What are the Colorado bad faith insurance laws?

Colorado’s bad faith insurance laws are detailed in Colorado Revised Statutes (CRS) 10-3-1115 and 10-3-1116, which covers prohibited actions, as well as remedies for infractions. As the law makes clear, insurance companies have a responsibility to handle claims in a timely, honest manner. Failure to do so could deem them legally liable in a civil lawsuit.

Colorado Bad Faith Insurance Statutes

CRS 10-3-1115 (1)(a) says that no insurance company can “unreasonably deny or delay payment of a claim of benefits” to first-party claimants. What exactly does “unreasonable” mean? The law explains: “An insurer’s delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.”

Case law also has much to add to Colorado bad faith insurance regulations. For instance, in Goodson v. American Standard Insurance Co. of Wisconsin, the Supreme Court of Colorado notes, “In addition to proving that the insurer acted unreasonably under the circumstances, a first-party claimant must prove that the insurer either knowingly or recklessly disregarded the validity of the insured’s claim.”

Types of Actions Considered Bad Faith

It’s quite unfortunate that bad faith insurance practices are so widespread. It has a ripple effect that hurts American businesses and consumers alike.

There are numerous ways in which insurance companies break the insurance laws regarding bad faith claims, such as when they:

  • delay investigating a claim;
  • don’t pay a claim in a prompt manner;
  • fail to communicate with the claimant regarding the status of a claim;
  • refuse a claim without first conducting an investigation;
  • offer a settlement significantly less than what’s in the claimant’s contract; and
  • simply don’t settle the claim ethically and fairly.

If you believe your insurance company handled your claim fraudulently or unlawfully, consult an attorney to discuss the legal specifics.

Staying Privy to Signs of Bad Faith Insurance Practices

Some of the signs claimants should watch for include:

  • lowballing the value of a claim;
  • threats not to pay claims;
  • demanding over-burdensome and unnecessary paperwork;
  • advising the claimant not to hire an attorney;
  • changing the policy without notice;
  • trying to diminish responsibility to investigate the claim;
  • significantly increasing premiums when the accident wasn’t the policyholder’s fault; and
  • using illegal and unethical investigation practices.

In some cases, insurance companies simply make legitimate oversights or mistakes, which doesn’t mean they are guilty of bad faith claim practices. They have to commit the unfair act knowingly in order for a claimant to file a claim against them.

Speaking to a Bad Faith Claims Attorney

If the insurance company handles your claim in an unfair or deceptive manner, we can help. We routinely handle these types of cases and can help you recover your benefits. For legal counsel in the Denver area, contact attorney D.J. Banovitz for a free consultation by calling (303) 300-5060.