(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, 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) Insurance policy means a contract of insurance.
(c) Insurer has the same meaning as set forth in section 10-1-102, C.R.S.
(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 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 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.