Colorado Supreme Court Ruled on Excess Insurance Coverage
The ruling clarifies that excess insurance providers are not obligated to cover gaps caused by the insolvency of a primary insurer.
Updated on Sept. 22, 2026 in Insurance
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In a unanimous decision, the Colorado Supreme Court ruled that Federal Insurance is not responsible for covering claims that remain unpaid due to the insolvency of a primary insurance provider. This decision affects the interpretation of excess insurance contracts across the state.
Why it matters
The ruling limits the liability of excess insurers by establishing that policies do not function as a financial guarantee for the failure of primary insurers. For policyholders, this clarifies that insolvency of a primary carrier does not trigger coverage from an excess policy for otherwise covered claims.
The unanimous court decision overruled a precedent from 1989, specifically clarifying that 'not covered' refers to the scope of an insurance contract rather than the ability to collect payment from a primary insurer.
The players
Colorado Supreme Court
The state's highest judicial body, which sets binding legal precedents for insurance contract interpretations within Colorado.
Federal Insurance
A subsidiary of Chubb that provides insurance products and was the defendant in the case regarding excess coverage obligations.
A.R. Wilfley & Sons
A pump manufacturer based in Commerce City that brought the lawsuit seeking coverage for claims left unpaid by an insolvent insurer.
The details
The court examined whether Federal Insurance, a Chubb subsidiary, was required to step in after a primary insurer, Reliance Insurance, became insolvent and stopped paying claims. Justices determined that the term 'not covered' in insurance policies refers to the scope of risks covered, not the collectibility of the underlying insurance. Consequently, excess or umbrella policies remain distinct from primary coverage and do not automatically fill gaps caused by a primary insurer's bankruptcy.
Timeline
1989: The Colorado Court of Appeals established the previous legal standard in Deisch & Marion, P.C. v. International Insurance Co.
September 21, 2026: The Colorado Supreme Court issued its ruling in A.R. Wilfley & Sons, Inc. v. National Union Fire Insurance Company.
Money Landscape
This ruling marks a significant departure from the 1989 Deisch & Marion precedent regarding the obligations of excess insurers. It clarifies the boundaries of coverage for Colorado businesses relying on layered insurance protections.
Businesses in Colorado should review their current insurance portfolios to understand how excess or umbrella policies respond in the event of a primary insurer's insolvency. Policyholders should consult with a qualified insurance broker to assess their risk exposure regarding gaps in coverage.
The takeaway
The court confirmed that excess insurance is not a safety net for insolvent primary providers. When renewing coverage, discuss the financial stability of your insurers with your professional advisors to identify potential coverage gaps.
Further reading
For more information on how policy types protect your business, see the Insurance section.
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