Gregory v. Safeco Insurance. Co. of America; Runkel v. Owners Insurance. Co.

2024 CO 13. Nos. 22SC399 & 22SC563. Homeowners’ Insurance—Occurrence-Based Insurance Contracts—Notice-Prejudice Rule.

March 11, 2024

In these cases, the Supreme Court considered whether the notice-prejudice rule, which allows an insurer to deny coverage based on a claim’s untimeliness only if the insurer can show prejudice from the late notice, applies to occurrence policies in the context of first-party homeowners’ property insurance claims. Specifically, the Court had to determine whether the policy considerations underlying its adoption of the notice-prejudice rule in the context of uninsured/underinsured motorist policies and third-party liability policies extend to occurrence-based, first-party homeowners’ property insurance policies.

The Court concluded that the notice-prejudice rule applies to occurrence-based, first-party homeowners’ property insurance policies for two reasons. First, recent cases have consistently applied the notice-prejudice rule to occurrence policies like those at issue here, in which the purpose of notice is to allow an insurer to investigate and defend against the claim and is not a fundamental term defining the temporal boundaries of coverage (unlike in a claims-made policy). Second, the policy considerations that the Court identified in Clementi v. Nationwide Mutual Fire Insurance Co., 16 P.3d 223, 229–30 (Colo. 2001), for determining whether the notice-prejudice rule applies, namely, the adhesive nature of insurance contracts, the public policy objective of compensating tort victims, and the inequity of granting the insurer a windfall due to a technicality, all support the application of the notice-prejudice rule here.

Accordingly, the Court reversed the decisions of the divisions below and remanded both cases for further proceedings consistent with this opinion.