“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.
“’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.
Hard money lenders are private investment companies that offer shorter term loans secured by real property when traditional commercial real estate loans are not available from banking institutions. Here, a hard money lender, CCI, insured against its own losses for want of fidelity by CCI’s own officers, with a fidelity bond from Lloyds. CCI officers allegedly committed fraud in attracting investors to invest in CCI, which made hard money loans to commercial real estate borrowers. Following CCI’s bankruptcy, investors sued Lloyds on behalf of CCI, and CCI itself, to recover losses. Lloyds claimed its policy did not cover the investors’ losses. The court of appeals agreed. Indirect losses to investors are protected by liability policies, not fidelity bonds. Because Lloyds issued a fidelity bond to protect CCI directly, it did not cover indirect losses by investors.