Late Notice – Colorado – Insurance Laws and Products

Gregory v. Safeco Ins. Co. of
Am.

Nos. 22SC399 and 22SC563, 2024 CO 13, 2024 WL 1040531 (Colo. Mar.
11, 2024)

The Supreme Court of Colorado extended the notice-prejudice rule
to first-party occurrence homeowner policies, reversing two
decisions from the underlying district courts.

In the first district court case, Karyn Gregory (Gregory) had a
homeowner’s policy with defendant Safeco, effective February
2017 through February 2018, which covered losses that occurred
during the policy period. Additionally, the policy required that if
the loss was caused by windstorm or hail, Gregory was to give
notice within 365 days of the loss. In May of 2017, during the
policy period, a hailstorm caused damage to Gregory’s home, but
she did not discover the damage until an inspection in preparation
for sale of the home in October 2018. Gregory filed a claim with
Safeco in October 2018, and Safeco denied the claim as untimely.
The trial court granted summary judgment in favor of Safeco.

In the other decision, the Runkels held a homeowner’s policy
with Owners Insurance Company (Owners) effective February 2019 to
February 2020, which applied to “losses, bodily injury,
property damage and personal injury which occur during the policy
term.” The policy further provided in the case of “loss
or damage by wind or hail, notice of the loss or damage must be
given to us or our agency within one year after the date the loss
or damage occurred.” On July 5, 2019, a hailstorm damaged the
Runkels’ roof and other parts of their property, but they did
not discover the damage until a contractor informed them around
late spring or early summer of 2020. The Runkels notified Owners in
July 2020, and filed a claim on July 15, 2020, 10 days after the
expiration of the one-year notice period set forth in the policy.
Like Safeco, Owners denied the claim, and the Runkels filed suit in
district court, which granted summary judgment in favor of
Owners.

Upon appeals by both Gregory and the Runkels, the Colorado
Supreme Court was asked whether the notice-prejudice rule,
generally applicable to uninsured, underinsured and third-party
liability policies, would extend to first-party homeowner’s
occurrence-based policies. Ultimately, the Supreme Court ruled to
extend the rule for two reasons.

First, “an occurrence entitles the insured to benefits
under coverage that already exists, and timely notice is merely a
condition of retaining that coverage,” in contrast to a
claims-made policy where “timely notice is an essential term
of the insurance contract because notice is required during the
policy period or within a short window thereafter.”

Second, the Supreme Court relied upon “the policy
considerations that we identified in Clementi v. Nationwide
Mutual Fire Insurance Company, 16 P.3d 223, 229-30 (Colo.
2001).” In Clementi, the Supreme Court applied the
notice-prejudice rule because public policy supports compensating
tort victims, insurers would receive an inequitable windfall due to
a technicality of notice, and the insured has little bargaining
power with homeowners’ insurance policies. For these reasons,
the judgements of the lower divisions were reversed and remanded
with instructions to follow the analysis of Clementi.

Specifically, the Supreme Court instructed the lower courts to
“first determine whether an insured’s notice was timely or
whether any delay was reasonable. If the court determines that the
notice was timely or that any delay was reasonable, then the
analysis ends there, and the court should conclude that coverage
exists. If, however, a court determines that an insured’s
notice was untimely and that the delay was unreasonable, then the
court moves to step two, which requires the court to determine
whether the insurer was prejudiced by such untimely
notice.”

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