Insurance Companies are Businesses.
The very reason behind why we buy insurance is to make sure that we will be financially secure to face the unexpected. Insurance is a key part of financial planning and a way of managing risks. By buying insurance to secure your health, travel, motor vehicle, or home, you put your trust in your insurance company to cover you should things go wrong. Therefore, in exchange for the fee (premium) you pay for your insurance policy, you effectively transfer the cost of a potential loss to the insurance company.
Unfortunately, insurance companies do not always act in the best interests of their customers.
At the end of the day, insurance companies are businesses—and this often means that they may try to take advantage of the vulnerable condition you can find yourself in after suffering an injury or damage. Put bluntly, insurance companies do not like to pay out claims. So, they may delay dealing with your claim, attempt to reduce the amount they have to pay out to you, fail to properly investigate your claim, and generally employ various unacceptable tactics to avoid liability.
Regardless of such practices, you have certain rights as a policyholder that you can (and should!) exercise if you find that your insurance company is not dealing with your case as it should. Insurance companies in Colorado owe a duty to their policyholders to act in good faith and to settle insurance claims fairly. Like many other US states, Colorado has enacted laws and regulations to protect consumers against malicious behavior by insurance companies that constitute bad faith actions, which are sadly not uncommon.
Most insurance companies would rather resolve the issue directly than risk a bad faith lawsuit.
If you believe that your insurance company is handling your claim in a manner that feels unfair or deceptive, you need to be proactive and take assertive steps to confront this situation. Our team at Legal Help in Colorado has successfully handled a number of cases involving insurance companies and has the knowledge and expertise to help you recover the benefits you deserve.
Bad Faith in the Context of Insurance
The concept of bad faith generally describes a dishonest dealing, whereby someone acts in an improper or fraudulent way, having no intention of honoring a promise—including one contained in a contract. In addition to specific laws that may be applicable to this effect, any business entering into a contract, including an insurance policy, has an implied duty to act honestly, in good faith, and fairly. In fact, all parties to a contract share this obligation of acting honestly and fairly, so failure to do so means that they may be sued for a breach of this duty.
Accordingly, when it comes to insurance policies, both the insurer and the insured are under a duty to act in a way that does not impede upon the other party receiving benefits under the insurance agreement. Therefore, bad faith insurance concerns an attempt on the part of an insurer to renege on its obligations to their clients, which may lead to liability for acting in bad faith.
Suing Your Insurance Company
If your insurance company is not dealing with your claim properly, you may be able to file a civil lawsuit against it. Typically, such lawsuits are based on any of the following three claims:
- Breach of contract, meaning a violation of any of the agreed-upon terms and conditions of a binding contract.
- Statutory bad faith.
- Common-law bad faith.
Breach of Contract
Breach of contract concerns situations when a party to a contract fails to uphold a specific requirement contained therein. In the context of insurance, a breach of contract claim can be brought for any violation of the insurer’s specific duties under the insurance policy, which is the contract in question.
This is a separate base from any potential bad faith claims that may also be relevant, as such claims don’t concern a violation of any specific provision of a contract but rather of the spirit of the agreement itself. In other words, a bad faith insurance claim arises when an insurer is deemed to have breached their implied duty of good faith and fair dealing.
Statutory Bad Faith
Bad faith insurance is a matter that is covered by virtue of specific statutes in many U.S. states, including Colorado. The statutory basis for a bad faith legal claim is found in Title 10 §10-3-1115 and §10-3-1116 of the Colorado Revised Statutes (C.R.S.) on Insurance. These cover prohibited actions as well as remedies for infractions. According to the applicable provisions, an insurer may not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant. The provisions define a first-party claimant as an individual, corporation, association, partnership, or other legal entity that asserts an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy. What is to be regarded as an “unreasonable denial or delay” in payment on the part of the insurer is defined by the C.R.S. as the delayed or denied authorization of the payment of a covered benefit without a reasonable basis for that action.
Common-Law Bad Faith
Common-law elements of bad faith vary from state to state. The main concept under the theory of common law torts with regard to insurance is that insurance carriers owe their policyholders a duty of good faith and fair dealing. Generally speaking, to succeed in a common law claim of bad faith you would have to prove that:
- Benefits you were entitled to under your insurance policy were withheld, which involves proving both that you had a valid claim under your policy terms and that said claim was denied by the insurer
- There was an unreasonable reason for withholding these benefits.
Bad Faith Claims in Colorado
Τhe common law basis of bad faith insurance claims in Colorado stems primarily from the Colorado Supreme Court decision in the case of Goodson v. American Standard Insurance Co. The judgment in question provides, among others, that to win a common-law claim the plaintiff must show that the insurance company unreasonably refused or delayed payment by acting unreasonably or with a reckless disregard for the truth. Whether the insurance company acted reasonably is a matter to be evaluated objectively in each individual case, based on the situation and facts as they existed at the time of the decision in question, with courts taking into consideration a number of relevant factors.
A lawsuit may consist of both a common-law bad faith claim and a statutory bad faith claim. A key difference between the two is that an action based on common-law action requires an intentional or reckless disregard for the rights of the insured on the part of the insurance provider, whereas Colorado statutory law only requires that the denial of benefits should be unreasonable.
It is also useful to bear in mind that, as established case law suggests, even though insurance coverage claims and bad faith claims are by their nature independent and contractual liability is not essential to establish extra-contractual liability, doing so has nonetheless often proved to be helpful. A personal injury lawyer with the necessary experience in bringing claims against insurance carriers will be able to review your individual case thoroughly, help you understand how your circumstances apply to Colorado law, and advise you on the best way to proceed.
Common Examples of Bad Faith Insurance
Unfortunately, insurance companies employ a wide range of tactics to avoid their obligations toward their policyholders. There are many ways in which they may act in bad faith by simply refusing to settle a claim ethically and fairly.
Although it would be impossible to compile an exhaustive list, some of the most common examples of such behaviors adopted by insurance companies include the following:
- Failing to disclose policy limitations and exclusions to policyholders before they purchase a policy.
- Delaying to investigate a claim, failing to conduct a prompt and complete investigation, or using illegal and unethical investigation practices.
- Trying to diminish responsibility to investigate a claim.
- Refusing a claim without first conducting an investigation/not investigating a claim altogether.
- Looking for evidence in support of the insurance company’s basis for denying a claim whilst ignoring evidence that supports the policyholder’s basis.
- Making excessive phone calls to the policyholder’s physician.
- Refusing to accept opinions provided by experts about the policyholder’s condition.
- Not replying promptly to a policyholder’s claim.
- Being unresponsive or not communicating with the claimant regarding the status of their claim.
- Denying a claim without giving a reason.
- Lowballing the value of a claim/offering a deceptively or unrealistically low settlement.
- Not paying a claim in a prompt manner.
- Demanding over-burdensome and unnecessary paperwork from the claimant.
- Making unreasonable demands on the policyholder to prove a covered loss.
- Changing the policy without notice.
- Abruptly canceling the policy without notice.
- Significantly increasing premiums when the accident wasn’t the policyholder’s fault.
- Threatening not to pay a claim.
- Advising the claimant not to hire an attorney.
- Essentially compelling the insured person to litigate in order to recover the amounts due under the insurance policy.
At this point, it should also be clearly noted that a difference in opinion between a policyholder and the adjuster over the loss amount does not in itself constitute bad faith. If, however, the adjuster refuses to provide reasonable support for their findings, it may well suggest that bad faith may be involved. Likewise, legitimate oversights or mistakes on the part of insurance companies do not automatically mean that they are guilty of bad faith practices, and you will need to show that such actions or omissions were intentional.
If you suspect that your claim is being handled by your insurance provider in bad faith, you are strongly advised to consult a lawyer who has thorough knowledge and experience in dealing with bad faith insurance and who will confront your insurance company on your behalf.
Given that the court’s main aim is to make the injured party whole again, the obvious outcome of a successful lawsuit against an insurance company that has been found liable for not handling your claim properly is that you should receive the payment due under your policy. Having said that, depending on the particular circumstances of your case, your insurance carrier may be held liable for more than just the amount they owe you under the policy. You could potentially obtain double, or even triple damages if the insurance company is found to have acted in bad faith.
More specifically, in accordance with the relevant provisions of C.R.S. § 10-3-1116, first-party claimants whose claim for payment of benefits has been unreasonably delayed or denied may bring an action to recover reasonable attorney fees and court costs plus two times the covered benefit. Therefore, if you are successful in recovering two times the covered benefit in damages, in addition to the damages for the breach of the insurance contract, you may effectively be looking at multiplied/triple damages.
Damages that may be awarded in bad faith cases against insurance companies may include “traditional” economic damages—i.e. compensating for the direct financial loss you incurred as the result of the insurer’s bad faith conduct. They may also include non-economic damages relating to harm that is not so easy to measure financially but remains significant, such as emotional distress. Finally, they may include punitive damages under certain conditions, where the insurer is found to have engaged in extraordinarily bad conduct. Damages are always case-specific, meaning that the award to be made by the court in your case is unique to you, irrespective of previous case law.
Considering all the above, as well as the various caps in place in relation to the amounts that may be ordered along with the potentially applicable exceptions, it is fair to say that bad faith insurance lawsuits are usually quite complicated. Consequently, pursuing the claim with the assistance of a skilled attorney in this area of law will increase your chances of being able to collect, for example, punitive damages along with compensatory damages.
If you are thinking about pursuing a lawsuit In Colorado, it is imperative that you act quickly and, in any event, ensure that you comply with the prescribed time limits. The statute of limitations for insurance bad faith claims in Colorado is generally two years from the date that the insured knew or should have learned of the insurance company’s unreasonable denial or delay of the claim.
Depending, however, on the particular circumstances of your case, your finding out about the insurance company’s bad faith conduct may involve delays. Additionally, other statutes of limitations, such as that pertaining to breach of contract, may also need to be taken into consideration. Finally, other requirements as to time limits may be contained in your insurance policy that you will also have to take into account and properly address. As a result, it becomes clear that the question of time limits, including the determination of when the bad faith conduct actually began, can be challenging.
If your insurance company has failed to act reasonably in processing, investigating, or paying your claim, and you believe that your claim has been handled in a manner that feels unfair or deceptive, contact Ross Ziev at Legal Help in Colorado for a free initial consultation today. We routinely handle these types of cases, are familiar with insurance company tactics, and are well equipped to confront them aggressively on your behalf, so that you can recover the benefits and related financial damages that you deserve.
Contact Legal Help in Colorado
We understand the stress, anguish, and financial pressure involved when insurance companies fail to provide you with what you have entrusted them with. Ross Ziev, along with our entire legal team at Legal Help in Colorado, is committed to getting justice for victims of negligence. We are well-seasoned in this area of law and set to pursue your claim aggressively, without succumbing to intimidation practices commonly adopted by at-fault parties.
Reach out to us today to schedule an appointment. Initial consultations are free and conducted with absolute confidence. If we take on your case, you can rest assured that our contingency payment policy means that you will not have to worry about being able to afford a skilled lawyer, on top of all other pressing considerations, as we only get paid when we win your case. Contact Legal Help in Colorado online, call us at (720) 743-3682, or visit our offices at 8480 E Orchard Road, STE #2400, Greenwood Village CO 80111 to discuss your case!