Craft v. Phila. Indem. Ins. Co.

Craft v. Phila. Indem. Ins. Co.

Opinion

 [**952]  en banc

JUSTICE MÁRQUEZ delivered the Opinion of the Court.

 [*P1]  We accepted jurisdiction pursuant to C.A.R. 21.1 to answer questions of state law certified to this court by the United States Court of Appeals for the Tenth Circuit regarding the applicability of the "notice-prejudice rule" to claims-made insurance policies.

 [*P2]  ] Under the notice-prejudice rule, an insured who gives late notice of a claim to his or her insurer does not [***3]  lose coverage benefits unless the insurer proves by a preponderance of the evidence that the late notice prejudiced its interests. Friedland v. Travelers Indem. Co., 105 P.3d 639, 643 (Colo. 2005). We first adopted the rule in the context of an underinsured motorist policy in Clementi v. Nationwide Mutual Fire Insurance Co., 16 P.3d 223, 230 (Colo. 2001). We later applied it to a liability policy in Friedland. 105 P.3d at 643. However, the liability policy in Friedland was an occurrence policy—that is, a policy that provides  [**953]  coverage for "occurrences" during a policy period, regardless of when a claim is made. We have not had occasion before today to address whether or how the notice-prejudice rule applies to claims-made liability policies.

 [*P3]  ] A claims-made policy covers only those claims brought against the insured during the policy period and reported to the insurer by a date certain, typically within a brief window following the expiration of the policy period. The date-certain notice requirement effectuates the parties' arrangement and limits the insurer's liability to those claims reported within the time specified.

 [*P4]  In this case, the insurer issued a policy that provided directors and officers liability coverage. The policy required the insured to give prompt notice of a claim; specifically, notice "as soon as practicable" after learning of the claim. [***4]  The policy also required the insured to give notice of the claim by a date certain; specifically, "not later than 60 days" after the expiration of the policy. Near the end of the one-year policy period, a company officer was sued for alleged misrepresentations he made during a merger. Unaware of the insurance policy, the officer defended himself against the suit. When he learned of the policy, approximately sixteen months after the policy period had expired, he immediately contacted the insurer but did not receive a response. The officer later settled the suit. He then sued the insurer for denying coverage under the policy. The insurer removed the case to federal district court and moved to dismiss the case on grounds that the officer gave untimely notice of his claim. The district court granted the motion to dismiss, rejecting the officer's argument that the notice-prejudice rule applied to the claims-made policy issued by the insurer. The officer appealed, and the case is now before the Tenth Circuit.

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