The Colorado Supreme Court has ruled that an umbrella or excess insurer does not have to replace an insolvent primary insurer when the underlying claim remains within the primary policy’s coverage. The unanimous Sept. 21 decision settles a previously unresolved question of Colorado insurance law and leaves the immediate dispute to continue in federal court.

In A.R. Wilfley & Sons v. National Union Fire Insurance Co., the court answered a question certified by the U.S. District Court in Denver. Its opinion held that the phrase “not covered” refers to the scope of an insurance policy, not whether payment can actually be collected from the company that issued it.

A.R. Wilfley & Sons, a Commerce City manufacturer of industrial pumps, has faced asbestos-related personal-injury claims since the 1980s. Some of its primary coverage was exhausted through settlements and claims. Another primary carrier, Reliance Insurance Company, became insolvent. Wilfley then sought defense and indemnity from Federal Insurance Company under umbrella and excess policies sitting above those primary layers.

Federal argued that its policies did not convert it into a substitute primary carrier merely because Reliance could no longer pay. Wilfley countered that the insolvent carrier’s benefits were effectively unavailable, making the occurrences “not covered” and requiring Federal to provide first-dollar defense and indemnity. A case summary from Law Week Colorado described that choice between policy scope and practical collectibility as decisive.

Justice Carlos Samour, writing for the court, sided with Federal. The policies treated coverage and collectibility as separate concepts and required the underlying limits to be paid before the excess layer could attach. The court said Federal had not agreed to insure against the financial failure of a scheduled primary carrier. It also overruled an inconsistent portion of a 1989 Colorado Court of Appeals decision.

The ruling does not erase Wilfley’s asbestos liabilities or revive coverage from the insolvent insurer. Instead, it determines which layer of the company’s insurance program must absorb the gap. Colorado Politics reported that Wilfley told the court it could close if Federal did not step in, underscoring the stakes for the manufacturer while not changing the contract language the justices analyzed.

The practical reach extends beyond this case. Colorado businesses with layered liability programs cannot assume that an excess or umbrella policy will automatically “drop down” when a listed primary carrier becomes insolvent. Coverage will turn on the wording of each contract, including whether the primary policy covers the occurrence and whether its limits have been paid or exhausted.

The decision was issued as 2026 CO 64 and was one of two opinions listed in the court’s Sept. 21 announcements. Because the state court answered only the certified question of Colorado law, the federal judge will apply that answer to the remaining claims in Wilfley’s lawsuit.