Insurance Bad Faith Claims FAQ
Below are some frequently asked questions about insurance bad faith claims. Additional information on this topic can be viewed by accessing the Insurance Disputes summary under the “Practice Areas” tab.
What Does "Insurance Bad Faith" Mean?
Colorado Law requires insurance companies to act fairly and in good faith. As part of the insurance company’s duty to act fairly and in good faith, they are also prohibited from unreasonably denying or delaying the payment of your claims. Colorado law includes an Unfair Claims Settlement Practices Act that prevents insurance companies from committing or performing the following:
- Failing to use reasonable standards in investigating your claim;
- Failing to affirm or deny coverage within a reasonable time;
- Refusing to pay your claim without conducting a reasonable investigation;
- Attempting to settle your claim for less than a reasonable amount;
- Failing to promptly settle your claim where liability has become reasonably clear;
In addition to these requirements, insurance companies are also required to:
- Investigate your claim for benefits;
- Not deny your claim based on surmise, speculation, or conjecture;
- Not deny your claim without substantial justification;
- Refuse to pay insurance benefits when due;
- Promptly communicate with you about the status of your claim;
- Be honest with its insured and third-party claimants;
- Provide you with factual reasons for why the insurer is denying or delaying any payment of benefits;
- Not “low ball” it’s insured for unreasonably low amounts.
In addition to an insurance company’s obligation to act in good faith, Colorado has recently passed unique law prohibiting insurance companies from unreasonably denying or delaying the payment of benefits to its insured. C.R.S. 10-3-1115, 1116. This statute not only provides that an insurance company is liable to its insured for damages when it unreasonably delays or denies payment of benefits, but also specifies the damages as twice the benefits that were unreasonably delayed or denied.
The requirement of your insurance company to act in good faith and to not unreasonably delay or deny the payment of your covered benefits applies to all types of insurance coverage, including auto insurance, home owners insurance, property insurance, health insurance, etc. If your insurance company is not complying with the above requirements or you believe that they are unreasonably delaying or denying the payment of your benefits, please contact an attorney at Larson Larimer Schneider. Our attorneys are experienced in insurance law, insurance coverage, and laws relating to bad faith. We can review and analyze the conduct of your insurance company, advise you as to whether their conduct violates Colorado law, and advise you of your potential remedies.
What Types of Claims Might I Have?
If your insurance company has failed to comply with the above obligations, you may have claims for breach of contract and/or breach of fiduciary duty under Colorado law. A breach of fiduciary duty claim may arise where an entity (i.e. an insurance company) has assumed responsibility to act for your benefit and fails to do so in good faith. In some cases, you may have additional claims for bad faith, negligence, and violations of the Colorado Consumer Protection Act.
What Damages May I Be Able to Recover?
In these types of cases, you may be able to recover as much as three times the amount of benefits the insurance company owed to you, interest on the insurance benefits, attorneys fees, costs, and punitive damages to punish the insurance company and deter similar behavior in the future.