(Article from Insurance Law Alert, June 2018)
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Answering a certified question, the Colorado Supreme Court ruled that a statutory claim for the unreasonable delay or denial of insurance benefits is not subject to the one-year statute of limitations applicable to actions brought under any penal statute. Rooftop Restoration, Inc. v. American Family Mutual Ins. Co., 2018 WL 2407591 (Colo. May 29, 2018).
A contractor, as assignee of benefits under a homeowners’ policy, alleged several causes of action against an insurer, including a statutory claim based on the unreasonable delay or denial of policy benefits. See Section 10-3-1116, C.R.S. (2017). The insurer argued that the claim was time-barred under the one-year statute of limitations set forth in section 13-80-103(1)(d), C.R.S. (2017), which applies to “all actions for any penalty or forfeiture of any penal statutes.” The court disagreed, finding that the denial of insurance benefits statute was not “penal” under Colorado law.
The court declined to apply the three-part test previously adopted by the Colorado Supreme Court in evaluating the “penal” nature of a statute. See Kruse v. McKenna, 178 P.3d 1198 (Colo. 2008). The court stated that “if the legislature even implicitly indicates that a statute is not penal for the purposes of identifying the correct statute of limitations, then our judicially created test must yield to the intent of the legislature.” The court inferred that the legislature did not intend to make section 10-3-1116 penal based on an accrual statute, 13-80-108, which provides that a cause of action for penalties accrues “when the determination of overpayment or delinquency for which such penalties are assessed is no longer subject to appeal.”
The court did not specify the applicable statute of limitations and remanded the matter for further proceedings.