Author: Blaire Bayliss (Law Clerk)
On May 22, 2019, Governor of Colorado Jared Polis signed HSB 19-1283 into law, which goes into effect on January 1, 2020.[i] Once the new law goes into effect, claimants may be able to obtain substantially more information regarding policy limits prior to filing a suit. Insurance providers should be aware of the new law, and should be aware of the increased need to obtain defense council early in a case to avoid unnecessary litigation, as well as to prepare for any litigation plaintiff’s attorneys may pursue.
Insurance Disclosures Required Prior to January 1, 2020
Before the new insurance disclosure law goes into effect on January 1, 2020, Colorado law only requires minimal disclosures from insurance providers. Colorado law currently requires automobile insurance providers to publish summary disclosure forms containing an explanation of the major coverages and exclusions of insurance policies.[ii] The summary disclosure may be general in nature, and automobile insurance providers are not legally required to disclosure policy limits, excess coverage, or umbrella coverage: only a broad description of the provided insurance policy is legally required.[iii] In order to obtain more detailed information, a claimant must file a suit and attempt to obtain additional information through discovery.
Once a suit has been filed and the process of discovery has begun, insurance providers may be required to provide claimants with additional details regarding the insurance policy in question. Defendants may be required to provide any insurance agreement under which any person carrying on an insurance business may be liable to satisfy part or all of a judgment or to indemnify or reimburse for payments made to satisfy the judgment.[iv] Whether the existence of liability insurance and policy limits of such insurance are “relevant” to automobile accident cases is generally a question for the court to determine.[v] Policy limits, excess insurance, and umbrella insurance limits may or may not be discoverable depending on the facts of each case, and obtaining a court ruling requiring such discovery may be a lengthy and difficult process.[vi]
Required Disclosures Beginning January 1, 2020
Beginning on January 1, 2020, HSB 19-1283will go into effect and will be formally codified under C.R.S. 10-3-1117. The new law, which was significantly supported and lobbied for by the Colorado Trial Lawyers Association,[vii] contains detailed disclosure requirements for insurance providers. The law requires that within 30 days of receiving a written request from the claimant,[viii] an insurer that issues commercial or personal automobile liability insurance coverage must provide the claimant with a statement, made under oath, of a corporate officer setting forth the following information with regard to each known policy of insurance:
- The name of the insurer;[ix]
- The name of each insured party;[x]
- The limits of the liability coverage,[xi] and;
- A copy of the policy.[xii]
These disclosures must include base insurance, excess insurance and umbrella insurance.[xiii]
The bill allows insurers that provide or may provide liability insurance coverage to make the require disclosures to the claimant through mail, facsimile, or electronic delivery.[xiv] Upon written request of a claimant or a claimant’s attorney, the insured party or the insured party’s insurance agent must disclose to the claimant or claimant’s attorney the name and coverage of each known insurer of the insured party and must forward the request to all affected insurers.[xv]
The claimant and any attorney of the claimant shall not disclose the disclosed information to any party; except that the claimant and an attorney of the claimant may discuss the information with the claimant’s insurer.[xvi]
An insurer or an insured party that violates the disclosure requirement is liable to the requesting claimant for damages in an amount of $100 per day until the information is provided to the claimant. The insurer or insured party is also responsible for attorney fees and costs incurred by the claimant in enforcing the penalty.[xvii]
How the Passage of New Insurance Disclosure Law Will Impact Insurance Providers
The most notable aspect of C.R.S. 10-3-1117 is that the plain language of the law appears to allow injured parties to obtain information about a tortfeasor’s liability insurance policy limits without being required to file an action in court and subsequently seek discovery of such information. In contrast to Colorado’s insurance disclosure requirements prior to January 1, 2020, the new law will enable claimants to obtain significantly more information regarding insurance policy limits prior to filing a suit.
It is possible that the new law will cut down on litigation costs for both the insurance provider and the claimant: if all parties know the tortfeasor has the state minimum amount of coverage, then plaintiff’s counsel may be reluctant to incur the costs to initiate a lawsuit, and may instead attempt to settle the claim without bringing suit. However, it is also possible that plaintiff’s attorneys may attempt to abuse the new law by using their newfound awareness of insurance liability limits to negotiate settlement solely based on liability limits, rather than on good faith negotiations. This may prove to be a double-edged sword. In cases involving large policies with high limits, plaintiff’s council may peruse litigation to maximize the value of the claim, increasing insurance providers’ need for defense council early in the process. However, in cases involving minimal insurance policies, claims representatives may be able to negotiate for conservative settlement values under the pretense that an attorney would be unable to recover the costs of perusing litigation, decreasing attorney’s fees for all parties involved.[xviii] Insurance providers should be aware of the new law, and should be aware of the increased need to obtain defense council early in a case to avoid unnecessary litigation, as well as to prepare for any litigation plaintiff’s attorneys may pursue.
[i] HSB 19-1283 §4
[ii] C.R.S. 10-4-636(1)(a)
[iii] C.R.S. 10-4-636
[iv] C.R.C.P. Rule 26(1)(D)
[v] See Lucas v. District Court, Pueblo County, 140 Colo. 510, 345 P.2d 1064 (1959).
[vi] See Lucas v. District Court, Pueblo County, 140 Colo. 510, 345 P.2d 1064 (1959).
[vii] Colorado Capitol Watch, Bill Detail: HB19-1283: Lobbyists, (accessed Jun. 18, 2019), https://www.coloradocapitolwatch.com/bill/1/HB19-1283/2019/1/ (the Colorado Trial Lawyers Association is an association of plaintiff’s attorneys, and is one of the largest such organizations in the state of Colorado).
[viii] C.R.S. 10-3-1117(1)
[ix] C.R.S. 10-3-1117(2)(a)(I)
[x] C.R.S. 10-3-1117(2)(a)(II)
[xi] C.R.S. 10-3-1117(2)(a)(III)
[xii] C.R.S. 10-3-1117(2)(a)(IV)
[xiii] C.R.S. 10-3-1117(2)(a)
[xiv] C.R.S. 10-3-1117(2)(a)
[xv] C.R.S. 10-3-1117(2)(b)
[xvi] C.R.S. 10-3-1117(4)
[xvii] C.R.S. 10-3-1117(3)
[xviii] See generally WilsonElser, Connecticut Legislature Approves Pre-Suit Policy Disclosures, (Oct. 2009), https://www.wilsonelser.com/news_and_insights/insights/659-connecticut_legislature_approves_pre-suit_policy (discussing the impacts of Connecticut’s 2009 passage of insurance disclosure laws, the language of which is identical to Colorado’s new law.)