SUMMARY 

April 5, 2018 

2018COA49 

No. 17CA405, Preferred Professional Insurance Company v. 

The Doctors Company — Insurance — Subrogation — Excess 

Insurer 

A division of the court of appeals concludes that an excess 

insurer seeking recovery under equitable subrogation for a primary 

insurer’s failure to settle a case against their mutual insured “steps 

in the shoes of the insured” and must plead and prove the primary 

insurer’s bad faith.

 

The summaries of the Colorado Court of Appeals published opinions 

constitute no part of the opinion of the division but have been prepared by 

the division for the convenience of the reader. The summaries may not be 

cited or relied upon as they are not the official language of the division. 

Any discrepancy between the language in the summary and in the opinion 

should be resolved in favor of the language in the opinion. 
COLORADO COURT OF APPEALS 2018COA49

Court of Appeals No. 17CA0405 

City and County of Denver District Court No. 15CV31295 

Honorable Elizabeth A. Starrs, Judge 

Preferred Professional Insurance Company, 

Plaintiff-Appellee, 

v. 

The Doctors Company, 

Defendant-Appellant. 

JUDGMENT REVERSED AND CASE 

REMANDED WITH DIRECTIONS 

Division IV 

Opinion by JUDGE DAVIDSON* 

J. Jones and Richman, JJ., concur 

Announced April 5, 2018 

Sweetbaum Sands Anderson, P.C., Jon F. Sands, Marilyn S. Chappell, Denver, 

Colorado, for Plaintiff-Appellee 

Taylor Anderson, LLP, Kyle P. Seedorf, John M. Roche, Lauren E. Rhinehart, 

Denver, Colorado, for Defendant-Appellant 

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. 

VI, § 5(3), and § 24-51-1105, C.R.S. 2017. 

 
1 

¶ 1 Suppose that an injured party sues a person who has both 

primary and excess insurance covering the claim. The injured party 

offers to settle for an amount within the primary coverage limit. 

The primary insurer exercises its contractual, discretionary right 

not to accept the settlement. But the excess insurer, perhaps 

spooked by the prospect of a judgment exceeding the primary 

coverage limit, pays the settlement demanded by the injured party. 

When the excess insurer sues the primary insurer to recover the 

amount paid in settlement, claiming that the primary insurer 

should have accepted the settlement offer, what sort of claim may 

the excess insurer assert? And must the excess insurer plead and 

prove that the primary insurer acted in bad faith in declining to 

settle? 

¶ 2 We hold that an excess insurer in this situation must proceed 

on a theory of equitable subrogation premised on the rights of the 

insured under his contract with the primary insurer — that is, the 

excess insurer must step into the shoes of the insured. It follows 

that, under Colorado law, because the insured would have to prove 

bad faith in an action against his primary insurer based on the 
2 

insurer’s refusal to settle, the excess insurer must also plead and 

prove such bad faith. 

¶ 3 The facts of this case match those of our hypothetical. 

Preferred Professional Insurance Company (PPIC) is the excess 

insurer that paid the settlement. The Doctors Company (TDC) is 

the primary insurer that declined to settle. But while PPIC 

purported to bring a claim of equitable subrogation against TDC, it 

disavowed any intent to proceed on the legal theory that it stands in 

the insured’s shoes. And it did not plead or attempt to show that 

TDC acted in bad faith. Instead, PPIC’s theory is that general 

equitable principles allow it to recover from TDC apart from any 

rights of the insured under his contract with TDC, and that it need 

not plead or prove that TDC acted in bad faith. 

¶ 4 The district court accepted PPIC’s theory and granted 

summary judgment in its favor. But we conclude that PPIC’s theory 

of recovery is not viable under Colorado law. So we reverse the 

summary judgment and remand the case to the district court for 

entry of judgment in TDC’s favor. 
3 

I. Background 

¶ 5 The undisputed facts establish that the parties both held 

separate professional liability policies for the same insured, Dr. 

Rupinder Singh. A medical malpractice suit was filed against Dr. 

Singh and other parties. 

¶ 6 TDC defended Dr. Singh in the suit as required by its primary 

liability policy. The policy provided coverage up to a limit of $1 

million. TDC’s policy required Dr. Singh’s consent before accepting 

any settlement offers, but TDC retained the discretion whether to 

accept or reject any such offers. 

¶ 7 PPIC’s insurance policy was an “excess policy,” which would 

cover any losses that exceeded TDC’s $1 million coverage up to an 

additional $1 million. As an excess insurer, PPIC did not have any 

duty to defend Dr. Singh in the suit. 

¶ 8 The plaintiff in the medical malpractice suit offered to settle 

the case with Dr. Singh for $1 million. Dr. Singh conveyed his 

desire to accept the settlement offer to both insurers, but TDC 

declined the plaintiff’s offer. PPIC told Dr. Singh he should accept, 

and it paid the $1 million settlement. 
4 

¶ 9 PPIC filed a claim for equitable subrogation, seeking payment 

of the $1 million from TDC. Both parties filed summary judgment 

motions. In its motion, PPIC argued that the applicable standard 

for recovery under equitable subrogation is a five-factor test set 

forth in Hicks v. Londre, 125 P.3d 452, 456 (Colo. 2005). TDC 

responded that in order to recover under equitable subrogation, 

PPIC was required to prove that TDC refused to settle in bad faith. 

In reply, PPIC argued that its claim for equitable subrogation was 

“not premised on the assertion that it has stepped into the shoes of 

its insured, Dr. Singh, through its payment of the settlement,” and 

that it was “not required to establish [bad faith]” to recover, relying 

exclusively on Unigard Mutual Insurance Co. v. Mission Insurance 

Co., 907 P.2d 94, 99 (Colo. App. 1994), and Hicks. The district 

court applied the Hicks factors and found in PPIC’s favor without 

addressing TDC’s argument concerning the need to show bad faith. 

¶ 10 On appeal, TDC contends that the district court erred as a 

matter of law. TDC asserts that, under well-established Colorado 

insurance law, an equitable subrogation claim brought by an excess 

insurer against the primary insurer to recover the amount paid in 

settlement can only be derivative (“standing in the shoes”) of the 
5 

insured’s rights. Consequently, TDC argues, PPIC’s refusal to plead 

and present evidence that TDC acted in bad faith in declining to 

settle, under the circumstances here, requires dismissal of PPIC’s 

claim. We agree with TDC. 

II. Standard of Review 

¶ 11 We review an appeal of a summary judgment de novo. 

Edwards v. Bank of Am., N.A., 2016 COA 121, ¶ 13. Summary 

judgment is a drastic remedy that should be granted only when the 

pleadings and the supporting documents demonstrate that no 

genuine issue of material fact exists and that the moving party is 

legally entitled to judgment. W. Elk Ranch, L.L.C. v. United States, 

65 P.3d 479, 481 (Colo. 2002). The moving party carries the 

burden to establish the lack of a genuine issue of fact. Any doubts 

in that regard must be resolved against the moving party. Bankr. 

Estate of Morris v. COPIC Ins. Co., 192 P.3d 519, 523 (Colo. App. 

2008). 

¶ 12 An appellate court may “independently review the question of 

whether the doctrine of equitable subrogation applies to the 

circumstances.” Hicks, 125 P.3d at 455. 
6 

III. Issue Preservation 

¶ 13 As a threshold matter, we address and reject PPIC’s argument 

that TDC did not properly preserve this issue in the district court. 

TDC argued in opposing PPIC’s motion for summary judgment that 

PPIC was pursuing a novel theory of recovery in the primary/excess 

insurance coverage context that should be rejected, and that the 

Hicks test has never been applied in this setting to allow an excess 

carrier to usurp the primary insurer’s role without a showing that 

the primary insurer acted in bad faith. TDC cited several bad faith 

failure to settle cases, including some arising in the insurance 

context between excess and primary insurers. So, while the words 

“step into the shoes of the insured” do not appear in TDC’s 

response, we conclude that the district court was alerted to the 

issue. 

IV. Analysis 

¶ 14 From settled Colorado insurance law, we conclude that an 

excess carrier asserting an equitable subrogation claim against a 

primary carrier for failing to settle must plead and prove that the 

primary insurer’s settlement decisions were made in bad faith. 

Without such an allegation, the claim is not legally viable. 
7 

A. In the Context of Colorado Insurance Law, the Claim of 

Equitable Subrogation Is Identified As Derivative of the Rights 

of the Insured 

¶ 15 Subrogation is “a creature of equity having for its purpose the 

working out of an equitable adjustment between the parties by 

securing the ultimate discharge of a debt by the person who in 

equity and good conscience ought to pay it.” In re Estate of Boyd, 

972 P.2d 1075, 1077 (Colo. App. 1998) (quoting United Sec. Ins. Co. 

v. Sciarrota, 885 P.2d 273, 277 (Colo. App. 1994)); see Cedar Lane 

Invs. v. Am. Roofing Supply of Colo. Springs, Inc., 919 P.2d 879, 884 

(Colo. App. 1996) (Equitable subrogation arises “because it is 

imposed by courts to prevent unjust enrichment.” (quoting 1 Dan B. 

Dobbs, Law of Remedies § 4.3(4), at 606 (2d ed. 1993))). 

¶ 16 In insurance cases, equitable subrogation is often used as a 

loss-shifting mechanism, dependent on the rights, obligations, and 

duties between the parties as set forth in the insurance policy. 

Thus, a subrogated insurer has “no greater rights than the insured, 

for one cannot acquire by subrogation what another, whose rights 

he or she claims, did not have.” Am. Family Mut. Ins. Co. v. DeWitt, 

218 P.3d 318, 323 (Colo. 2009) (citation omitted); see Bainbridge, 

Inc. v. Travelers Cas. Co. of Conn., 159 P.3d 748, 751 (Colo. App. 
8 

2006) (“[T]here must first exist a valid claim, right, or debt in order 

for another to become subrogated to it.”); Union Ins. Co. v. RCA 

Corp., 724 P.2d 80, 82 (Colo. App. 1986) (“The claim of a subrogee 

insurance carrier is derivative of the claim of its subrogor insured. 

Subrogation merely alters the beneficial ownership of the claim, not 

its identity, and gives the insuror the right to prosecute against 

responsible third parties whatever rights its insured possesses 

against them.”), overruled on other grounds by Mile Hi Concrete, Inc. 

v. Matz, 842 P.2d 198, 206 n.17 (Colo. 1992). 

¶ 17 In the insurance context, regardless of how an insurer obtains 

ownership of subrogation rights (viz., under contract with the 

insured or through principles of equity), they are derivative of the 

rights of the insured. “Once an insurance company enjoys those 

rights, [it] ‘stand[s] in the shoes of the insured’ for all legal purposes 

and may pursue any rights held by the insured subrogor.” DeWitt, 

218 P.3d at 323; see Cotter Corp. v. Am. Empire Surplus Lines Ins. 

Co., 90 P.3d 814, 834 (Colo. 2004) (by subrogation, a party who 

discharges another’s debt “stands in the shoes” of the subrogor); 

United Fire Grp. ex rel. Metamorphosis Salon v. Powers Elec., Inc., 

240 P.3d 569, 573 (Colo. App. 2010) (same); Bainbridge, 159 P.3d 
9 

at 751; Wright v. Estate of Valley, 827 P.2d 579, 582 (Colo. App. 

1992); Union Ins. Co., 724 P.2d at 82. 

B. Under Colorado Insurance Law, Any Settlement Obligation 

Owed by TDC to PPIC Was Defined by TDC’s Insurance Policy 

With Dr. Singh 

1. TDC Only Had a Duty to Dr. Singh to Make Reasonable 

Settlement Decisions 

¶ 18 Under the terms of an insurance policy, a primary insurer, to 

the exclusion of the insured, may have complete discretion to 

accept or reject settlement offers. See Farmers Grp., Inc. v. Trimble, 

691 P.2d 1138, 1141 (Colo. 1984); Aetna Cas. & Sur. Co. v. 

Kornbluth, 28 Colo. App. 194, 199, 471 P.2d 609, 611 (1970). 

However, in deciding whether to accept a settlement offer, the 

insurer must give at least as much consideration to the insured’s 

interests as it does to its own. See Goodson v. Am. Standard Ins. 

Co. of Wis., 89 P.3d 409, 415 (Colo. 2004). 

¶ 19 Because of the special nature of insurance contracts, Colorado 

courts have extended the duty of good faith and fair dealing implied 

in every bilateral contract to allow an insured to bring a separate 

tort action for bad faith refusal to settle. See id. at 414-15. 
10 

¶ 20 Thus, Dr. Singh had a contractual right to bring a tort claim 

against TDC for breach of the insurance contract for alleged bad 

faith failure to settle. In that claim, Dr. Singh would be required to 

prove that TDC acted in bad faith, or “unreasonably under the 

circumstances.” Am. Family Mut. Ins. Co. v. Allen, 102 P.3d 333, 

342 (Colo. 2004) (quoting Goodson, 89 P.3d at 415). Under Dr. 

Singh’s policy, TDC would be liable for any excess damages 

awarded against Dr. Singh if TDC had unreasonably — that is, in 

bad faith — refused the $1 million pretrial settlement offer. See 

Lira v. Shelter Ins. Co., 903 P.2d 1147, 1149 (Colo. App. 1994), 

aff’d, 913 P.2d 514 (Colo. 1996). 

¶ 21 Conversely, Dr. Singh could not recover against TDC for any 

liability he suffered if TDC’s settlement decisions were shown to 

have been objectively reasonable. See, e.g., Hazelrigg v. Am. Fid. & 

Cas. Co., 228 F.2d 953, 956 (10th Cir. 1955) (A primary insurer 

does not guarantee that its decision as to settlement will end 

advantageously, but it owes to its insured “the duty to exercise an 

honest discretion at the risk of liability beyond its policy limits.”). 

Premising liability on an insurer’s negligence for failure to settle 

reasonably reflects “the quasi-fiduciary relationship that exists 
11 

between the insurer and the insured by virtue of the insurance 

contract,” Trimble, 691 P.2d at 1141, which “necessarily imposes a 

correlative duty on the part of the insurance company to ascertain 

all facts” in making a decision to settle. Kornbluth, 28 Colo. App. at 

199, 471 P.2d at 611.

2. Numerous Other Jurisdictions Allow an Excess Insurer to 

“Stand in the Shoes of the Insured” to Seek Recovery 

From the Primary Insurer for Bad Faith Breach of the 

Duty to Settle Owed to the Insured 

¶ 22 As the excess carrier, PPIC assumed Dr. Singh’s risk of a 

judgment that exceeded the limits of his policy with TDC. PPIC and 

Dr. Singh contracted for the possibility of this exposure, but PPIC 

had no contractual relationship with TDC and, in that regard, no 

control over TDC’s settlement decisions. However, unlike Dr. 

Singh, PPIC did not have a contract or tort claim against TDC for 

any bad faith failure to accept the $1 million settlement offer. 

¶ 23 Other jurisdictions, concerned that excess insurers were 

facing ever-increasing risks of excess verdict amounts without 

recourse against primary insurers, created a remedy for excess 

insurers through derivative equitable subrogation. They reasoned 

that the excess insurer is effectively the insured for the purpose of 
12 

any judgment exceeding primary policy limits and, therefore, it 

should be protected at least to the same extent that the insured is 

protected by the contractual obligations owed to it by its primary 

insurer. See, e.g., Twin City Fire Ins. Co. v. Country Mut. Ins. Co., 23 

F.3d 1175, 1178 (7th Cir. 1994) (citing cases; the duty that a 

primary insurer owes an excess insurer is derivative of the primary 

insurer’s duty to the insured); Great Sw. Fire Ins. Co. v. CNA Ins. 

Companies, 547 So. 2d 1339, 1348 (La. Ct. App. 1989) (“[T]he 

excess insurer . . . stands in the shoes of the insured and should be 

permitted to assert all claims against the primary insurer which the 

insured himself could have asserted.”). 

¶ 24 As one commentator has explained, regardless of the fact 

there is no contractual relationship between them, “the primary 

insurer should be held responsible to the excess for improper 

failure to settle, since the position of the latter is analogous to that 

of the insured when only one insurer is involved.” Robert E. 

Keeton, Insurance Law § 7.8(d) (1971). 

¶ 25 Thus, an overwhelming number of courts allow an excess 

insurer to be equitably subrogated to the insured’s right to seek 

relief against the primary insurer for bad faith refusal to settle. See 
13 

W. Am. Ins. Co. v. RLI Ins. Co., 698 F.3d 1069 (8th Cir. 2012); Nat’l 

Sur. Corp. v. Hartford Cas. Ins. Co., 493 F.3d 752 (6th Cir. 2007) 

(collecting cases); Twin City Fire Ins., 23 F.3d at 1178; Hartford 

Accident & Indem. Co. v. Aetna Cas. & Sur. Co., 792 P.2d 749 (Ariz. 

1990); Morrison Assurance Co., 600 So. 2d at 1151; St. Paul Fire & 

Marine Ins. Co. v. Liberty Mut. Ins. Co., 353 P.3d 991 (Haw. 2015); 

Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818 (Mo. 2014); 

Truck Ins. Exch. of Farmers Ins. Grp. v. Century Indem. Co., 887 P.2d 

455, 460 (Wash. Ct. App. 1995). 

¶ 26 According to these courts, equitable subrogation in this 

context works to remedy the situation because the primary 

insurer’s contractual obligation to the common insured “is not 

reduced merely because of another contract between the insured 

and its excess insurer.” Peter v. Travelers Ins. Co., 375 F. Supp. 

1347, 1350 (C.D. Cal. 1974). 

¶ 27 TDC asserts, and PPIC does not seem to disagree, that the 

reasoning of these decisions is sound and fully consistent with wellaccepted principles of Colorado insurance law. 

C. The Division in Unigard Did Not Recognize an “Independent 

Equitable Subrogation Claim” and Its Decision is Fully Consistent 
14 

with Settled Colorado Law Recognizing Only Derivative Equitable 

Subrogation in the Insurance Context 

¶ 28 Nevertheless, PPIC insists that regardless of the viability of a 

“standing in the shoes” claim, it is not pursuing such a claim. It 

asserts that it is not seeking equitable subrogation “in the shoes” of 

Dr. Singh, but an “independent equitable claim” — in which it need 

only prove that it “equitably should have been paid” by TDC — a 

theory recognized, according to PPIC, in Unigard, 907 P.2d 94. We 

disagree. 

¶ 29 First, the issues presented in this case were not raised in 

Unigard, and the division did not address them. In Unigard, both 

insurers had agreed to settle and had paid differing portions of the 

settlement amount, which exceeded the limit of the primary 

coverage. The primary insurer had paid less than the limit of its 

primary coverage, and the insurers had reserved the right to a 

judicial determination of what each of them owed. The issue then 

was whether the primary insurer had to pay back the excess 

insurer for amounts paid by the excess insurer up to the limit of the 

primary coverage. Whether Colorado recognized an “independent,” 
15 

or non-derivative, claim of equitable subrogation simply had 

nothing to do with the case. 

¶ 30 Second, the principles of equitable subrogation discussed by 

Unigard must be considered in that context. The division first 

noted that under contract principles, in some jurisdictions in the 

circumstances before it, “the excess insurer succeeds, under the 

excess policy’s subrogation provisions, to the insured’s contract 

rights under the primary policy.” Id. at 99. The Washington and 

New Mexico cases cited by the division as supporting this theory 

both addressed the situation where two insurers are battling over 

whether one of them has an absolute obligation to pay, and 

therefore should reimburse the other. And, the decisions turned on 

the terms of the primary policies. See State Farm Mut. Auto. Ins. Co. 

v. Found. Reserve Ins. Co., 431 P.2d 737, 741-42 (N.M. 1967) 

(“Plaintiff had a right of subrogation against defendant by 

contract.”); Millers Cas. Ins. Co., of Tex. v. Briggs, 665 P.2d 887, 890 

(Wash. 1983) (subrogating excess insurer to the primary insurer 

based on “the terms of its policy and under general principles”). 

¶ 31 The Unigard division also noted a theory used in other 

jurisdictions “that equity will create a subrogation right in the 
16 

excess insurer because of that insurer’s payment of an obligation 

that equitably should have been paid by the primary insurer.” 907 

P.2d at 99. The Pennsylvania case cited for the “equitably should 

have been paid” formulation also concerned a nondiscretionary 

obligation of the primary — to defend a claim — and turned on the 

terms of the primary policy. See F.B. Washburn Candy Corp. v. 

Fireman’s Fund, 541 A.2d 771, 774 (Pa. Super. Ct. 1988). 

Moreover, the F.B. Washburn court itself based its decision on 

derivative equitable subrogation principles to determine whether an 

excess insurer could recover: 

“It has often been said that the equitable 

doctrine of subrogation places the subrogee in 

the precise position of the one to whose rights 

and disabilities he is subrogated.” Based on 

this principle, we are of the opinion that [the 

excess insurer and subrogee] stands in the 

same place as [the insured] . . . . 

Id. (emphasis added) (quoting Allstate Ins. Co. v. Clarke, 527 A.2d 

1021, 1024 (Pa. Super. Ct. 1987)). 

¶ 32 Thus, fairly read, Unigard is fully consistent with our 

interpretation of fundamental principles of Colorado insurance law 

that any subrogation rights sought by an excess insurer in the 

settlement context are derivative of the insured’s as set forth by the 
17 

primary insurance policy’s terms. We simply do not read Unigard

as implying that the rights of the insured under the primary policy 

are irrelevant. To the contrary, liability under either theory 

discussed in Unigard turned on the obligations imposed by the 

primary policy. And, the division observed that the debtor was 

asserting “a contract claim, based on the terms of the [primary] 

policy, that otherwise could have been enforced by [the insured].” 

Unigard, 907 P.2d at 99. 

D. Under the Insurance Policy, TDC’s Legal Obligation Was to 

Make Reasonable Settlement Decisions; Equity Will Not Require 

TDC to Pay Something It Was Otherwise Not Legally Obligated to 

Pay 

¶ 33 Whether derivatively based or not, an equitable subrogation 

claim allows for recovery only against obligated parties. Conversely, 

equity will not impose on someone an obligation not otherwise 

required by law. See, e.g., Blue Cross of W. N.Y. v. Bukulmez, 736 

P.2d 834, 840 (Colo. 1987); see also In re Masonite Corp. Hardboard 

Siding Prods. Liab. Litig., 21 F. Supp. 2d 593, 607 (E.D. La. 1998) 

(Equitable subrogation “is not an unchecked principle of conscience 

that allows recovery whenever it seems fair or right to make the 
18 

defendant pay for the subrogor’s losses that defendant is not legally 

obligated to pay.”). 

¶ 34 As discussed above, in the insurance context, whether an 

insurer is legally obligated depends on the terms of the insurance 

policy and the relationship between or among the parties to that 

policy. See DeWitt, 218 P.3d at 323; Bainbridge, 159 P.3d at 751; 

Union Ins. Co., 724 P.2d at 82. In this case, TDC’s settlement 

obligation was defined by its contract with Dr. Singh. TDC 

bargained for the discretion to settle, subject only to the legally 

imposed obligation of good faith, and that bargained-for 

discretionary obligation was the only potential source of any 

obligation TDC had to settle. See Hazelrigg, 228 F.2d at 957 (A 

primary insurer “is not required to prophesy or foretell the results of 

litigation at its peril. If it acts in good faith and without negligence 

in refusing the proffered settlement, it has fulfilled its duty to its 

insured, and those in privity with it.”). 

¶ 35 Absent a showing that a contractual provision violates public 

policy, equity should not be employed to defeat a party’s bargainedfor contractual rights. See Dover Assocs. Joint Venture v. Ingram, 

768 A.2d 971, 974 (Del. Ch. 2000). That seems to be particularly 
19 

so when a primary insurer is being sued by another entity with 

which it has no contractual relationship, to which it owes no 

independent obligation imposed by law (as PPIC concedes), and 

whose actions it has no ability to control. As TDC points out, it is 

inequitable to allow an excess carrier to nullify the primary 

insurer’s contractual right merely because the excess insurer 

disagrees with the primary insurer over the risk of exposure. 

¶ 36 Indeed, PPIC presents no good reason for ignoring the parties’ 

rights under the insurance contract. To the contrary, if PPIC were 

allowed to seek recovery without a showing that TDC acted in bad 

faith in ordinary circumstances such as alleged here, an excess 

carrier could accept a pretrial settlement offer within the primary 

insurer’s policy limits, knowing it could collect reimbursement from 

the primary carrier for whatever settlement amount it, as the 

“equitable subrogee,” paid. This outcome would occur regardless of 

whether the primary carrier had fulfilled its contractual duty to its 

insured to make settlement decisions reasonably and in good faith. 

Were we to accept PPIC’s argument that equitable subrogation 

applies where the excess insurer shows merely that it “had a 

reasonable, good faith belief that it should make the payment to 
20 

settle the claim,” we would subvert a primary insurer’s contractual 

right to control the insured’s case by effectively giving control of 

settlement decisions to the excess insurer. That would incentivize 

excess carriers to settle claims within primary policy limits without 

regard to damages or liability, and with no risk to them. 

E. As Applied to Equitable Subrogation Claims in the Insurance 

Context, the Hicks Factors Are, At Best, Incomplete 

¶ 37 In Hicks v. Londre, the court set forth specific requirements for 

allowing equitable subrogation in mortgage/lien cases.1 Although, 

at PPIC’s urging, the district court analyzed PPIC’s equitable 

subrogation claim under these factors, we conclude that they have 

limited relevance in the context of Colorado insurance law. The 

Hicks factors were expressly tailored to the situation in that case, 

where a creditor was seeking to leapfrog another creditor in priority 

vis-a-vis the debtor’s real property because it had paid the 

mortgagor’s obligations to the primary and secondary creditors. 

 

1 Those factors are: (1) the subrogee made the payment to protect 

his or her own interest; (2) the subrogee did not act as a volunteer; 

(3) the subrogee was not primarily liable for the debt paid; (4) the 

subrogee paid off the entire encumbrance; and (5) subrogation 

would not work any injustice to the rights of the junior lienholder. 

Hicks v. Londre, 125 P.3d 452, 456 (Colo. 2005). 
21 

But, what is “inequitable” in the insurance context is, as discussed, 

tied to the insurance policy. See generally DeWitt, 218 P.3d at 323; 

Unigard, 907 P.2d at 99. Importing into insurance cases the 

requirements of equitable subrogation used in lien cases seems like 

forcing the proverbial square peg into a round hole. 

¶ 38 Moreover, as our supreme court has noted, “the roots of 

equitable subrogation lie in the concept of remedying a mistake.” 

Joondeph v. Hicks, 235 P.3d 303, 307 (Colo. 2010). Applying the 

Hicks factors overlooks the central “mistake” in this context — 

whether a primary insurer’s failure to settle was in bad faith. 

Without that, there would be no wrong or mistake for equity to 

remedy. See Steiger v. Burroughs, 878 P.2d 131, 135 (Colo. App. 

1994); Fed. Deposit Ins. Corp. v. Mars, 821 P.2d 826, 832 (Colo. 

App. 1991).

F. PPIC Was Required to Plead and Prove That TDC’s Refusal to 

Accept the $1 Million Offer of Settlement Was Made in Bad Faith 

¶ 39 We hold that in the insurance context, Colorado law 

recognizes equitable subrogation only as a derivative right 

dependent on the obligations of the insurance contract. 

Consequently, PPIC could assert an equitable subrogation claim 
22 

against TDC only to the extent of Dr. Singh’s rights under his 

insurance contract with TDC, which only obliged TDC to exercise its 

discretion to settle reasonably under the circumstances. Goodson, 

89 P.3d at 415. 

¶ 40 However, in concluding that PPIC must plead and prove that 

TDC acted in bad faith, we reject TDC’s proposed two-part bad faith 

test, as set forth in Continental Casualty Co. v. Reserve Insurance 

Co., 238 N.W.2d 862 (Minn. 1976), that would also require proof of 

the insured’s liability. Under Colorado law, “[t]he basis for tort 

liability is the insurer’s conduct in unreasonably refusing to pay a 

claim and failing to act in good faith, not the insured’s ultimate 

financial liability.” Goodson, 89 P.3d at 414; see Travelers Ins. Co. 

v. Savio, 706 P.2d 1258, 1270 (Colo. 1985) (“[B]ad faith depends on 

the conduct of the insurer regardless of the ultimate resolution of 

the underlying compensation claim.”). 

V. Disposition 

¶ 41 PPIC argued in its reply brief in support of its summary 

judgment motion that its claim 

is premised on the general equitable remedy of 

equitable subrogation, as fleshed out in the 

Hicks standard. It is not premised on the 
23 

assertion that it has stepped into the shoes of 

its insured, Dr. Singh, through its payment of 

the settlement, and a follow-on argument that 

Dr. Singh could make that TDC’s refusal to 

settle was in bad faith. 

PPIC made the same argument in opposing TDC’s motion to 

dismiss. However, we have concluded that without an assertion 

that TDC acted in bad faith, PPIC’s equitable subrogation claim is 

not legally viable. 

¶ 42 Therefore, because PPIC’s claim for recovery is not supported 

by law, we reverse the district court’s order granting summary 

judgment for PPIC and remand for entry of judgment of dismissal in 

TDC’s favor. See, e.g., Goeddel v. Aircraft Fin., Inc., 152 Colo. 419, 

382 P.2d 812 (1963) (dismissal is appropriate when there is an 

absence of law supporting the plaintiff’s claim); Mahaney v. City of 

Englewood, 226 P.3d 1214, 1220 (Colo. App. 2009) (reversing grant 

of summary judgment in favor of appellee and remanding for entry 

of judgment in favor of appellant); Geiger v. Am. Standard Ins. Co. of 

Wis., 192 P.3d 480, 484 (Colo. App. 2008) (same). 

¶ 43 The district court’s grant of PPIC’s summary judgment motion 

is reversed, and the case is remanded to the district court to enter 

summary judgment in TDC’s favor. 
24 

JUDGE J. JONES and JUDGE RICHMAN concur.