Colorado insurance companies owe their policyholders a duty to act in good faith and settle insurance claims fairly.
When your car or home insurance company unfairly denies or delays paying a valid claim, and their actions are unreasonable, they may be liable for acting in “bad faith.”
Luckily, when it comes to companies that practice insurance bad faith, Colorado law affords insured car owners and homeowners broad protection.
If you have questions or would like to speak with a personal injury attorney, please contact us today.
What Is Bad Faith in Insurance?
Bad faith insurance occurs when insurance companies deliberately mislead policyholders by distorting the language of an insurance contract to evade claim payments. Additionally, acting in bad faith includes the failure to disclose policy limitations and exclusions before policy purchase, as well as making unreasonable demands on the policyholder to substantiate a covered loss.
Insurance companies are expected to take rigorous steps when investigating and managing claims.
Generally, they are required to do the following during the claims-adjusting process:
- Explain specific policy terms to the insured;
- Promptly investigate the insurance claims;
- Communicate with the insured during the claims process;
- Affirm or deny coverage of claims within a reasonable time after the insured submits a loss claim; and
- Promptly settle the claim after the company determines it owes a benefit.
Actions like denying coverage without investigation, submitting meager insurance settlement offers, and failing to communicate with the insured are examples of bad faith behavior.
Bad Faith Claim Against Insurance Company
Bad faith insurance occurs when an insurance company unjustly denies, delays, or underpays a valid claim. This may involve refusing payment for a policyholder’s legitimate claim or failing to promptly investigate and process claims within a reasonable timeframe.
Every contract in Colorado contains an implied duty of good faith and fair dealing.
When an insurer violates this implied duty, an insured party can file a claim against the insurer under three different theories: breach of contract, common-law bad faith, and statutory bad faith.
Breach of Contract Bad Faith
An insured party can file a claim for breach of contract asserting that though they satisfied all terms of the insurance contract, the insurer breached the contract by failing to pay the valid claim.
To recover on a breach of contract claim, the insured must prove:
- That a contract exists;
- That the insured performed their duties under the contract or that they were justified in failing to do so;
- That the insurer failed to perform the contract; and
- That the insurer’s failure resulted in damages.
Under a claim for breach of contract, the insured party may recoup the value of the insurance proceeds that the insurance company denied after the insured satisfied the contract conditions.
Common-Law Bad Faith
In this case, the insured party would allege that the insurance company acted unreasonably and with knowledge of, or reckless disregard for, the fact that no reasonable basis existed for their actions.
If the insured party can prove these elements, they can recover the value of the unpaid insurance proceeds and the value of the emotional distress the insurance company’s bad faith conduct caused.
In addition, if the insurance company’s wrongdoing was willful and wanton, the insured party may potentially recover punitive damages in an amount equal to the value of the actual damages.
Statutory Bad Faith
An insured car owner or homeowner can file a statutory bad faith claim under the Colorado Revised Statutes §10-3-1116(1).
Under CRS §10-3-1116(1), an insurer’s delay or denial of payment is unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.
This statute allows an insured party whose claim has been unreasonably delayed or denied to bring an action in a district court to recover reasonable attorney fees and court costs and two times the covered benefit.
Statutory bad faith provides remedies in addition to, not in place of, common law bad faith.
Wronged car owners and homeowners may also file a regulatory complaint against an insurance company acting in bad faith with the Colorado Department of Regulatory Agencies.
The Tenge Law Firm, LLC Can Help You Achieve a Just Financial Outcome
If your insurance company acted in bad faith, the Tenge Law Firm, LLC can assist you with your bad faith insurance claims.
When it comes to handling cases and taking care of our clients, our approach is different from that of other firms.
As an industry leader, we’ve recently been awarded Client Platinum status from Lawyers.com. We are a boutique firm, so we don’t take thousands of cases.
By being selective, we’re able to provide unparalleled support and service. We consider every client a part of our family, and we treat our family well.