COLORADO

UIM Exhaustion Does Not Require Payment of Underlying Limits

The Colorado Supreme Court addressed when an excess UIM carrier’s obligations are triggered under an exhaustion provision. The insured argued that excess coverage attached once his damages exceeded the limits of all underlying liability policies, even though those limits had not been paid, while the insurer argued that payment was required.

The Court agreed with the insured, holding that exhaustion occurs when the insured demonstrates undisputed damages exceeding the available underlying limits—not when those limits are actually paid. An excess UIM insurer may therefore be required to investigate and pay undisputed amounts once damages surpass underlying coverage, even if primary claims remain unresolved.

The Court also held that Colorado’s statutory “failure to cooperate” framework does not apply to the failure to satisfy a specific policy condition. The Supreme Court remanded, and its ruling on the policy condition required dismissal of the insured’s claims because he refused to provide required medical authorizations. Decision.

NEW YORK

Underwriting File Not Discoverable Where Policy Unambiguous

A New York appellate court affirmed an order denying a plaintiff’s effort to obtain an insurer’s underwriting file and unredacted claim notes in a declaratory judgment action over additional insured coverage. The plaintiff, injured at a construction site, had obtained a default judgment against the general contractor and then sued the subcontractor’s insurer, alleging the contractor should have been named as an additional insured.

During discovery, the plaintiff sought the insurer’s underwriting materials and complete internal notes. The court upheld a protective order, finding the requests went beyond what was “material and necessary.” The court emphasized that where an insurance policy is unambiguous, extrinsic evidence, such as underwriting files, is not considered in interpreting coverage. The court also agreed that portions of the claim notes were properly protected as privileged. The decision reinforces that discovery in coverage actions is not unlimited and will be curtailed when the policy language itself controls the dispute. Decision.

Graves Amendment Cuts Back NY’s Primary Coverage Rule for Rental Cars

New York’s highest court held that the federal Graves Amendment preempts state law to the extent it requires rental car companies to provide primary liability insurance to their renters. The case arose after a rental company’s customer caused property damage, and the renter sought a declaration that the rental company had to provide primary coverage up to New York’s statutory minimum limits.

The Court of Appeals ruled that while New York law still requires rental car companies to carry minimum liability insurance for their vehicles, federal law bars the state from effectively imposing vicarious liability through a primary‑coverage mandate. The court reasoned that New York’s prior interpretation (i.e., treating the statutory insurance requirement as primary to the renter’s coverage), could not survive the Graves Amendment, which was enacted to eliminate owner liability for a renter’s negligence. The decision preserves minimum insurance requirements but reshapes how coverage priority applies to rental car claims going forward. Decision.

FLORIDA

Drywall Isn’t a “Collapse” Under Homeowners Policies

A Florida appellate court affirmed summary judgment for an insurer, holding that the fall of a piece of ceiling drywall did not trigger “Additional Coverage – Collapse” under a homeowners policy. During a tropical storm, a portion of drywall fell from a bathroom ceiling due to hidden insect damage. The insureds argued the event qualified as an “abrupt collapse” of part of the building.

The court disagreed, focusing on the policy’s definition of collapse. Although the ceiling material fell abruptly and was caused by a covered peril, the court held that drywall itself is not a “building” or a “part of a building” capable of being occupied. The court also found that the bathroom remained usable for its intended purpose after cleanup. Because the fall did not involve “part of the building” and did not prevent the owner from using his bathroom, the loss fell outside collapse coverage. Decision.

COLORADO

Pedestrian Outside Disabled Car Is Not an Uninsured Motor Vehicle

A federal appellate court applying Colorado law held that uninsured motorist coverage did not apply to injuries suffered when a driver swerved to avoid a pedestrian standing in a dark interstate lane. Although the pedestrian had been a passenger in an uninsured vehicle that broke down hours earlier on the opposite side of the highway, the court concluded the connection between the vehicle and the accident was too remote.

The court focused on causation. Even assuming the uninsured vehicle had been used as transportation, the court found that multiple independent actions broke the causal chain. The passenger ignored the driver’s instructions, left a place of safety, crossed a wide median, and entered active traffic on foot. Those choices were deemed separate from the vehicle’s use and eliminated coverage. Under Colorado law, UM coverage requires a direct, uninterrupted link between the uninsured vehicle and the injury; mere background involvement or “but‑for” causation is not enough. Decision.