The “notice-prejudice rule,” which requires an insurer to prove that it was prejudiced by an insured’s late notice of a claim in order to deny coverage, does not apply to homeowners insurance policies, the Colorado Court of Appeals has ruled, but they added that “this case may present an opportunity for our supreme court to provide clarity on this question.”
Karyn Gregory bought a homeowners policy from Safeco Insurance Co., according to the appeals court’s opinion. During the policy period, Gregory’s roof sustained damage in a hailstorm in May 2017. Eighteen months later, a contractor informed her of the damage to the roof due to the hailstorm and Gregory filed a claim for the covered expense.
Safeco investigated and found that the most recent hailstorm in Gregory’s area was 18 months earlier, according to the opinion. The homeowners insurance policy had a provision requiring the policyholder to provide notice of damage within 365 days of the loss.
More than two years after the denial of her claim, Gregory brought suit against Safeco, claiming breach of contract, bad-faith breach of an insurance policy, and unreasonable delay, and denial of her claim. The district court ruled in favor of the insurer, stating that the “365-day notice requirement did not contravene the statute-of-limitations provision, that Gregory’s claim was untimely under the plain terms of the Policy, that her delay was unexcused as a matter of law, and that Safeco was therefore relieved of its obligation to provide coverage benefits for her claim.”
A published opinion penned by Court of Appeals Judge W. Eric Kuhn examined two issues: whether Colorado’s notice-prejudice rule applied and whether the policy’s 365-day notice provision was invalid under section 10-4-110.8(12)(a), C.R.S. 2021, which limits insurers’ ability to contractually shorten the applicable statute of limitations for insureds to file suits such as Gregory’s.
The district court ruled in favor of the insurer, concluding that the notice required by Safeco’s policy was not a violation of the statute-of-limitations provision, citing that the Colorado Supreme Court “has not extended Colorado’s notice-prejudice rule to first-party claims under homeowners’ insurance policies.” Kuhn affirmed the district court ruling, but noted that the Supreme Court has, thus far, applied the notice-prejudice rule only to “underinsured motorist cases and comprehensive general liability insurance policies.”
Gregory argued that Supreme Court precedent should apply “regardless of the type of insurance policy involved.” But Kuhn disagreed, stating that application of the rule to a new type of insurance policy would be a “departure from our supreme court’s precedent” and that the task of “deciding whether to extend the notice-prejudice rule to a new type of insurance policy is not one we may undertake.”
Judges David Furman and Neeti V. Pawar concurred.
Gregory was represented by David Roth of Roth Milne, who could not be immediately reached for comment. Safeco was represented by Brian Spano of Lewis, Roca, Rothgerber, Christie and could not be reached for comment either.
