August 18, 2019

Colorado Supreme Court: Notice-Prejudice Rule Does Not Apply to No-Voluntary-Payment Provisions

The Colorado Supreme Court issued its opinion in Travelers Property Casualty Co. of America v. Stresscon Corp. on Monday, April 25, 2016.

Insurance—Enforceability of “No Voluntary Payments” Provisions—Scope of the Notice-Prejudice Rule.

Travelers Property Casualty Company of America (Travelers) petitioned for review of the Court of Appeals’ judgment affirming the district court’s denial of its motion for directed verdict in a lawsuit brought by its insured, Stresscon Corporation (Stresscon). The Court of Appeals rejected Travelers’ contention that the “no voluntary payments” clause of their insurance contract relieved it of any obligation to indemnify Stresscon for payments Stresscon had made without its consent. The Court of Appeals found that the Supreme Court’s opinion in Friedland v. Travelers Indemnity Co., 105 P.3d 639 (Colo. 2005), permitting the insured in that case an opportunity to demonstrate a lack of prejudice from its failure to comply with a notice requirement of its insurance contract, had effectively overruled the Court’s prior “no voluntary payments” jurisprudence to the contrary and given Stresscon a similar opportunity.

The Supreme Court reversed the Court of Appeals’ judgment, holding that its adoption of a notice-prejudice rule in Friedland did not overrule any existing “no voluntary payments” jurisprudence in this jurisdiction, and declining to extend its notice-prejudice reasoning in Friedland to Stresscon’s voluntary payments, made in the face of the “no voluntary payments” clause of its insurance contract with Travelers. Because application of the notice-prejudice rule was the sole basis for the district court’s denial of Travelers’ motion for directed verdict, and because it was undisputed that Stresscon voluntarily settled and paid the third-party claim for which it sought reimbursement, the Court remanded the case with directions that the jury verdict be vacated and that a verdict instead be directed in favor of Travelers.

Summary provided courtesy of The Colorado Lawyer.

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