May 21, 2019

Colorado Court of Appeals: Notice-Prejudice Rule Applies Where Claim Filed with Insurance Company After Contractual Period

The Colorado Court of Appeals issued its opinion in MarkWest Energy Partners, L.P. v. Zurich American Insurance Co. on Thursday, July 14, 2016.

Insurance—Notice-Prejudice Rule—Occurrence Liability Policy.

MarkWest Energy Partners, L.P. (MarkWest), a natural gas company, procured from Zurich American Insurance Company (Zurich) a commercial general liability policy (the policy) with a limited pollution liability endorsement (the endorsement), covering “incidents” occurring between November 1, 2012, and November 1, 2013. On November 4, 2012, MarkWest was constructing a pipeline when a chemical used in the drilling process escaped the drilling area, thereby contaminating the surrounding area. MarkWest immediately reported the incident to local environmental officials, who approved a chemical cleanup protocol and confirmed that cleanup had been successfully completed in February 2013. On March 28, 2013, MarkWest notified Zurich of the contamination and filed an associated claim. Zurich denied the claim because MarkWest had failed to provide notice within 60 days of the incident, as required by the endorsement. MarkWest filed an action for damages, and the district court granted Zurich’s motion for summary judgment.

On appeal, MarkWest contended that the notice-prejudice rule applied and the district court erred in granting Zurich’s motion for summary judgment. Colorado’s notice-prejudice rule applies even where, as here, the notice requirement is a condition precedent to coverage under an occurrence liability policy. Therefore, unless Zurich can show that its ability to investigate the occurrence or defend against a claim was prejudiced by MarkWest’s late notice, the court cannot deny a claim based solely on a failure to strictly comply with the notice provision. Because the district court concluded otherwise, its decision was reversed and the case was remanded for further proceedings.

Summary provided courtesy of The Colorado Lawyer.

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.

Colorado Court of Appeals: Notice-Prejudice Rule Properly Applied by Trial Court to Third-Party Settlement

The Colorado Court of Appeals issued its opinion in Stresscon Corp. v. Travelers Property Casualty Company of America on Thursday, September 12, 2013.

Construction—Insurance Policy—Notice–Prejudice Rule—No Voluntary Payment Clause—Settlement—Collateral Source Rule—Damages—Attorney Fees.

Plaintiff Stresscon Corporation (concrete company) and defendant Travelers Property Casualty Company of America (insurance company) appealed the trial court’s judgment. The judgment was affirmed in part and reversed in part, and the case was remanded.

In this complex construction case, the general contractor and the concrete company settled their dispute without litigation. Before entering into the settlement, the concrete company did not inform the insurance company of the settlement or obtain its consent.

The insurance company argued that the notice–prejudice rule adopted in Friedland v. Travelers Indemnity Co., 105 P.3d 639, 643 (Colo. 2005), for example, does not apply to breaches of “no voluntary payment” clauses, and insurers are prejudiced as a matter of law whenever an insured settles with a third-party claimant before that third party has filed a lawsuit. “No voluntary payment” clauses in insurance policies prohibit insureds from voluntarily settling claims and making payment, or from assuming certain expenses, without the insurer’s consent, at the risk of losing insurance benefits. The notice–prejudice rule applies to “no voluntary payment” clauses in insurance policies. The notice–prejudice rule provides that (1) if an insured does not provide the insurer with notice of a claim until after the insured has settled, then (2) the insured will lose benefits after the settlement based on a presumption of prejudice, unless(3) the insured rebuts the presumption that the insurer’s interests were prejudiced by the lack of notice, and(4) the insurer does not then prove that it actually was prejudiced by the lack of notice. Further, an insured’s pre-litigation settlement with a third party does not conclusively establish that an insurer was prejudiced. Here, sufficient evidence was presented at trial to support the jury’s finding that the insurance company was not prejudiced. Therefore, the trial court properly applied the notice–prejudice rule in this case, and the record supports the jury’s verdict that the insurance company unreasonably delayed or denied the claim.

The insurance company argued that the trial court should have granted a judgment notwithstanding the verdict because the court had erroneously allowed the jury to consider conduct that occurred before the effective date of CRS §§ 10-3-1115 and -1116, which was August 5, 2008. The insurance company waived this argument, however, because it did not request a limiting instruction.

On cross-appeal, the concrete company, relying on the collateral source rule, argued that the trial court improperly reduced its damages by the amount that the insurer of one of the members of the crane team paid to satisfy the judgment in the first trial. The unambiguous language of the “other insurance” clauses in the insurance policies, however, states that the concrete company contracted away its right to recover benefits from both the insurance company and the insurer of the member of the crane team. Therefore, the trial court did not err when it reduced the damages by the amount that the insurer for the member of the crane team paid to the concrete company to satisfy the judgment in the first trial.

The concrete company also argued that the trial court incorrectly deducted the fees and costs that it incurred in bringing the fee request—namely, the “fees-on-fees”—from its award under CRS § 10-3-1116(1). A request for fees-on-fees in connection with a § 10-3-1116(1) claim is a request for damages, and the trial court erred in denying this portion of the concrete company’s fees claim. The case was remanded to the trial court for a determination of the reasonable amount of attorney fees and costs that the concrete company incurred in defending the judgment on the statutory claim on appeal.

Summary and full case available here.