The procedural trap that decided the coverage case

This is the part that turns a coverage dispute into a cautionary tale about litigation hygiene.

The insureds argued the plaintiff's voluntary dismissal of the fiduciary-duty claim had been procedurally invalid. But that argument had to be made in the case where the dismissal happened, and made timely. Instead there was a “motion for clarity” filed roughly two years later, followed by an appeal that did not challenge the dismissal's validity — which produced a preclusive finding that foreclosed the coverage argument entirely.

The appellants also advanced no alternative basis for coverage. A court cannot find coverage a party has not identified.

What a board and its broker should do about it

Ask the carrier, in writing, what triggers the duty to defend a director. The answer will be one of two things: a specific kind of claim, or the director's status and role. Those are very different products, and most boards have never asked.

Know whether the association actually carries directors-and-officers cover, separate from its general liability tower. A CGL policy is not a D&O policy, and the theory on which a director gets defended under a CGL policy is narrow and contingent, as this case shows. This is the single most common gap in Colorado association insurance programmes.

Watch for a plaintiff's voluntary dismissal of the covered claim. Whether by design or accident, dropping the one count that triggers the defence strips the insured of a funded defence while leaving every other claim alive. If a board or director believes such a dismissal was invalid, the moment to say so is immediately, in that case — not two years later in a coverage action.

And tell volunteers what they are and are not covered for, before they act. A volunteer who exceeds the association's authorisation is outside the policy the association bought, and outside the indemnity in the bylaws that depends on acting within the role.

The wider insurance picture for a Colorado director

Two other rulings from this period sit alongside this one, and together they describe a hardening environment.

In New Hampshire Insurance Co. v. TSG Ski & Golf, LLC, decided February 24, 2025 and published, the Tenth Circuit held that a CGL knowledge-of-falsity exclusion defeated both defence and indemnity for a Colorado condominium owners' association whose directors testified they knew a $15.5 million assessment demand ignored payments already made. Compensatory damages of $225,000 generated $2.3 million in statutory fees, all uninsured.

And the Colorado Supreme Court has agreed to decide, in Twin Shores Master Owners Association v. Willis, No. 25SC286 — certiorari granted en banc on January 12, 2026 — whether a unit owner's guest is an invitee as to the association under the Premises Liability Act in common elements the association owns and controls. A management company is a co-petitioner, so the manager's exposure is in the same case. We offer no prediction on it.

The common thread for a Colorado director is that coverage is narrower and more conditional than the word “insured” suggests, and that the conditions are set years before a claim arrives — in the policy, in the bylaws, and in what the board actually authorised.

What would change the answer

A policy whose duty to defend is triggered by the insured's status, or by any claim arising from association business, rather than by a specific count. Conduct actually authorised by, or within the scope of, the volunteer's role. A timely and properly preserved challenge to the voluntary dismissal. And an insured who articulates an alternative coverage basis — the appellants here advanced none.

Note also that this is an unpublished order and judgment: persuasive only, citable under the Tenth Circuit's own rule but not binding.