On April 25, 2016, the Supreme Court of Colorado issued a ruling that overruled — or at a minimum restricted — a 2005 decision in which it stated that an insurer could not avoid coverage for late notice without showing that it was prejudiced as a result. In a 4-3 decision, the court held in Travelers Property Casualty Co. v. Stresscon Co., that where an insured failed to provide notice of a claim prior to reaching a settlement, the “no-voluntary-payments” provision (or “consent-to-settle” provision) in an occurrence policy excused the insurer’s duty to indemnify for the settlement amount. This decision is noteworthy because in its decision in Friedland v. Travelers Indemnity Co., the Colorado Supreme Court held that an insurer could not deny coverage in a liability policy for late notice, where a settlement was reached before notice without a showing of prejudice. One way to reconcile these two results is to say that the court examined the issue under two different parts of the policy — and in so doing, reached different results. By digging a little deeper into the facts of these cases, however, the analysis is a bit more complicated. This article examines how the court backed away from applying a notice-prejudice rule and why policyholders should take note of this important change in Colorado law.
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