Under Colorado law, "[t]he rights of parties to an insurance policy are contractual and are measured by a reasonable and natural construction of the terms and conditions of the policy." Hansen v. Barmore, 779 P.2d 1360, 1362 (Colo.Ct.App. 1989). And the "express provisions in a policy requiring that the insured give notice of the accident and forward suit papers to the insurer as a condition precedent to coverage are enforceable.
In order to demonstrate that Wheatridge forfeited its coverage by failing to cooperate, Auto-Owners must demonstrate that Wheatridge failed to cooperate with it “in ‘some material and substantial respect.'” Hansen v. Barmore, 779 P.2d 1360, 1364 (Colo.App. 1989) (quoting Farmers Auto. Inter-Insurance Exchange v. Konugres, 202 P.2d 959, 963 (Colo. 1949)).
An insured who fails to cooperate breaches the contract if his or her failure creates a material and substantial disadvantage to the insurer. Gattenby v. Am. Nat'l Prop. & Cas. Co., No. 19-CV-01983-REB-KMT, 2020 WL 3250129, at *3 (D. Colo. Apr. 16, 2020) (first citing State Farm Mutual Automobile Insurance Co. v. Secrist, 33 P.3d 1272, 1275 (Colo. App. 2001); then citing Hansen v. Barmore, 779 P.2d 1360, 1364 (Colo. App. 1989)); see also Ahmadi v. Allstate Ins. Co., 22 P.3d 576, 579 (Colo. App. 2001). The insurer bears the burden to prove failure to cooperate.
In Colorado, "[r]ecovery under an insurance policy may be forfeited when, in violation of a policy provision, the insured fails to cooperate with the insurer in 'some material and substantive respect.'" Hansen v. Barmore, 779 P.2d 1360, 1364 (Colo. App. 1989) (quoting Farmers Auto. Inter-Ins. Exch. v. Konugres, 202 P.2d 959, 962 (Colo. 1949)); accord Soicher v. State Farm Mut. Auto. Ins. Co., 351 P.3d 559, 565 (Colo. App. 2015); see State Farm Mut. Auto. Ins. Co. v. Brekke, 105 P.3d 177, 189 (Colo. 2004) (en banc) ("In addition to the duty to investigate owed by the insurer to the insured, the insured owes contractual duties of cooperation and reporting to the insurance provider."). "The purpose of a cooperation clause is to protect the insurer in its defense of claims by obligating the insured not to take any action intentionally and deliberately that would have a substantial, adverse effect on the insurer's defense, settlement, or other handling of the claim."
The court of appeals has held that a delay is justified when the purposes of the notice provision are met by actual notice to the insurer, whether or not made in strict compliance with the policy. Hansen v. Barmore, 779 P.2d 1360, 1362 (Colo.Ct.App. 1989); see Emcasco, 678 P.2d at 1053 (concluding that where an insurer was informed of a suit filed against the insured six weeks after the claim was filed, there was substantial compliance with a policy's notice requirements). In Hansen, the court held that timely notice provided by a third party, rather than by the insured, substantially satisfied the notice requirements under the policy in question.
Under Colorado law an insured may forfeit the right to recover under an insurance policy if he or she fails to cooperate in violation of a policy provision. See Soicher v. State Farm Mut. Auto. Ins. Co., 351 P.3d 559, 564 (Colo. App. 2015); Hansen v. Barmore, 779 P.2d 1360, 1364 (Colo. App. 1989). "The purpose of a cooperation clause is to protect the insurer in its defense of claims by obligating the insured not to take any action intentionally and deliberately that would have a substantial, adverse effect on the insurer's defense, settlement, or other handling of the claim."
This is so even where the insurance contract expressly provides that notice must be given by the insured. Colonial Ins. Co. v. Barrett, 208 W. Va. 706, 711 (2000); Hansen v. Barmore, 779 P.2d 1360, 1362 (Colo. App. 1989) (noting that the "vast majority of jurisdictions" have ruled that an insurance policy's notice provision can be satisfied "by an injured third party rather than the insured"); Great Am. Ins. Co. v. Short, No. E028861, 2001 WL 1264944, at *5 (Cal. Ct. App. Oct. 23, 2001) (citing cases). Whether third party notice satisfies the notice requirement is not "a question attracting widespread debate."
Konugres , 202 P.2d at 963. See alsoHansen v. Barmore , 779 P.2d 1360, 1364 (Colo. App. 1989) ("Generally, the question of whether the insured has violated his insurance policy by failing to cooperate with the insurer is a question of fact for the trial court."). Non-cooperation constitutes breach only if "material and substantial disadvantage" to the insurer is proved.
An inconsequential lack of cooperation is immaterial, and an insured's failure to cooperate may be excused if due to a mistake or a showing that there was no exercise of bad faith. See Hansen v. Barmore, 779 P.2d 1360, 1364 (Colo. App. 1989). "[T]he question of whether the insured failed to cooperate with the insurer is a question of fact for the trial court."
Id. Policy provisions requiring an insured to provide timely notification to the insurer of a claim or occurrence as a condition precedent to coverage are generally enforceable. See Hansen v. Barmore, 779 P.2d 1360, 1362 (Colo.App. 1989). However, such provisions should be liberally construed in favor of the insured.