While Colorado Revised Statute § 13-80-101(1) provides that a lawsuit based on a breach of contract must be brought within three years after the cause of action accrues, Colorado allows insurance companies to shorten this period within the insurance contract to as little as six months from the date on which the damage occurred.1 Most often the insurance policy will reduce the period in which to bring an action to a period of one to two years.
To protect unsuspecting homeowners, the Colorado State Legislature enacted Colorado Revised Statute § 10–4–110.8(12)(a) in 2014 which prohibits an insurance carrier from reducing the three-year statute of limitations period for claims brought by a “homeowner” –
(12)(a) Notwithstanding any provision of a homeowner’s insurance policy that requires the policyholder to file suit against the insurer, in the case of any dispute, within a period of time that is shorter than required by the applicable statute of limitations provided by law, a homeowner may file such a suit within the period of time allowed by the applicable statute of limitations . . .
(b) On and after January 1, 2014, an insurer shall not issue or renew a homeowner’s insurance policy that requires the policyholder to file suit against the insurer, in the case of any dispute, within a period of time that is shorter than required by the applicable statute of limitations provided by law.
Recently, an insured requested whether this statute would prevent insurance carriers from shortening the period of time to file a lawsuit for a group of homeowners under a non-residential policy of insurance. Interestingly, this very issue was addressed by Judge Christine Arguello in February 2017 in the case of Pinewood Townhome Association v. Auto Owners Insurance Company.2
Located in Aurora, Colorado, the Pinewood community was comprised of several townhome buildings which had sustained wind and hail related damage in 2012. The community of townhomes were insured under a Business Owners Policy which covered “commercial property” and contained various business-related provisions. The insurance policy reduced the period for which Pinewood could bring a lawsuit to two years after the date on which the direct physical loss or damage occurred.
Pinewood sued for breach of contract three-years after the physical loss had occurred, contending that it constituted a “homeowner” because it had a policy of insurance covering townhomes. Auto-Owners argued that Pinewood should not be considered a “homeowner” because the townhomes at issue were commercial properties governed by a commercial insurance policy, not a homeowner’s policy.
In ruling that the statute did not apply to Pinewood, Judge Arguello noted that the lawsuit had not been initiated by a townhome owner under a homeowner’s policy, but rather by a commercial entity and self-proclaimed business owner. She further noted that the policy of insurance referred to the covered buildings as Pinewood’s “commercial properties,” not as Pinewood’s home or homes. Finally, Judge Arguello interpreted the separate treatment of insurance coverage for commercial and homeowner’s insurance within Title 10 of the Colorado Revised Statutes (which governs property and casualty insurance) as signaling that the Colorado legislature did not intend for the homeowner’s provisions within the statutes to automatically apply to commercial policy’s.
While there are no appellate decisions on this issue, Judge Arguello’s recent order demonstrates the importance of closely reviewing and understanding the time limitations imposed by each individual insurance policy especially when presented with a commercial or business owners policy of insurance. Failing to identify the period in which legal action may be brought under the policy can ultimately lead to the preclusion of any further recourse under the policy.
1 Grant Family Farms, Inc. v. Colo. Farm Bureau Mut. Ins. Co., 155 P.3d 537, 538 (Colo. App. 2006); Union Health & Accid. Co. v. Welch, 206 P. 790, 790 (Colo. 1922) (upholding six-month contractual limitation on suits against insurer).
2 Pinewood Townhome Association v. Auto-Owners Ins. Co., No. 15-1604, 2017 WL 590294 (D. Colo. Feb 13, 207).