Colorado Supreme Court Limits Reach Of Insurance Consumer Protections

By Michael Karlik | The Denver Gazette

The Colorado Supreme Court ruled on Monday that the legislature’s consumer protections requiring insurance companies to take certain steps before they allege a policyholder failed to cooperate do not apply to any obligation specifically laid out in the policy.

In 2020, the legislature changed state law to limit insurance companies’ ability to assert a failure-to-cooperate defense when they are sued for withholding benefits. Among other things, an insurer must give a policyholder time to address any specifically identified failures to cooperate in the claim investigation.

Plaintiff Anthony Wenzell and the groups supporting him argued the law captures an insurer’s allegation of noncooperation across the board, including obligations laid out in the insurance policy. The defendants — insurers State Farm and USAA — and their allies countered that extending the law’s protections to cover things the policyholder is already aware of would spawn unnecessary legal disputes.

By 6-1, the Supreme Court sided with the insurance companies.

“Policyholders are on notice of the enumerated conditions precedent in their policies requiring them to engage in specific conduct — like the duty to provide a comprehensive medical release — without additional notice from the insurer,” wrote Justice William W. Hood III in the April 27 opinion.

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