, b) the nature, materiality and admissibility of testimony, and c) how the change would affect the witnesses.
“We firmly believe that under the law every person is considered innocent until proven unable to pay us back.” Skip Hunter, Bail Bondsman. Bail bondsman accepted money to post bond, but did not post the bond or return the money. CRS 10-2-704 imposes fiduciary duties on “insurance producers” such as bail bondsmen. At common law, suretyship law controlled bail bondsmen, which the Court relied on for this Opinion. There are three parties to a suretyship: principle (criminal defendant), surety (bail bondsman), and the creditor (the court). A creditor is akin to an insured under the insurance statutes, and the fiduciary duty is owed to the insured. Thus, the bail bondsman did not owe any fiduciary duties to the criminal defendant. The case was remanded because it was not clear that the Insurance Commission would have reached the same result using the correct interpretation of the law.
Twice the covered benefits plus attorneys’ fees and costs is what an insurance company must pay if it acts in bad faith when deciding an uninsured or underinsured insurance claim under CRS 10-3-1116. In this case, the claimant/plaintiff was awarded $0 damages on a statutory bad faith claim, but ultimately recovered three times the amount of UIM coverage available under the policy: double for statutory bad faith and a third under the settlement of a bad faith breach of contract claim. The court of appeals affirmed. First, it held that the policies were ambiguous on the identity of the insured, allowing the jury to conclude claimant was an insured. Then it held that even if the question of coverage was fairly debatable, delay or denying coverage was not necessarily reasonable. And finally, a successful statutory claim independently entitles a claimant to double the covered benefits.
“If the interest of the absentee is not represented at all, or if all existing parties are adverse to him, then he is not adequately represented.” Opinion. In a personal injury case, the parties moved for a protective order to keep certain records confidential. State Farm, defendant’s insurer, moved to intervene and oppose the order. The trial court denied the motion, but the court of appeals reversed. The court agreed with State Farm that: 1) its record-keeping obligations under state law gave it an interest in the outcome of the protective order; 2) there was no other venue in which State Farm could challenge the order; and 3) its interests were not protected by counsel for the insured, even if that counsel was hired by State Farm. The court did not, however, rule on the merits of the protective order. Instead, State Farm was permitted to intervene on remand.
It was a $1million mistake. A title company (Agent) closed 2 loans, for 2 different banks, 2 months apart, assuring both banks that they were first position lienholders for the same property. The Agent’s underwriter eventually paid over $1 million to resolve the banks’ competing claims over foreclosure proceeds. Underwriter sued Agent, and won. Agent appealed, challenging the interpretation of their contract and the applicability of a statutory defense for reliance on a payoff statement. The court of appeals held: 1) Agent was an “escrow” because it “handled” money during the closings, 2) Agent couldn’t rely on a “payoff statement” under CRS 38-35-124.5, as it didn’t indicate the amounts owed to the actual creditor or holder of the debt, and 3) the contractual phrase “actual prejudice” meant “substantial detriment to the significant interests of the party.” Affirmed.
Mind the gap. In this case, the gap is between a settlement less than the policy limits of an insured motorist who caused an accident, and the total amount of actual damages. Under a former version of CRS 10-4-609, underinsured motorist (UIM) coverage must cover the difference between any settlement and the total amount of damages – a reduction approach. But, the law changed, and now UIM policies must only cover the amount of total damages in excess of the policy limits of an insured motorist. Here, the UIM policy was excess and consistent with CRS 10-4-609. The court of appeals therefore held that UIM coverage was not available where, as here, the settlement was less than the policy limits of the available insurance. In light of the public policy reflected by the statute, the court was not free to reach a different result. Thus, there was no unreasonable denial of coverage.
“’For a while’ is a phrase whose length can’t be measured.” – Haruki Murakami. This case began with a car accident in 1995. Litigation ensued. In 1998, Allstate settled, but three suits were still pending. Two state cases were stayed pending the outcome of the third – federal litigation over the denial of coverage by Hartford. The federal case was decided in 2006. The state cases, including a case against State Farm for underinsured motorist coverage, were dismissed in 2007. A new case was brought against State Farm in 2008, which was dismissed on statute of limitations grounds. The Court affirmed dismissal. It held that the 2 year limitation in CRS 13-80-107.5(1)(b) begins upon a payment in the underlying bodily injury claim against the underinsured motorist. Here, it began running in 1998, the point at which the plaintiffs received a settlement payment from Allstate.
“Keep your friends close, and your enemies closer.” Machiavelli. At a YMCA basketball game, Vaughn, the father of a player, hit Miller, a referee, and injured him. Miller sues and Vaughn’s insurer, Shelter, defends under a reservation of rights because its policy excludes coverage for intentional acts. Vaughn is found negligent. Vaughn then assigned his rights in his insurance coverage to Miller, in a Bashor Agreement. Shelter brought a declaratory judgment action denying coverage and wins. Vaughn and Miller argued that Shelter was precluded from disclaiming coverage because Vaughn was found to have acted negligently, not intentionally. The court disagreed, affirming judgment for Shelter. Shelter was not collaterally estopped, because 1) Vaughn’s and Shelter’s interests conflicted and 2) Shelter could not have argued Vaughn acted intentionally while defending him.
Owning a nightclub is so full of drama there is a reality TV show about it. This case starts with a bar fight, but ends with a lawsuit against an insurance broker. A Bar’s Patron is injured during a fight and sues. Bar’s insurance policy had an assault and battery exclusion and denied coverage. Bar didn’t think its policy had the exclusion, so Bar sued Broker. Bar settles with Patron and executes a “Bashor” agreement, assigning any proceeds from Bar’s claims. But the claims against Broker are dismissed because of the assignment. The court of appeals held: 1) Broker must show the settlement was unreasonable, 2) Bar could still claim assigned damages, 3) Broker’s failure to obtain the insurance requested gave rise to a negligence claim, and 4) that claim was assignable because it was a commercial, not personal transaction. Summary Judgment for Broker reversed and the case was reinstated.