Under Colorado common law, insurance companies owe a duty of good faith and fair dealing to their insureds. When an insurer acts in bad faith, it breaches this implied duty of good faith and fair dealing and a claimant can take legal action against it. To succeed, a claimant must prove that the insurance company unreasonably delayed and/or denied payment of a claim and did so with knowledge or reckless disregard that its actions were unreasonable.
In 2008, Colorado enacted a pair of statutes that offer policyholders another, separate cause of action against insurance companies that act in bad faith. C.R.S. § 10-3-115 and § 10-3-116 provide first-party claimants with a significantly lower burden of proof and thus act as a strong remedy against insurers that unreasonably delay and/or deny valid claims. The statutory bad faith claim of action does not require that the insurer have knowledge or reckless disregard of its unreasonable action. The only element at issue in the statutory claim is whether an insurer delayed or denied benefits without a reasonable basis. A prevailing insured is entitled to twice the covered benefit, attorney fees, and court costs. And, to prevail, an insured need not prove any damages at all. Even if the insurer ultimately pays the claim in full, a claimant may still bring a statutory bad faith claim for the insurer's unreasonable delay of payment.
There are many ways that an insurance company can act in bad faith, including:
- Failing to properly investigate or delaying investigation of a claim;
- Failing to pay a claimant the full benefits owed under the relevant policy;
- Failing to pay amount owed under the policy promptly;
- Failing to communicate with the claimant regarding a claim;
- Failing to effectuate a prompt, fair, and equitable settlement of a claim.
If any of the above apply to your situation, even if the claim is partially paid or even eventually paid in full, you may have a claim for statutory bad faith. Call SJJ today for a free consultation.