With a sharp dissent warning of “virtually boundless obligations” for insurers, a recent Colorado Court of Appeals ruling has sent ripples through the industry. In a first-of-its-kind decision, the court penalized an insurer $35,600 for a delayed policy disclosure, even though the policy ultimately provided no coverage for the claim. To help us unpack this landmark case, we’re joined by Simon Glairy, a leading expert in insurance law and risk management. We’ll explore the complex interplay between an insurer’s duty to investigate and its strict legal obligation to be transparent, delving into the practical challenges this ruling creates for carriers and the profound message it sends about a claimant’s right to information.
Esurance initially set aside a $17,100 reserve, suggesting it believed coverage might apply. How does an insurer’s own internal uncertainty during an investigation affect its legal obligation to disclose a policy, especially when it later determines that no coverage actually exists? Please elaborate on this process.
That is precisely the heart of this ruling. The court looked directly at Esurance’s own actions during that critical 30-day window. When an insurer opens a claim file and, more significantly, allocates a $17,100 reserve for bodily injury, it’s making a tangible, internal acknowledgment that the policy “may be relevant.” It’s a financial admission of potential exposure. This isn’t just a clerical note; it’s a clear signal that the insurer itself believes coverage is a possibility worth investigating. The court’s message is that the obligation to disclose is triggered by this initial uncertainty—by the potential for relevance—not by the final, black-and-white coverage decision. The moment the insurer’s own team saw a potential link, the clock on transparency started ticking, and their final determination weeks later couldn’t turn back that clock.
An insurer was asked for a policy on September 7 but only determined it was invalid on October 11, after the 30-day disclosure deadline had passed. What practical, step-by-step measures should insurers implement to balance a thorough coverage investigation with meeting such strict statutory deadlines?
This case is a wake-up call for insurers to overhaul their intake and investigation protocols. First, every written policy request must immediately trigger a hard, 30-day deadline in the system that cannot be ignored. Second, insurers need to run parallel processes. The claims investigation team determining coverage should operate concurrently with, but independently of, an administrative team tasked with locating and preparing the policy for disclosure. You can’t wait for the investigation to conclude before you even start looking for the document. Finally, a “disclose, then decide” approach becomes the safest harbor. If the investigation is complex and the deadline is looming, the prudent step is to send the policy to the claimant with a clear reservation of rights letter. This fulfills the statutory duty of transparency while explicitly stating that coverage has not yet been determined. This prevents a simple administrative deadline from turning into a $35,600 penalty.
A dissenting judge in this case warned of imposing “virtually boundless obligations” on insurers. How might this ruling affect insurer behavior on future claims where a policy’s relevance is highly questionable from the start? Please share your thoughts on any potential unintended consequences for the industry.
The dissenting opinion voices a very real fear in the industry. The primary unintended consequence could be a shift toward defensive over-disclosure. Insurers, fearing hefty daily penalties, might start producing policies for any and all requests, no matter how tenuous the connection to a claim. This increases administrative costs and operational friction, which ultimately get passed on to all policyholders through their premiums. We may also see a rise in what Judge Jones called “satellite litigation”—lawsuits focused not on the actual harm from an accident, but purely on procedural compliance with disclosure statutes. It creates a new avenue for litigation where the prize isn’t compensation for an injury but a penalty for a clerical delay, which wasn’t the legislature’s core intent. It forces insurers to expend resources fighting battles over process rather than substance.
A trial court limited the penalty to $600, reasoning transparency goals were met once the claimant was told there was no coverage. The appeals court disagreed, imposing the full $35,600 penalty. What does this signal about the law’s intent regarding transparency and the claimant’s right to the policy document itself?
The chasm between the $600 and the $35,600 penalties is incredibly telling. The trial court saw the issue as one of information: once the claimant was told “no coverage,” the spirit of transparency was satisfied. The appeals court, however, sent a much stronger message: transparency is not just about the insurer’s conclusion; it’s about providing the claimant with the actual tool—the policy document—to verify that conclusion for themselves. The law gives the claimant the right to see the contract, to read the declarations page, and to have their own counsel evaluate the language. By imposing the full penalty for all 356 days of delay, the court affirmed that simply being told an answer is not enough. The claimant has a right to the source material, and this right is so fundamental that denying it carries a significant, day-by-day financial consequence until it is rectified.
What is your forecast for insurance disclosure disputes in Colorado following this first-of-its-kind ruling?
I forecast a significant, near-term increase in litigation focused specifically on this disclosure statute. Plaintiff’s attorneys now have a powerful, appellate-level precedent that puts insurers on the defensive. We will likely see a new standard emerge in demand letters, where a request for the policy is front and center, with the 30-day clock highlighted. Insurers will need to immediately tighten their internal compliance and workflows to avoid these unforced errors, as they are now low-hanging fruit for generating penalties and attorney fees. In the long term, I expect the insurance lobby will push the General Assembly for clarification on the statute, just as the dissenting judge suggested. They will seek to define “may be relevant” more narrowly to prevent the “boundless obligations” he warned of. Until then, we are in a new landscape where the process of disclosure is just as critical—and potentially as costly—as the coverage decision itself.
