Source: https://www.bbl.law/insurance-claim-denial-is-my-insurer-acting-in-bad-faith/
Timestamp: 2019-04-24 19:53:21+00:00

Document:
By: Anthony B. Vanicek, Esq.
While Colorado recognizes the common law tort of bad faith breach of an insurance contract, Colorado also provides insureds with separate statutory basis for recovery found in C.R.S. § 10-3-1115 and § 10-3-1116. When an individual makes an insurance claim, the insurance company has various obligations including acknowledging your claim, the duty to properly and promptly investigate the claim, respond to your communications, and to make sure the claim is not unreasonably denied or delayed. Bad faith claims can be broken down into two types: (1) first-party insurance bad faith claims and (2) claims under a liability policy.
Under C.R.S. § 10-3-1115(1)(b)(i) a “’First-party claimant’ means an individual, corporation, association, partnership, or other legal entity asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy.” This would include many common claims such as money owed to the insured after an automobile accident. The statute specifically excludes a “person asserting a claim against an insured under a liability policy” § 10-3-1115(b)(ii)(B).
The statute directs that “[a] person engaged in the business of insurance shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.” C.R.S. § 10-3-1115 (1)(a). The statute will deem an insurer’s delay or denial to be unreasonable “if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.” C.R.S. § 10-3-1115(2). Wrongful denial of a claim can come with harsh penalties for the insurance provider. A First-party claimant whose claim is “unreasonably delayed or denied” is permitted to recover reasonable attorneys’ fees and two times the covered benefit. § 10-3-1116(1). This usually provides insurance companies with incentive to diligently investigate claims and do right by their obligations in the policy.
These claims typically involve an insurance company’s failure to defend, indemnify or settle a claim as per the policy limits. As with First-party claims, it can also involve the insurance company’s failure to reasonably investigate a claim.
Unlike the First-party claims where “unreasonableness” requires proving that the insurer either “knew” or “recklessly disregarded” the fact that its denial was unreasonable, proving unreasonable conduct under a liability policy only requires showing of “whether the insurer’s delay or denial was negligent.” C.R.S. § 10-3-1113(2).

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