Colorado’s insurance laws stipulate that insurers engage in fair settlement practices when handling a claim. The law also allows policyholders to file a bad faith claim when the insurance company commits deceptive or unfair practices.
Acting in bad faith means to engage in unreasonable actions that lead to denial or delay in settling the claim. Claimants may pursue a bad faith claim whether they filed a first- or third-party injury claim.
Colorado’s Laws against Unfair Claim Settlement
Colorado Revised Statutes 10-3-1104(h) stipulate various unfair claim settlement practices that insurers may not use when settling claims:
- misrepresenting facts or provisions in a policy;
- not communicating in a reasonably prompt manner;
- not implementing reasonable standards for investigating claims promptly;
- not settling a claim for a reasonable amount; and
- not settling a claim where liability is reasonably clear.
Filing a Complaint with the Division of Insurance
Consumers who are not satisfied with an insurance company and who wish to file a complaint or inquire about a policy can do so through the Colorado Department of Regulatory Agencies – Division of Insurance. This department will suggest steps an insured may take based upon the information provided to them. It could lead to an investigation into the matter.
If there was wrongdoing, the Division of Insurance will follow up with the insurer to make sure they have complied with the appropriate laws and regulations. The process of resolving a complaint can take up to 90 days, possibly longer when the situation is complicated. But there is another option: to secure help from a lawyer.
Filing a Bad Faith Claim
Claimants can sue the insurance company directly if it engaged in bad faith while processing or settling your claim. But there must be evidence that proves conduct was unfair, unreasonable, unjust, or illegal.
Additionally, the claimant has to establish that the insurance company knew its practices or conduct was wrong whether this is intentional or negligent. Also, claimants must establish that as a result they suffered damages. In this type of situation, the loss is a failure to financially protect the individual.
For instance, Driver A has underinsured motorist (UIM) coverage on his policy. Another driver, Driver B, was at fault for a crash but doesn’t have enough liability insurance to pay for all the damages Driver A sustained. Driver A’s underinsured motorist coverage should cover the gap up to the policy limits. Yet Driver A’s insurance company denies the UIM claim.
Driver A must prove that the denial was unreasonable and that the insured knew it was unreasonable, which the terms of the policy itself may demonstrate. Finally, Driver A must prove that the insurer’s bad faith caused him financial harm. If successful with a bad faith claim against the insurance company, Driver A might be able to recover additional damages.
For help with this process in or around Arvada, get in touch with D.J. Banovitz. Call (303) 300-5060 or contact us online to set up a consultation.