Insurance Takeaways from the Supreme Court of Colorado Decision in Gregory v. Safeco Insurance Co.

Earlier this year, in Gregory v. Safeco Insurance Co., the Supreme Court of Colorado addressed the question of whether, under Colorado law, the notice-prejudice rule should apply to first-party property insurance claims under occurrence-based homeowners’ insurance policies. 545 P.3d 942 (Colo. 2024). In a thoughtful and lengthy opinion, the Supreme Court adopted the rule by a 4-3 vote. Id. at 961. The facts and holding are discussed in several articles. See, e.g., ACCC_Articles_COSupCrtPrejAndPropClaims_Law360_20240312.pdf; https://www.cohenziffer.com/law360-insurance-authority-the-top-property-insurance-decisions-of-2024-so-far/; https://cl.cobar.org/from-the-courts/gregory-v-safeco-insurance-co-of-america-runkel-v-owners-insurance-co/; https://www.insurancebusinessmag.com/us/news/legal-insights/can-an-insurance-carrier-reject-a-homeowners-claim-if-it-is-late-481599.aspx. Rather than retread those details, this blog highlights three other important takeaways from the opinion.

Stare Decisis Remains Vital

Stare decisis, the court in Gregory explained, “is a judicially created doctrine under which courts follow preexisting rules of law.” Gregory, 545 P.3d at 950. This bedrock principle of Anglo-American jurisprudence, which has gone through some rough times of late, remains strong in Colorado. In applying the doctrine, the court in Gregory thoroughly walked through its past decisions on late notice, tracing its jurisprudence back one hundred and fifteen years to its decision in Barclay v. London Guarantee & Accident Co., 105 P. 865 (Colo. 1909). The court then methodically plotted a course forward to the present day and the embracing of the notice-prejudice rule in the context of occurrence-based, first-party homeowners’ property insurance policies.

Although it is self-evidently anachronistic and lowercase “c” conservative – asking lawyers and judges to look backward, with the express purposes of adhering to precedent (history and “tradition”), fostering stability and predictability, and curbing judicial activism—stare decisis is nonetheless a pillar (if imperfect) of our judicial system. See Lindquist and Cross, Stability, Predictability and the Rule of Law: Stare Decisis as Reciprocity Norm, Univ. of Tex. Rule of Law Conf., 2010; Federalist No. 78. The Gregory decision is an example of the application of this seminal principle.

Insurance Law Must Be Mined Carefully and Comprehensively

Just as stare decisis is a foundational tenet of Anglo-American jurisprudence, so is the notice-prejudice rule, a universally adopted rule of American insurance law, at least for occurrence-based policies. Or, almost, as it is, apparently, a near-universal rule of several states. Indeed, for many years, it was a matter of insurance law dictum that everywhere adhered to the notice-prejudice rule for occurrence policies, except New York, and that was changed by the New York legislature more than 15 years ago.

However, the broader point is that Colorado’s law on notice was, and is, different from the law of other states. It is even different within Colorado, depending on the type of insurance policy. And this is not uncommon. Unlike most businesses in the United States, insurance is subject to regulation by the individual states. (In the United States, the McCarran-Ferguson Insurance Regulation Act, 15 U.S.C.A. §§ 1011-1015, statutorily prohibits the federal government from regulating the insurance industry. This regulatory authority is left solely to the individual states.) Likewise, there is no national or federal body of insurance law. Courts in all states are bound only by the precedents of their state appellate courts. Thus, one of the first steps to take in any insurance case is to determine what state’s law might apply to the interpretation of the insurance policy at issue and then how that state or those states have ruled (or might rule) on the critical questions and defenses to the claim.

Policyholders Should Always Identify and Comply with Deadlines

Although listed third, this might be the most critical lesson from Gregory – policyholders should always pore over their policies to ensure they know of and comply with any deadlines. In Gregory, the policyholders were required to give notice within one year of the date of the loss. Other policies might require proof of loss to be provided 60 or 90 days from the date of loss or the date the insurance company requests them; others might require that a lawsuit be brought within one, two, or even three years from the date of loss. Adding to the difficulty is that different states might apply different rules to these deadlines – some might require strict compliance. In contrast, others have put in place various equitable rules, such as requiring prejudice or equitable tolling, which might blunt the otherwise draconian impact of some of these provisions. But it all starts with the policy language. Policyholders must look at that first, hopefully at or not long after the time of the loss, and do as much as they can to comply with any deadlines.