The Colorado Supreme Court declined last week to reconsider its longstanding expectations for insurance company defendants, and agreed that an insurer failed to properly raise its defenses against a policyholder’s breach-of-contract lawsuit.

When an insured driver has an accident with someone who is uninsured, they may obtain benefits under their own insurance policy for the damages they suffer. Insurers who delay or deny those benefits can be sued for their actions.

The case before the Supreme Court questioned whether Progressive Direct Insurance Company was prevented from adequately defending itself against a lawsuit from its policyholder, Andrew Ortiz. Specifically, the alleged at-fault driver did not participate in the litigation and Ortiz obtained a default judgment against her. Legally, that meant she admitted liability for the accident.

But the Supreme Court found that Progressive waited for months after the default judgment to assert that the company should be able to dispute the at-fault driver’s liability, in addition to the amount of damages Progressive would owe.

“In this case, Progressive failed to specifically plead the legitimate defenses it intended to raise as soon as practicable,” wrote Justice Maria E. Berkenkotter in the June 1 opinion.

The Supreme Court also rejected an invitation from Progressive and from one appellate judge to reconsider its 2004 precedent requiring insurance company defendants to promptly indicate their anticipated defenses so that judges can determine the extent of a company’s participation when an uninsured motorist is involved.

Ortiz and another driver collided at a Denver intersection in January 2020. He sued the driver for negligence and his own insurer, Progressive, for its allegedly unreasonable investigation and denial of his claim.

The uninsured driver did not participate in the case, prompting Ortiz’s claims against her to resolve in his favor by default. Ten months later, Progressive argued it should be able to defend against the other driver’s liability at a hearing, since it would have to pay for the damages she caused. But District Court Judge Alex C. Myers rejected that argument, explaining the other driver’s default already established her liability and Progressive would now get the chance to argue how much the damages were.

Progressive participated in a damages hearing and ended up paying Ortiz $86,959 for the non-appearing driver’s actions. At a separate trial for Ortiz’s claims against the company, jurors found Progressive liable for acting in bad faith and unreasonably delaying or denying benefits. They awarded Ortiz in excess of $216,000.

Progressive asked Myers for a new trial, arguing it should have been allowed to contest the defaulting driver’s liability versus Ortiz’s own responsibility for the crash. Myers disagreed, finding Progressive had not specifically shown why such proceedings were necessary until right before the trial. Even then, “the jury rejected Progressive’s argument and theory” at trial, Myers added.

A three-judge Court of Appeals panel agreed that under the Supreme Court’s precedent, Progressive had to make a “particularized showing” that its participation in a hearing on the defaulting driver’s liability was necessary for fairness. Because Myers correctly concluded Progressive did not, and because Progressive was able to litigate the accident in multiple places, the panel upheld the outcome.

Judge Lino S. Lipinsky de Orlov wrote separately to say he agreed, but he was concerned that the Supreme Court’s 2004 precedent produces unfair results when the allegedly at-fault driver fails to appear.

Because the default judgment established responsibility for the non-appearing driver, there was never “a trial to determine Ortiz’s liability for the collision underlying this case,” Lipinsky wrote. “I believe Progressive should have been allowed to litigate Ortiz’s fault, if any.”

“Progressive never has an opportunity to present the fault argument. Instead, the court tells the jury, ‘I’ve already determined default,’” Brendan O. Powers, representing Progressive, told the Supreme Court during oral arguments. He added that the court should “embrace the idea of ignoring the default” under the circumstances.

The Supreme Court disagreed.

“The district court appropriately balanced the interests of the parties and provided Progressive with the opportunity for a fair hearing on its legitimate defenses,” wrote Berkenkotter.

She added that judges need to know which defenses an insurer intends to pursue “as soon as practicable,” and Progressive used “boilerplate” defenses that were insufficient. Ultimately, Progressive was able to present its points to Myers and the jury and wound up paying less than Ortiz requested.

The case is Progressive Direct Insurance Company v. Ortiz.