The Colorado Supreme Court granted a federal judge’s request on Friday to address an issue that has produced conflicting answers in policyholders’ lawsuits against insurance companies over unpaid benefits.

“Parties (and judges) regularly spend undue time and money fighting in the pretrial context about a legal question that should be resolved once and for all by the Colorado Supreme Court,” wrote U.S. Magistrate Judge N. Reid Neureiter in a March 17 order outlining the dilemma for the state’s highest court.

Neureiter explained that there is a “perceived tension” in insurance lawsuits between two principles. First, there is the argument that an insurance company’s duty to settle or resolve a claim is generally suspended upon the filing of a lawsuit, termed the “suspension rule.”

Second, there is the principle that insurers continue to have a duty to act in good faith toward their policyholders, even after a lawsuit is initiated.

Those two principles collide when a plaintiff seeks evidence from an insurer regarding the insurer’s claims-related activity during the ongoing lawsuit. Although such cases are governed by state law, insurers typically exercise their right to transfer the litigation to federal court. As a result, Neureiter explained, the Colorado Supreme Court is unlikely to provide guidance about what to do through the normal appellate process.

Moreover, the Denver-based federal appeals court will be similarly unlikely to weigh in because the issue involves a pretrial evidentiary dispute, to which appellate courts give “great deference” to trial judges, he added.

Consequently, the issue “cries out for resolution by Colorado’s Supreme Court,” Neureiter concluded.

In the underlying case, James Berns was rear-ended in March 2020. The at-fault driver’s insurance company offered $25,000 to settle, which was the maximum under the driver’s policy. Berns then turned to his own insurer, State Farm, which provided up to $250,000 in coverage for injuries caused by an uninsured or underinsured motorist.

After extensive back-and-forth over medical records, Berns sued State Farm in 2024 in state court to avoid hitting the statute of limitations. State Farm transferred the case to federal court. The company continued to obtain medical evidence about Berns, including evaluations from multiple doctors.

The parties then asked Neureiter: Does the “suspension rule” allow State Farm to withhold information placed in Berns’ claim file after he initiated the lawsuit?

“This is an issue that we’re all struggling with as magistrate judges in this court without much guidance from the Colorado courts on how to do this,” Neureiter told attorneys from both sides during a Feb. 2 conference.

He referenced a decision he authored in June 2025, which described in detail the competing philosophies in Colorado’s U.S. District Court. On the one hand, evidence from the claim file after the lawsuit has begun can illustrate whether the insurer is continuing to act in good faith. On the other hand, that information is irrelevant if the insurer’s duty to settle or resolve a claim is suspended pending the outcome of a trial.

Neureiter cited three judges — Senior Judge Robert E. Blackburn and Magistrate Judges Maritza Dominguez Braswell and Kathryn Starnella — who believed plaintiffs were entitled to know whether their insurer continued to act in good faith on a claim even after a lawsuit began. Senior Judge Christine M. Arguello and Judge Nina Y. Wang, meanwhile, took the opposite position.

Neureiter, in speaking with the attorneys for Berns and State Farm, indicated he would side with the insurance company unless Berns sought the state Supreme Court’s intervention.

Berns accepted the invitation.

In cases alleging bad-faith conduct by insurance companies, “the insurers’ Claim Records are the most important piece of evidence. In the majority of those cases, the investigation and decisions regarding benefits owed have not been resolved, so are part of the lawsuit,” wrote Berns’ attorney, John G. Taussig III. “In those cases, absent access to post-litigation claim records, insureds are bringing a knife to a gunfight.”

On March 20, the Supreme Court issued an order accepting Neureiter’s request to weigh in. It will decide whether and to what extent plaintiffs may access insurers’ notes or files regarding the claim after a lawsuit has begun.

The case is Berns v. State Farm Mutual Automobile Insurance Company.

Earlier in March, the justices also intervened in an ongoing civil case in state court. Joel Farkas is liable for a $41.2 million debt, and the creditor, VP Fruition Holdings LLC, issued a half-dozen subpoenas to organizations financially affiliated with Farkas.

Farkas moved to void those requests for information. He argued that, under the civil rules, VP Fruition Holdings first had to provide “proof to the satisfaction of the court, that any person has property of, or is indebted to” Farkas.

“Not only does VP Fruition indiscriminately shotgun subpoenas to Farkas’ banks, phone company, and landlord; it demands that these nonparties produce thousands of documents that contain private and proprietary information about the financials and business operations of an untold number of other nonparties that VP Fruition has no conceivable legal right to obtain,” his attorneys wrote.

Denver District Court Judge Ericka F.H. Englert agreed with Farkas, finding the subpoenas did not comply with the rule, which was the “exclusive procedure” for obtaining information from third parties about someone who has been found liable for a debt.

VP Fruition Holdings turned to the Supreme Court, arguing it was illogical to require proof of the financial relationship between a debtor and associated entities at the outset.

“Without access to documents uniquely within the possession of the nonparties Petitioner wishes to subpoena, Petitioner cannot uncover evidence of Debtor’s fraudulent transfers or use of alter egos or otherwise trace Debtor’s assets, and is therefore substantially hindered in its ability to enforce its judgment,” wrote attorney Patrick Gillette.

On March 12, the Supreme Court ordered Farkas to respond to VP Fruition Holdings’ petition.

The case is VP Fruition Holdings LLC v. Farkas.