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HOUSE BILL 10-1394

HOUSE BILL 10-1394
BY REPRESENTATIVE(S) Rice, Fischer, Gerou, Labuda, Swalm,
Carroll T., McFadyen;
also SENATOR(S) Scheffel, Carroll M., Gibbs, Tochtrop.
CONCERNING COMMERCIAL LIABILITY INSURANCE POLICIES ISSUED TO
CONSTRUCTION PROFESSIONALS.
Be it enacted by the General Assembly of the State of Colorado:
SECTION 1. Part 8 of article 20 of title 13, Colorado Revised
Statutes, is amended BY THE ADDITION OF A NEW SECTION to read:
13-20-808. Insurance policies issued to construction
professionals. (1) (a) THE GENERAL ASSEMBLY FINDS AND DETERMINES
THAT:
(I) THE INTERPRETATION OF INSURANCE POLICIES ISSUED TO
CONSTRUCTION PROFESSIONALS IS OF VITAL IMPORTANCE TO THE ECONOMIC
AND SOCIAL WELFARE OF THE CITIZENS OF COLORADO AND IN FURTHERING
THE PURPOSES OF THIS PART 8.
(II) INSURANCE POLICIES ISSUED TO CONSTRUCTION PROFESSIONALS
HAVE BECOME INCREASINGLY COMPLEX, OFTEN CONTAINING MULTIPLE,
NOTE: This bill has been prepared for the signature of the appropriate legislative
officers and the Governor. To determine whether the Governor has signed the bill
or taken other action on it, please consult the legislative status sheet, the legislative
history, or the Session Laws.
________
Capital letters indicate new material added to existing statutes; dashes through words indicate
deletions from existing statutes and such material not part of act.
LENGTHY ENDORSEMENTS AND EXCLUSIONS CONFLICTING WITH THE
REASONABLE EXPECTATIONS OF THE INSURED.
(III) THE CORRECT INTERPRETATION OF COVERAGE FOR DAMAGES
ARISING OUT OF CONSTRUCTION DEFECTS IS IN THE BEST INTEREST OF
INSURERS, CONSTRUCTION PROFESSIONALS, AND PROPERTY OWNERS.
(b) THE GENERAL ASSEMBLY DECLARES THAT:
(I) THE POLICY OF COLORADO FAVORS THE INTERPRETATION OF
INSURANCE COVERAGE BROADLY FOR THE INSURED.
(II) THE LONG-STANDING AND CONTINUING POLICY OF COLORADO
FAVORS A BROAD INTERPRETATION OF AN INSURER’S DUTY TO DEFEND THE
INSURED UNDER LIABILITY INSURANCE POLICIES AND THAT THIS DUTY IS A
FIRST-PARTY BENEFIT TO AND CLAIM ON BEHALF OF THE INSURED.
(III) THE DECISION OF THE COLORADO COURT OF APPEALS IN
GENERAL SECURITY INDEMNITY COMPANY OF ARIZONA V. MOUNTAIN STATES
MUTUAL CASUALTY COMPANY, 205 P.3d 529 (COLO. APP. 2009) DOES NOT
PROPERLY CONSIDER A CONSTRUCTION PROFESSIONAL’S REASONABLE
EXPECTATION THAT AN INSURER WOULD DEFEND THE CONSTRUCTION
PROFESSIONAL AGAINST AN ACTION OR NOTICE OF CLAIM CONTEMPLATED BY
THIS PART 8.
(IV) FOR THE PURPOSES OF GUIDING PENDING AND FUTURE ACTIONS
INTERPRETING LIABILITY INSURANCE POLICIES ISSUED TO CONSTRUCTION
PROFESSIONALS, WHAT HAS BEEN AND CONTINUES TO BE THE POLICY OF
COLORADO IS HEREBY CLARIFIED AND CONFIRMED IN THE INTERPRETATION
OF INSURANCE POLICIES THAT HAVE BEEN AND MAY BE ISSUED TO
CONSTRUCTION PROFESSIONALS.
(2) FOR THE PURPOSES OF THIS SECTION:
(a) “INSURANCE” HAS THE SAME MEANING AS SET FORTH IN SECTION
10-1-102, C.R.S.
(b) “INSURER” HAS THE SAME MEANING AS SET FORTH IN SECTION
10-1-102, C.R.S.
PAGE 2-HOUSE BILL 10-1394
(c) “INSURANCE POLICY” MEANS A CONTRACT OF INSURANCE.
(d) “LIABILITY INSURANCE POLICY” MEANS A CONTRACT OF
INSURANCE THAT COVERS OCCURRENCES OF DAMAGE OR INJURY DURING THE
POLICY PERIOD AND INSURES A CONSTRUCTION PROFESSIONAL FOR LIABILITY
ARISING FROM CONSTRUCTION-RELATED WORK.
(3) IN INTERPRETING A LIABILITY INSURANCE POLICY ISSUED TO A
CONSTRUCTION PROFESSIONAL, A COURT SHALL PRESUME THAT THE WORK
OF A CONSTRUCTION PROFESSIONAL THAT RESULTS IN PROPERTY DAMAGE,
INCLUDING DAMAGE TO THE WORK ITSELF OR OTHER WORK, IS AN ACCIDENT
UNLESS THE PROPERTY DAMAGE IS INTENDED AND EXPECTED BY THE
INSURED. NOTHING IN THIS SUBSECTION (3):
(a) REQUIRES COVERAGE FOR DAMAGE TO AN INSURED’S OWN WORK
UNLESS OTHERWISE PROVIDED IN THE INSURANCE POLICY; OR
(b) CREATES INSURANCE COVERAGE THAT IS NOT INCLUDED IN THE
INSURANCE POLICY.
(4) (a) UPON A FINDING OF AMBIGUITY IN AN INSURANCE POLICY, A
COURT MAY CONSIDER A CONSTRUCTION PROFESSIONAL’S OBJECTIVE,
REASONABLE EXPECTATIONS IN THE INTERPRETATION OF AN INSURANCE
POLICY ISSUED TO A CONSTRUCTION PROFESSIONAL.
(b) IN CONSTRUING AN INSURANCE POLICY TO MEET A
CONSTRUCTION PROFESSIONAL’S OBJECTIVE, REASONABLE EXPECTATIONS,
THE COURT MAY CONSIDER THE FOLLOWING:
(I) THE OBJECT SOUGHT TO BE OBTAINED BY THE CONSTRUCTION
PROFESSIONAL IN THE PURCHASE OF THE INSURANCE POLICY; AND
(II) WHETHER A CONSTRUCTION DEFECT HAS RESULTED, DIRECTLY
OR INDIRECTLY, IN BODILY INJURY, PROPERTY DAMAGE, OR LOSS OF THE USE
OF PROPERTY.
(c) IN CONSTRUING AN INSURANCE POLICY TO MEET A CONSTRUCTION
PROFESSIONAL’S OBJECTIVE, REASONABLE EXPECTATIONS, A COURT MAY
CONSIDER AND GIVE WEIGHT TO ANY WRITING CONCERNING THE INSURANCE
POLICY PROVISION IN DISPUTE THAT IS NOT PROTECTED FROM DISCLOSURE BY
PAGE 3-HOUSE BILL 10-1394
THE ATTORNEY-CLIENT PRIVILEGE, WORK-PRODUCT PRIVILEGE, OR ARTICLE
72 OF TITLE 24, C.R.S., AND THAT IS GENERATED, APPROVED, ADOPTED, OR
RELIED ON BY THE INSURER OR ITS PARENT OR SUBSIDIARY COMPANY; OR AN
INSURANCE RATING OR POLICY DRAFTING ORGANIZATION, SUCH AS THE
INSURANCE SERVICES OFFICE, INC., OR ITS PREDECESSOR OR SUCCESSOR
ORGANIZATION; EXCEPT THAT SUCH WRITING SHALL NOT BE USED TO
RESTRICT, LIMIT, EXCLUDE, OR CONDITION COVERAGE OR THE INSURER’S
OBLIGATION BEYOND THAT WHICH IS REASONABLY INFERRED FROM THE
WORDS USED IN THE INSURANCE POLICY.
(5) IF AN INSURANCE POLICY PROVISION THAT APPEARS TO GRANT OR
RESTORE COVERAGE CONFLICTS WITH AN INSURANCE POLICY PROVISION
THAT APPEARS TO EXCLUDE OR LIMIT COVERAGE, THE COURT SHALL
CONSTRUE THE INSURANCE POLICY TO FAVOR COVERAGE IF REASONABLY
AND OBJECTIVELY POSSIBLE.
(6) IF AN INSURER DISCLAIMS OR LIMITS COVERAGE UNDER A
LIABILITY INSURANCE POLICY ISSUED TO A CONSTRUCTION PROFESSIONAL,
THE INSURER SHALL BEAR THE BURDEN OF PROVING BY A PREPONDERANCE
OF THE EVIDENCE THAT:
(a) ANY POLICY’S LIMITATION, EXCLUSION, OR CONDITION IN THE
INSURANCE POLICY BARS OR LIMITS COVERAGE FOR THE INSURED’S LEGAL
LIABILITY IN AN ACTION OR NOTICE OF CLAIM MADE PURSUANT TO SECTION
13-20-803.5 CONCERNING A CONSTRUCTION DEFECT; AND
(b) ANY EXCEPTION TO THE LIMITATION, EXCLUSION, OR CONDITION
IN THE INSURANCE POLICY DOES NOT RESTORE COVERAGE UNDER THE
POLICY.
(7) (a) AN INSURER’S DUTY TO DEFEND A CONSTRUCTION
PROFESSIONAL OR OTHER INSURED UNDER A LIABILITY INSURANCE POLICY
ISSUED TO A CONSTRUCTION PROFESSIONAL SHALL BE TRIGGERED BY A
POTENTIALLY COVERED LIABILITY DESCRIBED IN:
(I) A NOTICE OF CLAIM MADE PURSUANT TO SECTION 13-20-803.5;
OR
(II) A COMPLAINT, CROSS-CLAIM, COUNTERCLAIM, OR THIRD-PARTY
CLAIM FILED IN AN ACTION AGAINST THE CONSTRUCTION PROFESSIONAL
PAGE 4-HOUSE BILL 10-1394
CONCERNING A CONSTRUCTION DEFECT.
(b) (I) AN INSURER SHALL DEFEND A CONSTRUCTION PROFESSIONAL
WHO HAS RECEIVED A NOTICE OF CLAIM MADE PURSUANT TO SECTION
13-20-803.5 REGARDLESS OF WHETHER ANOTHER INSURER MAY ALSO OWE
THE INSURED A DUTY TO DEFEND THE NOTICE OF CLAIM UNLESS AUTHORIZED
BY LAW. IN DEFENDING THE CLAIM, THE INSURER SHALL:
(A) REASONABLY INVESTIGATE THE CLAIM; AND
(B) REASONABLY COOPERATE WITH THE INSURED IN THE NOTICE OF
CLAIMS PROCESS.
(II) THIS PARAGRAPH (b) DOES NOT REQUIRE THE INSURER TO RETAIN
LEGAL COUNSEL FOR THE INSURED OR TO PAY ANY SUMS TOWARD
SETTLEMENT OF THE NOTICE OF CLAIM THAT ARE NOT COVERED BY THE
INSURANCE POLICY.
(III) AN INSURER SHALL NOT WITHDRAW ITS DEFENSE OF AN INSURED
CONSTRUCTION PROFESSIONAL OR COMMENCE AN ACTION SEEKING
REIMBURSEMENT FROM AN INSURED FOR EXPENDED DEFENSE COST UNLESS
AUTHORIZED BY LAW AND UNLESS THE INSURER HAS RESERVED SUCH RIGHT
IN WRITING WHEN ACCEPTING OR ASSUMING THE DEFENSE OBLIGATION.
SECTION 2. Part 1 of article 4 of title 10, Colorado Revised
Statutes, is amended BY THE ADDITION OF A NEW SECTION to read:
10-4-110.4. Exclusion – claims involving loss in progress not
known to insured. (1) A PROVISION IN A LIABILITY INSURANCE POLICY
ISSUED TO A CONSTRUCTION PROFESSIONAL EXCLUDING OR LIMITING
COVERAGE FOR ONE OR MORE CLAIMS ARISING FROM BODILY INJURY,
PROPERTY DAMAGE, ADVERTISING INJURY, OR PERSONAL INJURY THAT
OCCURS BEFORE THE POLICY’S INCEPTION DATE AND THAT CONTINUES,
WORSENS, OR PROGRESSES WHEN THE POLICY IS IN EFFECT IS VOID AND
UNENFORCEABLE IF THE EXCLUSION OR LIMITATION APPLIES TO AN INJURY
OR DAMAGE THAT WAS UNKNOWN TO THE INSURED AT THE POLICY’S
INCEPTION DATE.
(2) ANY PROVISION IN AN INSURANCE POLICY ISSUED IN VIOLATION
OF THIS SECTION IS VOID AND UNENFORCEABLE AS AGAINST PUBLIC POLICY.
PAGE 5-HOUSE BILL 10-1394
A COURT SHALL CONSTRUE AN INSURANCE POLICY CONTAINING A PROVISION
THAT IS UNENFORCEABLE UNDER THIS SECTION AS IF THE PROVISION WAS
NOT A PART OF THE POLICY WHEN THE POLICY WAS ISSUED.
(3) THIS SECTION APPLIES ONLY TO AN INSURANCE POLICY THAT
COVERS OCCURRENCES OF DAMAGE OR INJURY DURING THE POLICY PERIOD
AND THAT INSURES A CONSTRUCTION PROFESSIONAL FOR LIABILITY ARISING
FROM CONSTRUCTION-RELATED WORK.
SECTION 3. Applicability. This act applies to all insurance
policies currently in existence or issued on or after the effective date of this
act.
SECTION 4. Safety clause. The general assembly hereby finds,
PAGE 6-HOUSE BILL 10-1394
determines, and declares that this act is necessary for the immediate
preservation of the public peace, health, and safety.
____________________________ ____________________________
Terrance D. Carroll Brandon C. Shaffer
SPEAKER OF THE HOUSE PRESIDENT OF
OF REPRESENTATIVES THE SENATE
____________________________ ____________________________
Marilyn Eddins Karen Goldman
CHIEF CLERK OF THE HOUSE SECRETARY OF
OF REPRESENTATIVES THE SENATE
APPROVED________________________________________
_________________________________________
Bill Ritter, Jr.
GOVERNOR OF THE STATE OF COLORADO
PAGE 7-HOUSE BILL 10-1394

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