On February 17, 2015, the Colorado Supreme Court held that the “notice-prejudice rule” does not apply to claims-made policies. In its landmark 2005 decision, the Colorado Supreme Court held that an insured under an occurrence policy who gives late notice of a claim to its insurer does not lose coverage benefits unless the insurer can prove it was prejudiced by the late notice.
In Craft v. Philadelphia Indemnity Insurance Company, the Colorado Supreme Court answered a certified question of Colorado law posed by the Tenth Circuit Court of Appeals. The Colorado court agreed with the federal appeals court that there was no definitive Colorado decision on the question of application of the notice-prejudice rule to claims-made policies.
The Craft decision finds that, unlike occurrence policies, the date-certain notice requirement in a claims-made policy defines the scope of coverage. “Thus, to excuse late notice in violation of such a requirement would rewrite a fundamental term of the insurance contract.” The Supreme Court held the public policy reasons applied in 2005 to extend the notice-prejudice rule to an occurrence policy do not apply in the context of a claims-made policy.