It is important that a policyholder review and understand the various conditions and duties required of them in the event of a loss. One of the most important conditions contained in many insurance policies is the limitation placed on a policyholder’s right to sue an insurance carrier when there is a disagreement on the amount of damage or loss caused by the event.

This provision of the policy is often titled – Legal Action Against Us – and typically includes language providing:

Legal Action Against Us

No one may bring a legal action against us under this Coverage Part unless:

1. There has been full compliance with all of the terms of this Coverage Part; and

2. The actions is brought within 2 years after the date on which the direct physical loss or damage occurred.

While the timeframe to file a legal action is generally defined under State law, in some states an insurance policy can contractually establish a shorter period to file a legal action. Colorado applies a hybrid approach.

Colorado requires that any legal action against an insurance company for failure to pay for the appropriate amount of damage or loss must be brought within three years of the date of the event causing the damage or loss. In an effort to prevent insurers from shortening this three year period on unsuspecting homeowners, the Colorado State Legislature enacted Statute § 10–4–110.8(12)(a) in 2014, which prevents an insurance carrier from reducing the three-year statute of limitations period for claims brought by a homeowner.

However, the protections provided under Statute § 10–4–110.8(12)(a) apply only to homeowners. All other policyholders, including homeowner associations, condominium associations, religious organizations, and business owners, must comply with the Legal Action Against Us provision within their insurance policy. This period of time is generally going to be 1-2 years under most nonresidential insurance policies in Colorado, but can be as short as six months.

Colorado policyholders should request a certified copy of their insurance policy following any loss event to understand the coverages in place, conditions, and duties required of them under the insuring agreement. The requirements of the Legal Action Against Us clause should be reviewed and calendared with the understanding that failure to bring legal action within the required period of time can result in a complete bar to legal action.