An insurance company’s failure to deal fairly and honestly with policyholders and injured third parties can have serious consequences for those who are attempting to pay for medical bills and property damage. Recognizing the important role of insurers, the Colorado Legislature passed a series of laws aimed at regulating how insurance companies handle claims.
One such law is the Colorado Unfair Claims Practice Act, which makes it unlawful for insurers to take part in certain bad faith behaviors. Unfortunately, filing a claim under the Unfair Claims Practice Act can be time-consuming and difficult, so if you believe that your insurer has been acting in bad faith, it is crucial to speak with an experienced Colorado insurance dispute attorney who can walk you through the claims filing process.
According to Colorado’s Unfair Claims Practice Act, it is unlawful for an insurance company to use deceptive practices when dealing with both first party and third party insurance claims. First party claims are those filed by someone against his or her own insurance company, while third party claims arise under another person’s policy.
For instance, an individual who was injured in a car crash that was caused by someone else’s negligence may be able to file a third party claim with the at-fault party’s insurance company. Generally, the law prohibits bad faith actions, such as:
- Misrepresenting a policy’s coverage;
- Failing to respond to communications regarding a claim;
- Failing to deny or pay a claim promptly;
- Failing to create standards for investigating insurance claims;
- Failing to conduct a reasonable investigation;
- Failing to respond to a claim within a reasonable time period after the appropriate documentation has been submitted;
- Failing to offer timely and fair settlement when liability is reasonably clear;
- Forcing a policyholder to file a lawsuit by offering much less than what is owed;
- Trying to resolve a claim for less than the reasonable amount indicated by advertisements accompanying an application;
- Trying to settle claims on a policy that was changed without the policyholder’s consent;
- Making payments without sending a statement describing coverage;
- Telling claimants that it automatically appeals all awards granted in arbitration in an effort to force them to accept a settlement less than what they would have received in arbitration;
- Prolonging an investigation or payment by forcing a claimant to provide a preliminary claim report form as well as documentation establishing proof of loss, both of which contain the same information;
- Refusing to promptly provide a reasonable explanation of the basis for the denial of a claim;
- Refusing to quickly settle claims under one provision of the policy in an effort to affect settlements offered under other parts of the policy agreement;
- Raising the defense of comparative negligence without first conducting a reasonable investigation and developing substantial evidence in support of the negligence claim;
- Failing to adopt and implement reasonable standards for the prompt resolution of medical payment claims; or
- Excluding medical benefits based solely on the claimant’s participation in motorcycling, snowmobiling, off-highway vehicle riding, skiing, or snowboarding.
Unfortunately, this statute does not create a private right of action, which means that only the state insurance commissioner can discipline a company for violating the act. However, insurance companies can be sued for breaching the duty to act in good faith and the Unfair Claims Practices Act can be used as evidence of what the duty of good faith requires.
Essentially, under Colorado law, insurance companies are required to be honest with policyholders as well as third party claimants. Insurance companies who fail to comply with these laws can and should be held accountable for their actions, so if you were injured and believe that an insurer has acted in bad faith, it is critical to speak with an experienced insurance dispute attorney who can protect your interests.
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Victims of bad faith insurance practices may be able to collect twice the amount of what they should have collected under their policy in addition to attorney’s fees. Unfortunately, filing a claim of bad faith insurance practices can be difficult and time-consuming, so if you were injured and were unfairly denied coverage, please contact McCormick & Murphy, P.C., at 888-668-1182 to schedule a free consultation with a dedicated insurance dispute attorney who can evaluate your case.
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