What are the Colorado Bad Faith Statute Insurance Laws?

Insurance companies have a duty to act in good faith when handling claims. When insurers fail to meet this obligation, policyholders may experience delays, denials, or unfair treatment. In Colorado, bad faith insurance practices are addressed through specific statutes, ensuring policyholders have legal recourse to seek justice. This blog explores the relevant laws, types of claims, and what steps policyholders can take to protect their rights.

Understanding Colorado’s Bad Faith Insurance Laws

In Colorado, bad faith occurs when an insurer unjustifiably denies or postpones the settlement of a legitimate claim, with the main statutes being as follows.

1. 1. C.R.S. § 10-3-1115: Prohibits insurance companies from unjustifiably delaying or refusing benefits that are due to policyholders.
   2. C.R.S. § 10-3-1116: Allows the insured to pursue reimbursement for attorney fees, benefits, and court costs.

These laws are in place to ensure insurance companies are responsible and safeguard policyholders from unethical business practices. Learn more about insurance disputes here.

Understanding Policy Language

Insurance carriers may stretch their own terms/laws to avoid paying or sufficiently paying claims. For example, insurers might misrepresent coverage limits or exclude certain damages without a valid reason. Misinterpretation can be a significant indicator of bad faith and can also be challenged through legal proceedings, assuming you have the stomach for the battle.

Bad Faith Practices

Bad faith practices are not always obvious. Some common behaviors include:

• Denying coverage without a standardized and complete investigation
• Unreasonable delays in processing claims
• Low settlement offers that don’t reflect the damages
• A general failure to communicate with the policy holder sufficiently
• Unreasonable demands on policyholders to verify claims with extensive unreasonable evidence.

For example, if a claim for hail damage in Colorado is denied without a reasonable explanation, this can be considered bad faith. Insurers may also pressure policyholders to provide unnecessary extra documentation or photographic evidence, leading to long delays. Explore legal options for property claims.

Impact of Non-Communication

Non-communication is another tactic insurers use to stall or avoid paying claims. If your insurer stops responding or fails to provide updates in a reasonable timeframe, this behavior can definitely be a clear red flag of bad faith conduct.

Unreasonable Demands on Policyholders

Some insurers demand excessive or repetitive documentation to substantiate a valid claim. This practice can delay the process unnecessarily, creating stress and financial strain for policyholders. Such demands are a clear indicator of bad faith behavior.

Legal Recourse for Policyholders

Colorado law provides remedies for policyholders who suffer from bad faith insurance conduct. If you’ve experienced a denied or delayed claim, you may pursue:

• Punitive damages for emotional distress
• Legal fees and court expenses as per C.R.S. § 10-3-1116
• Contract breach claims for insured benefits
• It’s crucial to record your interactions with the insurance company, maintain all written documents, and consult with a lawyer. You may also submit a regulatory complaint to the Colorado Division of Insurance (source).

Emotional and Financial Impact on Policyholders

Unfair practices can lead to considerable stress and financial difficulties. Policyholders might face delays in obtaining funds for essential repairs, medical bills, or lost belongings. The emotional burden can be equally intense, compounding frustration and uncertainty in an already challenging situation.

Preventative Measures for Policyholders

To minimize the chances of unethical practices, policyholders should:

1. Understand your insurance policy – Carefully review coverage, limitations, and exclusions.
2. Document all claims – Keep a detailed record of communications, inspections, and proposals.
3. Act promptly – Report any damage and file claims without delay.
4. Consult an insurance lawyer – Reach out to Colorado Legal for legal help if you suspect any unfair practices.
5. By staying proactive, policyholders can shield themselves from unjust delays or denials. For expert assistance, consult with our insurance attorneys.

Types of Bad Faith Claims

Policyholders can file two types of bad faith claims in Colorado:

1. First-Party Claims: Against your insurer for denying or delaying a valid claim.
2. Third-Party Claims: When the insurer fails to settle a claim, exposing you to additional damages.

Breach of Contract Claims

Breach of contract occurs when the insurer fails to fulfill their obligations under the policy terms. Policyholders can seek compensation for the covered loss, along with legal fees and other damages.

Statutory and Common-Law Claims

Statutory claims under C.R.S. § 10-3-1115/1116 allow policyholders to pursue additional compensation beyond the initial benefits. Common-law bad faith claims, rooted in Colorado case law, provide remedies for emotional distress and economic losses caused by insurer misconduct.

Conclusion

Colorado's bad faith insurance laws provide substantial protection for policyholders dealing with unjust treatment from insurers. Whether it’s a delayed claim or an underpaid one, policyholders have a multitude of legal options to recover their losses are a result of bad faith dealings. Understanding your rights and taking the right steps can get you on the path to financial compensation from bad faith insurers.

If you’re handling, what you think, may be bad faith insurance claim, contact Colorado Legal today to schedule a consultation and start thinking about your rights as the insured.

External Sources:

• Colorado Division of Insurance
• C.R.S. § 10-3-1115 and § 10-3-1116