An article written by Matthew Sellers, “Can an insurance carrier reject a homeowner’s claim if it is late?” seems barely deceptive relating to the Colorado Supreme Court case, famous in The Doom and Gloom Assumes a Costume of Plume—The Insurance Industry Needs to Stop Being So Negative and Watch Out for Its Customers. Sellers wrote:
[T]he Supreme Court of Colorado prolonged the applying of the notice-prejudice rule to occurrence-based first-party householders’ insurance coverage insurance policies. This rule requires an insurer to display that it was prejudiced by the insured’s late discover of a declare earlier than denying protection primarily based on the untimeliness of the declare. This marks a departure from the standard method that allowed insurers to disclaim claims primarily based on late discover with out proving prejudice.
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This improvement underscores the dynamic nature of insurance coverage regulation and the potential for authorized precedents to evolve. Insurance professionals ought to keep knowledgeable about authorized developments and regulatory adjustments that might have an effect on coverage language, claims processing, and the general insurance coverage market.
If I didn’t know higher, studying this text implies that the Colorado Supreme Court did one thing completely different from the vast majority of different states. In reality, only some states apply the draconian forfeiture rule, as defined by insurance coverage regulation professor Johnny Parker in his article, The Role of Prejudice in Resolving Insurance Condition Clause Disputes: The Good, The Bad, & The Ugly. 1
Colorado adopted the identical rule because the overwhelming majority of states that use the discover prejudice rule, which Professor Parker famous is “the primary tool used by courts to resolve insurance disputes that arise out of an insured’s failure to comply with a condition clause.” Parker then labeled the three strategies or guidelines as the nice, unhealthy, or ugly:
These classifications are primarily based on a number of variables consisting of: (1) whether or not the unfairness rule has been adopted; (2) the extent to which it has been utilized to situation provisions apart from discover situations; (3) specific restrictions or limitations on the applying of the unfairness rule; and (4) who has the burden of proving or disproving prejudice.
Section II.C concludes {that a} majority of jurisdictions require insurers to show that they have been really prejudiced by the insured’s noncompliance. In jurisdictions labeled nearly as good, the regulation is characterised by: (1) recognition of the rule’s applicability to most, if not all, situation provisions; (2) absence of specific restrictions on increasing the doctrine’s utility; and (3) allocation of the burden of proof on the insurer.
In jurisdictions labeled as unhealthy, prejudice jurisprudence is restricted in its utility to 2 or fewer situation provisions. The regulation in these jurisdictions additionally expressly acknowledges that the rule isn’t relevant past particular situation provisions and/ or particular sorts of insurance policies. Many of the jurisdictions whose regulation is assessed as unhealthy additionally allocate the burden of disproving prejudice to the insured, thus recognizing a presumption of prejudice in favor of the insurer.
In jurisdictions labeled as ugly, the regulation continues to stick to the strict or literal interpretation method to resolving insurance coverage contract disputes. These jurisdictions have interaction within the conventional situation precedent/situation subsequent evaluation, which favors the drafter of the coverage. Consequently, if the situation constitutes a situation precedent, which in most situations it can, or expresses the implications of an insured’s failure to conform, protection is void no matter whether or not the insurer was prejudiced.
Parker famous that solely 5 jurisdictions, Arkansas, Hawaii, Mississippi, Virginia, and the District of Columbia, use the forfeiture rule, which insurance coverage firm attorneys have been unsuccessfully arguing for within the current Colorado case. Professor Parker additional commented on how a lot criticism this rule of regulation and circumstances have obtained:
It can also be worthy of be aware that the regulation in these jurisdictions has been totally repudiated and rejected by a majority of jurisdictions. It has been deserted by the overwhelming majority of jurisdictions that initially adopted it.
If there’s a development, it will be a problem to after which a change of the regulation in these 5 remaining jurisdictions nonetheless following the antiquated forfeiture rule.
If you might be deeply within the improvement of this space of insurance coverage regulation, Professor Parker’s work is a wonderful evaluation.
Thought For The Day
The distinction between the virtually proper phrase and the best phrase is basically a big matter—it’s the distinction between the lightning bug and the lightning.
—Mark Twain
1 Johnny Parker, The Role of Prejudice in Resolving Insurance Condition Clause Disputes: The Good, The Bad, & The Ugly, 47 U. Mem. L. Rev. 779 (2017).