Bad Faith Insurance Claims in Colorado: A Complete Guide

Dealing with a denied insurance claim can be extremely frustrating. You pay premiums year after year expecting coverage, but when you need it most, the insurer wrongfully denies your claim. This unethical practice is known as insurance bad faith.

Colorado law protects policyholders from bad faith conduct by insurers. This guide explains how to identify bad faith, the steps to file a claim, and your legal rights.

What is Insurance Bad Faith?

Insurance bad faith refers to unreasonable denial or delay of a valid claim by an insurance company. It occurs when an insurer breaches its duty of good faith and fair dealing owed to the policyholder.

Some examples of bad faith actions by insurers:

• Denying a claim without conducting a reasonable investigation
• Unreasonably delaying payment of benefits
• Misrepresenting or altering policy terms to avoid paying claims
• Offering unreasonably low claim settlements
• Failing to defend the insured against lawsuits as required

These tactics allow insurers to avoid paying the full benefits rightfully owed to the policyholder.

Bad Faith Insurance Claims in Colorado

Colorado law prohibits insurance companies from unreasonably delaying or denying payment of legitimate claims. This protects policyholders against bad faith.

The key statutes are:

• C.R.S. § 10-3-1115 – Defines unfair claim settlement practices by insurers as unfair or deceptive acts. Allows first-party claimants to sue insurers for unreasonable conduct.

• C.R.S. § 10-3-1116 – Permits policyholders to recover 2x the covered benefit plus attorney fees and costs if an insurer unreasonably delays or denies payment.

These laws hold insurers accountable for claim settlement misconduct in Colorado. Policyholders can take legal action if they encounter unreasonable claim denial or delays.

Examples of Bad Faith Tactics by Insurers

Some common indicators of bad faith conduct by insurance companies:

• Denying claims without investigation – Refusing to pay a claim without first conducting proper inquiries to determine if the loss is covered.

• Delaying investigation and payment – Failing to promptly investigate and process claims once it’s clear benefits are owed.

• Misrepresenting policy terms – Altering or misstating policy provisions to justify not paying a claim.

• Underpaying claims – Offering substantially less than the value of damages and losses covered under the policy.

• Poor communication – Being unresponsive to inquiries from the insured and failing to provide status updates.

• Abusive behavior – Using intimidation tactics to discourage policyholders from pursuing legitimate claims.

Any of these actions suggest bad faith if they lead to unreasonable delays or wrongful denial.

Steps to File a Bad Faith Insurance Claim in Colorado

Follow these steps if you need to take legal action against an insurer for bad faith:

1. Review your policy – Verify your specific claim is covered under the policy provisions.

2. Document all communications – Keep detailed records of all calls, letters, and meetings with the insurer related to your claim.

3. Get denials in writing – Request any claim denial letters and appeal if possible. Make sure the insurer provides a specific reason.

4. Send a demand letter – Formally demand payment and give the insurer reasonable time to respond.

5. File a complaint – Submit a complaint to the Colorado Division of Insurance if the insurer is unresponsive.

6. Consult an attorney – Retain an experienced bad faith insurance lawyer to discuss your legal options.

7. File a lawsuit – Your attorney can file a civil complaint alleging breach of contract, statutory bad faith, and common law bad faith by the insurer. Then pursue damages through the litigation process if necessary.

Thoroughly documenting the claims process and having a qualified attorney on your side are key to successfully pursuing a bad faith case.

Remedies and Damages in Bad Faith Cases

If you prove your claim of insurance company misconduct, Colorado law entitles you to the following compensation:

• Denied policy benefits – Insurer must pay the wrongfully denied insurance proceeds.

• 2x damages – Damages equal to two times the wrongfully delayed or denied covered benefit.

• Attorney fees – Compensation for your fees and legal costs.

• Prejudgment interest – Interest accrued from when benefits were first owed.

• Emotional distress – Damages for inconvenience, frustration, and emotional harm caused by the insurer’s bad faith.

• Punitive damages – Additional damages to punish the insurer for willful misconduct. Punitive amounts consider the insurer’s finances.

This can result in a total payout significantly greater than the original denied claim value. For example, a $100,000 wrongfully denied claim could result in over $400,000 in damages and compensation.

Proving Bad Faith in Court

In a bad faith lawsuit, you must prove to the court that the insurer’s denial or delay was unreasonable. Ways to establish unreasonableness include showing:

• The insurer failed to properly investigate the claim circumstances
• They misrepresented policy terms and exclusions
• No explanation was given for the denial
• The insurer has a pattern of quickly denying claims

Presenting evidence like recorded phone calls and claim determination letters can prove misconduct. An experienced bad faith attorney knows how to build a compelling case against unethical insurers.

Is a Lawsuit the Only Option?

Filing a lawsuit should not be your first choice. It’s best to try resolving issues directly with the insurance company first.

You can submit a formal complaint to the Colorado Division of Insurance. If that doesn’t resolve the problems, demanding mediation before suing is wise.

But if the insurer continues to act in clear bad faith, pursuing litigation may be your only recourse to obtain fair compensation. With an attorney’s help, you can hold your insurer accountable.

Choosing an Attorney for Your Bad Faith Claim

Not all attorneys have expertise in bad faith insurance cases. Seek a lawyer who:

• Focuses specifically on insurance litigation
• Has a proven track record of favorable settlements and verdicts
• Is experienced fighting major insurance carriers
• Offers fee arrangements suited to your case such as contingency fees

A qualified bad faith attorney will thoroughly evaluate your situation and advise you of the best legal strategies.

Take Action Against Bad Faith Insurers

Don’t tolerate unethical claim denial or delays from your insurance provider. You pay premiums in good faith and have the right to expect fair claims handling in return. With help from a knowledgeable attorney, you can potentially recover double damages plus litigation costs using Colorado bad faith insurance laws. This deters insurers from putting profits over honoring policies. Contact an experienced insurance lawyer for a free consultation if you believe you have a bad faith claim.