Although many aspects of insurance claims handling are now regulated by states, correspondence and disclosure between third-party claimants and auto liability carriers remain in many ways the wild, wild West. Carriers sometimes receive time-limited, policy-limits demands requiring response in as little as two weeks, with inadequate information to assess the claim. In an attempt to tame these outrageous requests, state legislatures have sought to dictate the information and timelines of correspondence, to provide clarity to claimants and insureds regarding the liability carrier’s position.

Utah now follows suit, with Utah Code Ann. § 31A-2-323, effective May 6, 2026 (the “Statute”). The Statute establishes procedural requirements for policy-limits demands, direct communications with insureds, and carrier correspondence obligations under Utah insurance law. Unlike its Colorado counterpart, C.R.S. §10-3-1117¹, the Statute is nested under the motor vehicle insurance part and explicitly applies to third-party auto liability claims.

While the Statute does not create an independent cause of action or impose any penalties, it is not without its own complexities. The Statute provides requirements for both third-party claimants and auto carriers in the correspondence of demands and carrier responses.

Third-party claimants issuing policy-limits demands must: (1) include reasonably sufficient information to allow a liability insurance carrier to evaluate the claim, including a description of the incident, injuries, liability basis, damages, and supporting documentation (including medical records, bills, and lost wages for any alleged damages); and (2) provide the carrier no less than 30 days to accept or reject the policy-limits demand. 
 
If the carrier rejects the policy-limits demand and the claimant intends to sue the insured, the claimant or claimant’s counsel may elect to correspond directly with the unrepresented insured. The claimant may not file a cause of action against the insured until 45 days after the date the insured receives the correspondence, unless necessary to preserve the claimant’s legal rights.

Such correspondence must:

(i) be in writing, with a copy delivered to the carrier;

(ii) include a reference to the Statute, with a plain-language explanation of the claimant’s claim against the insured;

(iii) include a description of the claimant’s related injuries;

(iv) provide a copy of the demand letter that was sent to the carrier and, if applicable, provide a copy of the liability carrier’s written response; and

(v) note that any attorney representing the claimant is adverse to the insured and indicate the legal action the claimant intends to pursue.

The final, and most problematic, section of the Statute sets out a carrier’s responsibilities in responding to an insured. Within 30 days of a carrier receiving a copy of a claimant’s letter sent to the insured, a carrier shall provide an insured a written disclosure stating whether the carrier agrees to defend and indemnify the insured, including whether indemnification is limited to policy limits or extends to an excess verdict, judgment, or settlement. If a carrier’s indemnification is limited to the policy limits, the correspondence must provide a reasonable explanation as to the basis and notify the insured of the insured’s right to seek counsel. However, the Statute provides no clarity as to what is considered “reasonable.”

Additionally, the Statute fails to address its direct conflict with Utah law regarding the duties to defend and indemnify. The Statute requires a carrier to evaluate its duty to defend based solely on a letter from the claimant, before any lawsuit is filed. Yet, under Utah law, an insurer’s duty to defend is traditionally governed by the “eight-corners” rule by comparing the policy against the allegations in the complaint. Equine Assisted Growth & Learning Ass'n v. Carolina Cas. Ins. Co., 2011 UT 49, ¶ 18, 266 P.3d 733, 737 (Sup.Ct.)². The Statute now requires a carrier to evaluate the duty to defend prior to receiving any written lawsuit, in contravention to standard policy language defining a “suit” and Utah law regarding the triggers for a duty to defend.

The Statute also requires a carrier to provide a statement on its duty to indemnify at the outset of a claim, only 30 days after receipt of a copy of the claimant’s letter to the insured, directly contradicting Utah precedent, which holds that the duty to indemnify is not ripe until liability is determined in the underlying case. State Farm Fire & Cas. Co. v. Inevat, LLC, No. 2:17-cv-00901, 2018 U.S. Dist. LEXIS 97075 (D. Utah June 8, 2018).

It is unclear at this time how Utah courts will resolve the conflicts between the Statute’s requirement of an early evaluation of the duties to defend and indemnify and Utah precedent. It is also unclear what teeth – if any – the Statute has to encourage more open disclosures between claimants and carriers. Non-compliance with the Statute neither precludes a bad faith finding nor prevents a claimant from filing suit. The legislature only states that compliance with the Statute may be considered as evidence for or against bad faith in any subsequent action by the insured against the liability carrier. Finally, it remains unclear how courts will resolve the issue of “reasonableness” when carriers are now required to issue coverage decisions in the nascency of a claim, before all relevant information is uncovered.

As with most disclosure statutes, the Statute attempts to clarify the duties among claimants, insureds, and carriers but unintentionally muddies the waters. Although Utah auto liability carriers now have an explicit 30-day deadline to explain their coverage position on the duties to defend and indemnify in third-party auto claims, the Statute provides no guidance on how to respond to these questions pre-suit. Carriers will need to think carefully about how to craft these responses.
______________________________________________________________________________________________

^{1 Colorado’s disclosure statute fails to sufficiently clarify whether the statute applies solely to third-party claims, leading to a rise in disputes between insureds and carriers as to whether the penalties or non-disclosure in C.R.S. § 10-3-1117 apply to first-party benefits.}

^{2 We note that Utah law holds that under certain circumstances, extrinsic evidence may be considered in evaluating the duty to defend.  However, that holding is not relevant to discussion of this Statute.}