To alleviate some of the uncertainty around noncooperation defenses, the legislature passed H.B. 20-1290, which enacted section 10-3-1118 and created rules for insurers asserting noncooperation. Wenzell v. United Servs. Auto. Ass’n, 2024 COA 40, ¶ 28, 552 P.3d 1121, 1126-27, cert. granted, 24SC372 (March 10, 2025). Section 10-3-1118 went into effect on September 14, 2020, and applies to post-enactment litigation. See Ch. 229, secs. 1-2, § 10-3-1118, 2020 Colo. Sess. Laws 1116-17.

A review of the legislative history indicates that Section 1118 was intended to place “guardrails” on the insurer’s ability to abuse the failure to cooperate defense. To that end:

Section 10-3-1118(1) provides that several conditions must be met

before an insurer can assert a failure to cooperate defense against

an insured. First, it requires that (1) an insurer inform the insured

in writing that the insurer needs information that is unavailable

without the insured’s assistance and (2) the “request is for

information a reasonable person would determine the insurer needs

to adjust the claim filed by the insured or to prevent fraud.” § 10-3-

1118(1)(a), (1)(b), (1)(d).

It also requires that the insurer provide the insured with sixty days

to respond to the request for information and provide an

“opportunity to cure” that includes “written notice to the insured of

the alleged failure to cooperate, describing with particularity the

alleged failure, within sixty days after the alleged failure” and

“[a]llow[s] the insured sixty days after receipt of the written notice

to cure the alleged failure to cooperate.” § 10-3-1118(1)(c),

(1)(e)(I)-(II). If these requirements are not met, an insurer may not

assert a failure to cooperate defense against an insured in court or

in arbitration. § 10-3-1118(1).

2024 COA 40, ¶¶ 29-30, 552 P.3d 1121, 1127 (finding that an insurer must “strictly comply” with these requirements in order to plead or prove the defense).

Committee debate and testimony is also clear that the intent was for the statute to apply to an insurer’s pre-suit requests for information. During the legislative hearings on the bill, its sponsor, Representative Garnett, stated as follows:

In recent years, insurers have avoided paying

20 claims by arguing that the insured failed to cooperate

21 during its investigation. What constitutes not —

22 noncooperation is largely undefined and subject to the

23 discretion of individual insurance companies.

24 For example, failure to cooperate can include

25 failure to respond to a letter, failing to submit

1 information on the correct form, failing to sign a

2 specific form, or refusing to turn over private or

3 irrelevant information.

4 Courts have struggled to provide clarity

5 because of the near limitless assertions of insurance

6 company — an insurance company can make and then use

7 to accuse policyholders of failing to cooperate.

8 To make matters worse, failure to cooperate

9 is a complete defense, meaning that even the smallest

10 allegation can void an entire claim.

11 So with House Bill 1290, we’re trying to set

12 conditions under which insurance companies can claim a

13 failure-to-cooperate defense and there void — and

14 therefore void payment of the covered benefits.

15 In order to prove a failure-to-cooperate

16 defense in a court of law or an arbitration, each of

17 the following conditions must be met: An insurer must

18 submit a written request to the insured. The

19 information is not available to the insurer, the

20 request gives the insured 60 days to respond. The

21 request is for the information the insurer would be

22 entitled to via discovery in litigation.* * *

What we’re trying to do here is level the

12 playing field for consumers.

House Judiciary Committee Hearing Transcripts, dated March 10, 2020, at 2:19-3:22; 4:11-12.

Witnesses both for and against the bill testified that it was designed to apply to pre-litigation requests for information:

So I don’t think any of this is going to

16 make a difference in litigation, because once you’re in

17 litigation, all different rules apply.

Id. at 22:15-17 (testimony by witness, Marc Levy).

So discovery is there to go out and find the

24 information, but importantly this bill talks about

25 claims before litigation.

Id. at 48:23-25 (testimony by witness, Frank Patterson).

Representative Benevidez also acknowledged that the statute was designed to apply to pre-litigation information requests:

And — and I guess I’m still more confused on

4 the — what you’re putting on insureds, because I read

5 this that this — this is a defense in a court of law

6 or in an arbitration, but that doesn’t mean these

7 things don’t have to be done before it gets to that

8 point. And then that’s only a defense. So this

9 happens long before it gets into court, as far as the

10 cooperation.

Id. at 39:3-10.

But a worrisome trend is developing in federal court. Insurers are beginning to utilize Section 1118 as a weapon of litigation, sending letters from the assigned adjusters directly to the plaintiffs’ attorneys after suit is filed (and perhaps years into litigation), making demands for information and action (e.g., production of records, signed medical releases, attending IME’s, etc.), citing Section 1118, and threatening a “noncooperation” defense if the demands are not met.

The obvious problem is that this practice circumvents the Rules of Civil Procedure and court oversight of the discovery process. If permitted, this practice gives insurers the ability to conduct “discovery,” during litigation, beyond the reach of the courts and outside of the litigation process. The insured-plaintiff is left with a “Sophie’s choice” on whether to say “how high” when an insurer demands that she “jump” during litigation (and provide whatever information is demanded, or go through whatever process the insurer insists upon – such as an IME), or to refuse the demand and risk a new “noncooperation” defense under the guise of Section 1118.

This author is witnessing this tactic unfold in real time. A recent and ongoing case involves exactly this fact pattern. And the insurer has been allowed to amend their answer to assert a “noncooperation” defense based upon a refusal to attend a psychological IME (in an orthopedic injury case) that was demanded by the insurer, during litigation, under Section 1118. This was not a Rule 35 examination. In fact, the plaintiff requested that the insurer file a Rule 35 motion to have the court determine whether the request for such an examination met the “good cause” standard and is warranted in the case (and stated that, if the court determined it was appropriate, she would attend the examination), but the insurer refused – insisting that it wanted to give the plaintiff “the choice,” rather than force her to undergo the examination. Despite filing a motion for protective order and vigorously opposing the insurer’s motion to amend its answer, the amendment to add a Section 1118 defense was permitted. The court reasoned that the insurer’s demand was something permitted by the policy, and was thus a “parallel track” to discovery under the Rules of Civil Procedure. Hubchik v. Owners Ins. Co., Civil Action No. 23-cv-01359-DDD-KAS, 2024 U.S. Dist. LEXIS 229002, at *14 (D. Colo. Dec. 17, 2024). The court, however, reserved final judgment on the issue for dispositive motions, which have yet to be fully briefed.

So what is an insured to do? It strikes the author that there are several counterarguments to an insurer’s attempt to utilize Section 1118 in this manner. Without giving away too much concerning dispositive motions practice in the above case, here are the highlights:

•  Section 1118 was never intended to work this way, on its face. There is some support for this in the case law. See, e.g., Worley v. State Farm Mut. Auto. Ins. Co., Civil Action No. 1:23-cv-00337-DDD-MDB, 2025 U.S. Dist. LEXIS 33734, at *16-17 (D. Colo. Feb. 6, 2025) (agreeing, on summary judgment, that it “would not have been possible for [the insurer] to comply with section 10-3-1118” because the plaintiff filed suit 30 days after the request for information; and stating, “While that means, in cases such as this, that insurance companies will be barred from pleading failure-to-cooperate defenses where a plaintiff files suit less than 120 days after the insurance company’s initial request for information, the statutory language is clear that this result is required. . . .”).

• Permitting the statute to operate in the way advocated by the insurers violates public policy and results in absurdities – i.e., by essentially removing the “guardrails” put in place by the Rules of Civil Procedure.

•  Section 1118, if it means what the insurers argue, conflicts with the Rules of Civil Procedure. When that happens, the Rules trump the statute. See, e.g., Jones v. Krautheim, 208 F. Supp. 2d 1173, 1175 (D. Colo. June 25, 2002) (when a state statute directly conflicts with a Federal Rule of Civil Procedure, the Federal Rule controls).
•  If all else fails, arguments and evidence (including expert testimony) should be presented on the insurer’s failure to “strictly comply” with Section 1118’s requirements – e.g., that the information demanded was not reasonably “needed” to adjust the claim; that the information was available to the insurer by other means, etc.

Short of this, a legislative fix may be necessary. While the author, and I suspect the insurance industry as well, knows that this statute was not designed to be a weapon for the insurance company to be wielded during litigation (in fact its clear intent was the opposite), statutes have a way of changing through court decisions.

This comes in the context of the excellent opinion from the Colorado Court of Appeals in Wenzell, which not only found that the requirements of the statute must be strictly followed by the insurer in order to raise such a defense, but also confirmed that this statute encompasses arguments by the insurer that the policyholder violated specific policy provisions (conditions precedent) beyond just the “cooperation clause.” Wenzell dealt with the issue in the context of requests for signed medical record releases – for which a stand-alone condition existed in the policy. The court held that the statute contemplates the insurer’s argument that the insured violated conditions precedent to coverage, and stated that otherwise “insurers could raise noncooperation while labeling it a condition precedent and avoid the requirements of section 10-3-1118 entirely, thereby enabling insurers to do exactly what section 10-3-1118 seeks to prevent.” 2024 COA 40, ¶ 37, 552 P.3d 1121, 1128.

Alas, Wenzell has been accepted on certiorari by the Colorado Supreme Court. 24SC372 (March 10, 2025). We will have to wait and see how this, too, may change Section 1118.