DEPARTMENT OF REGULATORY AGENCIES
Division of Insurance
3 CCR 702-5
Property and casualty
Amended Regulation 5-2-11
TRANSITION FROM NO-FAULT AUTO TO TORT SYSTEM
Section 1	Authority
Section 2	Scope and Purpose
Section 3	Applicability
Section 4	Definitions
Section 5	Rules
Section 6	Enforcement
Section 7	Severability
Section 8	Effective Date
Section 9	History
Section 1	Authority
This regulation is promulgated pursuant to  §§ 10-1-109, and 10-4-601.5 (as codified in HB 03- 1188 effective July 1, 2003).
Section 2	Scope and Purpose
The purpose of this regulation is to promote a smooth transition from a no-fault auto system to a tort system in the State of Colorado, by prescribing rules and providing guidance to auto insurers. On July 1, 2003, the Colorado Auto Accident Reparations Act, also known as the motor vehicle no-fault insurance law, is repealed pursuant to  § 10-4-726, C.R.S. There is considerable industry and consumer confusion concerning the effect of the conversion to a tort system on auto policies. Among other things, confusion exists concerning the effect of the conversion on auto policies issued or renewed prior to July 1, 2003 that renew after July 1, 2003. In addition, there is industry confusion concerning various rate filing requirements, notice requirements regarding changes to automobile policies, and the applicability of statutory requirements to motorcycles.
Regarding the provisions of this regulation that address medical payments coverage, the purpose for the regulation is to encourage orderly and timely coordination and payment of claims, and to discourage duplicative payments under multiple available coverages and policies, including secondary health insurance policies.
The Division bases its interpretation of various statutory changes effected by the repeal of the no-fault law and the enactment of HB 03-1188 and SB 03-239 upon the constitutional prohibition against impairment of existing contracts and retrospective application of laws. These prohibitions are set forth in Article II, Section 11 of the Colorado Constitution and are elaborated upon in case law.
Section 3	Applicability 
This regulation shall apply to all carriers who issue automobile policies in the State of Colorado.

Section 4	Definitions
As used in this regulation:
A.	“Medical Payments Coverage”  refers to automobile insurance coverage that pays for covered medical expenses incurred for bodily injury caused by an automobile accident and sustained by an insured regardless of fault.
B.	“No-fault”  refers to the Colorado Auto Accident Reparations Act enacted under  § § 10-4-701 to 10-4-726, C.R.S. which was repealed in accordance with  § 10-4-726, C.R.S. on July 1, 2003.
C.	“Primary coverage”  refers to a plan that provides benefits up to the limits of the policy, regardless of other insurance policies in effect. Primary coverage provides first dollar coverage regardless of whether excess or secondary coverage has been exhausted.
D.	“Secondary coverage”  refers to a plan that provides benefits that are not primary.
E.	“Tort”  refers to the auto system to which Colorado will revert on July 1, 2003. Tort refers to a civil wrong for which an insured may seek redress in a court of law, usually in the form of damages.
Section 5	Rules
A.	By operation of law, Colorado will revert from a no-fault auto system to a tort system effective on July 1, 2003. The change will occur after midnight at 12:00.01 am United States mountain time, July 1, 2003, as calculated under  § 2-4-109, C.R.S.
B.	All auto policies issued, written or delivered on or after July 1, 2003 must be issued, written or delivered as tort policies.
C.	Renewal notices delivered to insureds prior to July 1, 2003 for policies with an  effective  date on or after July 1,     2003, must renew or amend the policies as tort policies that comply with Part 6 of Article 4 of Title 10, and any and all other applicable insurance laws.
D.	Existing no-fault policies do not automatically convert to tort policies on July 1, 2003. The policy's no-fault coverages apply until the next renewal date.
E.	Insurers may offer policyholders the option to “convert”  their no-fault policies to tort policies effective after midnight July 1, 2003. The insurer and policyholder must mutually agree to this mid-term conversion. Insured consent may be made in the same medium in which the offer or request to convert is made, e.g., electronically. The insurer must maintain adequate proof of the insured's consent. Adequacy will be determined by the division.
F.	Insurers are prohibited from requiring policyholders to convert their no-fault policies to tort policies until the next renewal date that comes after midnight July 1, 2003.
G.	Policyholders may request that insurers convert their no-fault policies to tort policies for an effective date after midnight July 1, 2003. The insurer and policyholder must mutually agree to this mid-term conversion. Insured consent may be made in the same medium in which the offer or request to convert is made, e.g., electronically. The insurer must maintain adequate proof of the insured's consent. Adequacy will be determined by the division.
H.	Insurers are prohibited from re-underwriting policies mid-term that convert from the no- fault to the tort system.
I.	Insurers are prohibited from charging application fees or cancellation fees or other similar charges to insureds upon conversion of policies from no-fault to tort policies.
J.	Insurers are prohibited from “rolling on”  additional coverages such as limits of medical payments coverage that are in excess of the amount required by law without the insured's consent. Insured consent may be made in the same medium in which the offer or request to add additional coverages is made, e.g., electronically. The insurer must maintain adequate proof of the insured's consent. Adequacy will be determined by the Division. Where insurers have added additional coverages prior to the effective date of this regulation, they must obtain insured consent for the change or remove the coverage as of its effective date, recalculate premium and refund any owed premium.
K.	The division has determined that the notice requirements contained in  § § 10-4-110.5, 10-4-626 (as codified in HB 03-1188 effective July 1, 2003 and later renumbered as 10- 4-629), 10-4-629 (formerly codified in HB 03-1188 as 10-4-626), and 10-4-720 (effective until July 1, 2003), C.R.S., and regulations promulgated thereunder, do not apply at the first conversion of a no-fault policy to a tort policy where the sole cause for the reduction in coverage is the repeal of the no-fault law. These statutes continue to apply when it is the insurer's actions that cause the reduction in coverage, the increase in premium or the failure to renew, i.e., application of the insurer's underwriting guidelines and/or rating rules. Where the reduction in coverage occurs solely because of the effect of the repeal of the no-fault law, the insurer is not unilaterally reducing coverages. Rather, coverages are being modified by operation of law and accordingly, the notice requirements do not apply.
L.	The Division has determined that the rating provisions contained in  § 10-4-416, C.R.S. do not apply at the first conversion of a no-fault policy to a tort policy, where the sole cause for the decrease in coverage is the repeal of the no-fault law. This statute continues to apply when it is the insurer's action that causes the reduction in coverage, or the increase in premium, i.e., application of the insurer's underwriting guidelines and/or rating rules. Where the reduction in coverage occurs solely because of the effect of the repeal of the no-fault law, the insurer is not unilaterally reducing coverages. Rather, coverages are being modified by operation of law and accordingly, the prohibition does not apply.
M.	Except as provided in section 5(N), on or before the tenth (10th) calendar day before the effective date of the change to the policy where the insurer is first converting a no-fault policy to a tort policy, the insurer shall send by first-class mail written notice of the change to the named insured at the insured's last known address. The notice shall state in clear and specific terms all of the following:
1.	The proposed action to be taken, including, if the change is a change in premium or change in coverage, the amount of the premium, the type of coverage to which the premium change is applicable, the type of coverage increased or reduced, and the extent of the change in coverage,
a.	In the notice, insurers shall make reasonable efforts to express the amount of any premium change as a dollar amount allocated among the various coverages,
b.	If an insurer is unable to comply with section 5(M)(1 )(a) within the required timeframe, the insurer shall include in the notice a statement that the allocation of the premiums for the various coverages will be identified no later than when the policy is issued. In addition, the insurer shall be prepared to justify the failure to the division to the satisfaction of the division.
c.	In no event shall a policy be issued that does not clearly differentiate the premiums for the various coverages.
2.	The proposed effective date of the change.
3.	A statement of reasons why the change is necessary so that a person of average intelligence can understand the necessity for the change without making further inquiry. This statement shall include, at a minimum, the following:
a.	An explanation of the change in law necessitating the conversion of the policy,
b.	A general explanation of why various coverages are being increased or reduced, including the effect on premium.
c.	Notices regarding the changes in coverages and the changes in premiums may be mailed separately within the required timeframe.
N.	Where the insured requests that the carrier convert the policy mid-term, and the insurer agrees to convert the policy, insurers shall mail the notice to the insured as required in section 5(M) or within 10 calendar days after the change becomes effective, or shall provide the same information required in section 5(M) in the same medium in which the request was made. The insurer must maintain adequate proof that the information was provided. Adequacy will be determined by the Division.
O.	Motorcycles are required to have complying policies as that term is defined by  § 10-4- 601(1), C.R.S. (HB 03-1188). The Colorado general assembly expressed its intent to continue the complying policy requirement for motorcycles in SB 03-239. The governor signed SB 03-239 into law on June 5, 2003, after the effective date of HB 03-1188. Accordingly, the language in SB 03-239 controls over that in HB 03-1188. SB 03-239 states in  § 42-4-1409, C.R.S. that motor vehicles must have complying policies. The language clarifies that this requirement must be met “as required by law” . The language in HB 03-1188 stated the requirement had to be met in accordance with article 6 of title 10, which appears to exclude motorcycles from the definition of “motor vehicle” . This apparent conflict was resolved by SB 03-239, which now permits the division to adopt the definition of “motor vehicle”  and “motorcycle”  contained in title 42 for purposes of interpreting and enforcing the legislative intent in  § 42-4-1409, C.R.S. (SB 03-279). For these reasons, among others, it is the division's interpretation of the relevant statutes that motorcycles must maintain complying policies.
P.	 Medical payments coverage shall be primary coverage unless rejected by the insured in writing or in the same medium in which the application for the policy was taken.
Q.	For covered benefits and up to the policy limits, medical payments coverage includes any and all co-payments, co-insurance and deductibles of secondary plans.
Section 6	Enforcement
Noncompliance with the requirements and timeframes specified in this regulation may result, after proper notice and hearing, in the imposition of any sanctions made available in Colorado statutes pertaining to the business of insurance or other laws which include the imposition of fines, issuance of cease and desist orders, and/or suspension or revocation of license.
Section 7	Severability
If any provision of this regulation is for any reason held to be invalid, the remainder of the regulation shall not be affected.
Section 8	Effective Date
This regulation is effective January 1, 2009.
Section 9	History
Emergency regulation 03-E-1 effective from May 23, 2003 to June 3, 2003.
Emergency regulation 03-E-2 effective from June 3, 2003 to July 23, 2003.
Emergency regulation 03-E-5 effective July 23, 2003 to October 19, 2003.
Emergency regulation 03-E-10 effective October 19, 2003 to January 1, 2004.
New regulation effective on January 1, 2004.
Emergency regulation 03-E-13 effective January 1, 2004 to January 20, 2004.
Emergency regulation 04-E-1 effective January 20, 2004 to April 1, 2004.
Amended regulation effective April 1, 2004.
Amended regulation effective January 1, 2009.