Insurance companies like Allstate, Farmers, USAA, and State Farm have a duty to act in “good faith” towards the people that they ensure. When these companies fail to live up to this duty, insurance bad faith lawyers defend the rights of the insureds.
Understanding Third Party Bad Faith Colorado
There are two main types of insurance claims, known as first party and third party insurance claims, so the process of filing a claim against an insurer depends in large part on whether the wronged individual is a first or third party. If you were recently injured in a auto collision and your claim was denied by the at-fault party’s insurer, it is important to contact an experienced bad faith insurance attorney who can explain your legal options.
Third Party Insurance Claims
A first party insurance claim is one that is filed by a policyholder with his or her own insurer. Third party insurance claims, on the other hand, are filed by someone other than the policyholder. For instance, if a driver was injured in an accident caused by another person’s negligence, the injured party can file a liability claim with the at-fault individual’s insurer.
Because there is no contact between an insurer and an injured third party, the injured person can make claims for expenses that are not covered under the at-fault party’s insurance policy, such as lost wages and medical expenses. If an insurer is unable or unwilling to reach a settlement with the injured party, he or she can file a lawsuit in court.
Although there is not a contract between an insurer and an injured third party, insurers still have a duty to operate in good faith. However, this duty is much lower than what is owed by a policyholder’s own company. Despite this, insurance companies are still prohibited from exhibiting certain bad faith acts, including interfering with the claimant’s ability to pursue the claim by tampering with a witness or withholding evidence.
Insurers are also prohibited from lying outright to a claimant or otherwise engaging in fraud.
What to do if you Believe an Insurer is Acting in Bad Faith
If you were recently injured in Colorado and filed a claim with the at-fault party’s insurer and believe that the company is negotiating in bad faith, it is important to first speak with the adjuster or the adjuster’s supervisor, as the delay or denial of a claim may merely be due to a clerical error or miscommunication. It’s also a good idea to put the accusation of bad faith in writing and refer specifically to the problematic behavior.
In many cases, a written accusation of bad faith is all it takes for an insurer to begin dealing with a claimant more fairly. However, if an insurer continues to act in bad faith, the third party may be able to file a claim in court, where he or she could recover damages in an amount well above what the claimant was originally seeking.
Colorado Insurance Bad Faith Laws
Among many laws that govern how insurance companies do business, the Colorado Revised Statutes contain several important provisions that relate to how insurance companies must act towards their insureds, and penalties in the event of their failure to do so.
These include the following:
C.R.S. §10-3-1113: Information to trier of fact in civil actions
- In any civil action for damages founded upon contract, or tort, or both against an insurance company, the trier of fact may be instructed that the insurer owes its insured the duty of good faith and fair dealing, which duty is breached if the insurer delays or denies payment without a reasonable basis for its delay or denial.
- Under a policy of liability insurance, the determination of whether the insurer’s delay or denial was reasonable shall be based on whether the insurer’s delay or denial was negligent.
- Under a policy of first-party insurance, the determination of whether the insurer’s delay or denial was reasonable shall be based on whether the insurer knew that its delay or denial was unreasonable or whether the insurer recklessly disregarded the fact that its delay or denial was unreasonable.
- In determining whether an insurer’s delay or denial was reasonable, the jury may be instructed that willful conduct of the kind set forth in section 10-3-1104 (1) (h) (I) to (1) (h) (XIV) is prohibited and may be considered if the delay or denial and the claimed injury, damage, or loss was caused by or contributed to by such prohibited conduct.
C.R.S. § 10-3-1104: Unfair Methods of Competition – Unfair or Deceptive Acts or Practices:
(h) Unfair claim settlement practices: Committing or performing, either in willful violation of this part 11 or with such frequency as to indicate a tendency to engage in a general business practice, any of the following:
(I) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue; or
(II) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies; or
(III) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; or
(IV) Refusing to pay claims without conducting a reasonable investigation based upon all available information; or
(V) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; or
(VI) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear; or
(VII) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds; or
(VIII) Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application; or
(IX) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured; or
(X) Making claims payments to insureds or beneficiaries not accompanied by statement setting forth the coverage under which the payments are being made; or
(XI) Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration; or
(XII) Delaying the investigation or payment of claims by requiring an insured or claimant, or the physician of either of them, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information; or
(XIII) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; or
(XIV) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement; or
(XV) Raising as a defense or partial offset in the adjustment of a third-party claim the defense of comparative negligence as set forth in section 13-21-111, C.R.S., without conducting a reasonable investigation and developing substantial evidence in support thereof. At such time as the issue is raised under this subparagraph (XV), the insurer shall furnish to the commissioner a written statement setting forth reasons as to why a defense under the comparative negligence doctrine is valid.
(XVI) Excluding medical benefits under health care coverage subject to article 16 of this title to any covered individual based solely on that individual’s casual or nonprofessional participation in the following activities: Motorcycling; snowmobiling; off-highway vehicle riding; skiing; or snowboarding; or
(XVII) Failing to adopt and implement reasonable standards for the prompt resolution of medical payment claims.
(i) Failure to maintain complaint handling procedures: Failing of any insurer to maintain a complete record of all the complaints which it has received since the date of its last examination. This record shall indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of these complaints, and the time it took to process each complaint. For purposes of this paragraph (i), “complaint” shall mean any written communication primarily expressing a grievance.
(j) Misrepresentation in insurance applications: Making false or fraudulent statements or representations on or relative to any application for an insurance policy, for the purpose of obtaining a fee, commission, money, or other benefit from any person;
(k) Requiring, directly or indirectly, any insured or claimant to submit to any polygraph test concerning any application for or any claim under any policy of insurance;
(l) Violation of or noncompliance with any insurance law in part 6 of article 4 of this title;
(m) Failure to make promptly a full refund or credit of all unearned premiums to the person entitled thereto upon termination of insurance coverage;
10-3-1115. Improper denial of claims – prohibited – definitions – severability
(1) (a) A person engaged in the business of insurance shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.
(b) For the purposes of this section and section 10-3-1116:
(I) “First-party claimant” means an individual, corporation, association, partnership, or other legal entity asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy. “First-party claimant” includes a public entity that has paid a claim for benefits due to an insurer’s unreasonable delay or denial of the claim.
(II) “First-party claimant” does not include:
(A) A nonparticipating provider performing services; or
(B) A person asserting a claim against an insured under a liability policy.
(2) Notwithstanding section 10-3-1113 (3), for the purposes of an action brought pursuant to this section and section 10-3-1116, an insurer’s delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.
C.R.S. 10-3-1116. Remedies for unreasonable delay or denial of benefits
(1) A first-party claimant as defined in section 10-3-1115 whose claim for payment of benefits has been unreasonably delayed or denied may bring an action in a district court to recover reasonable attorney fees and court costs and two times the covered benefit.
(2) An insurance policy, insurance contract, or plan that is issued in this state that offers health or disability benefits shall not contain a provision purporting to reserve discretion to the insurer, plan administrator, or claim administrator to interpret the terms of the policy, contract, or plan or to determine eligibility for benefits.
(3) An insurance policy, insurance contract, or plan that is issued in this state shall provide that a person who claims health, life, or disability benefits, whose claim has been denied in whole or in part, and who has exhausted his or her administrative remedies shall be entitled to have his or her claim reviewed de novo in any court with jurisdiction and to a trial by jury.
(4) The action authorized in this section is in addition to, and does not limit or affect, other actions available by statute or common law, now or in the future. Damages awarded pursuant to this section shall not be recoverable in any other action or claim.
(5) If the court finds that an action brought pursuant to this section was frivolous as provided in article 17 of title 13, C.R.S., the court shall award costs and attorney fees to the defendant in the action.
Featured Bad Faith Client Review
After I was hit broadside by a drunk driver who had no insurance, my own insururance company would not pay for the injuries that the other driver had caused. Not only that, they refused to pay my medical bills, and would not send me the forms that I needed to fill out. Eventually I was sued by my doctors to collect their medical bills.
I hired McCormick & Murphy, and they sued my insurance to recover the uninsured motorist benefits that I was entitled to. They also sued my insurance company for not paying for my medical bills and for treating me in bad faith. A jury awarded me over $900,000.00 for the damages my insurance company had done to me.
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