Opinion ID: 2623130
Heading Depth: 3
Heading Rank: 1

Heading: Need For Expert Testimony.

Text: Next we address whether expert testimony of industry standards is required to establish the reasonableness of an insurer's conduct in a first-party claim for the breach of an insurer's duty of good faith. We begin by discussing basic principles behind this tort claim. An insurer must deal in good faith with its insured. Decker v. Browning-Ferris Indus. of Colorado, 931 P.2d 436, 443 (Colo.1997). The insurance contract imposes a quasi-fiduciary relationship between the insurer and insured that imposes an implied covenant of good faith upon the insurer. Id. This special relationship gives rise to a separate action in tort when the insurer breaches its duty of good faith and fair dealing. Goodson v. American Std. Ins. Co. of Wisconsin, 89 P.3d 409, 414 (Colo.2004) (discussing the requirements for asserting a claim against an insurer for the breach of the duty of good faith and the damages available). An insurer may breach its duty of good faith due to the insurer's conduct with third-parties or with first-parties. The third-party context involves claims against the insurer for its alleged misconduct with third-parties asserting claims against the insured. By contrast, the first-party context involves claims against the insurer for its alleged misconduct with its own insured. To assert a claim for the breach of an insurer's duty of good faith, the tort requires proof of a different standard depending upon whether the insurer's conduct is with a third-party or a first-party. Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1274 (Colo.1985). In the third-party context, an insured's claim is based on general principles of negligence and requires proof that the insurer acted unreasonably under the circumstances. Goodson, 89 P.3d at 415; see also Farmers Group Inc. v. Trimble, 691 P.2d 1138, 1142 (Colo.1984). In a first-party claim, like this one, the insured must prove both that the insurer acted unreasonably under the circumstances and that the insurer either knowingly or recklessly disregarded the validity of the insured's claim. Goodson, 89 P.3d at 415 (citing Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1274 (Colo.1985)). Because this second element is not relevant to the issues raised on appeal, we do not address it here. Thus, the next relevant inquiry is whether the insured, the plaintiff, must rely upon expert testimony to establish industry standards to prove that the insurer breached its duty of good faith  that is, that the insurer acted unreasonably. [12] The reasonableness of an insurer's conduct is measured objectively based on industry standards in both the first-party and third-party context. Goodson, 89 P.3d at 415; Savio, 706 P.2d at 1275. Although we have not specifically decided the need for expert testimony to establish what is reasonable under the circumstances, our court of appeals has. It has held that in the third-party context, expert testimony is not required to establish the reasonableness of the insurer's conduct where the standard of care does not entail specialized knowledge or skill beyond that of the average juror. [13] Surdyka v. DeWitt, 784 P.2d 819, 822 (Colo.App.1989). Expert witnesses can provide additional relevant evidence of the standard of care if the standard is not within the common knowledge of the ordinary juror. Gerrity Oil & Gas Corp. v. Magness, 946 P.2d 913, 931 (Colo.1997). We have stated that in tort claims for professional negligence, expert testimony is often required to establish the industry standard of care when the standard is not within the common knowledge of ordinary people. [14] Goodson, 89 P.3d at 415. On the other hand, in contexts slightly different than the one presented here, this court and the court of appeals have agreed with the Surdyka court's principles that expert testimony is not required where the defendant's standard of care does not require specialized or technical knowledge. [15] Nor is expert testimony required to establish the standard of care when a legislative enactment or administrative rule establishes the standard of care. Giampapa v. American Family Mut. Ins. Co., 919 P.2d 838, 841 (Colo.App.1995) (insurance company employee admitted that statute established standard of care for insurer to pay bills within thirty days), appealed after remand and rev'd on other grounds, 64 P.3d 230 (Colo.2003). But where the legislative enactment or administrative rule is not conclusive of the standard of care, the statute or rule may be used as evidence of the standard of care from which the trier of fact may evaluate the defendant's conduct. Gerrity, 946 P.2d at 932. In such instances, expert testimony is required to establish the standard of care only if the standard is not within the common knowledge and experience of ordinary persons. Id. For example, statutory safety standards under the Occupational Safety and Health Act, 29 U.S.C. § 653(b)(4) (2001), offered in support of expert testimony may be used as some indication of the standard of care owed by the defendant in a negligence claim for failing to follow industry standards in providing safe facilities and equipment. Scott v. Matlack, Inc., 39 P.3d 1160, 1170 (Colo.2002). We find our reasoning in Gerrity instructive for this case. There, the plaintiff claimed that an oil and gas operator engaged in negligent drilling operations in violation of Colorado's administrative rules. Gerrity, 946 P.2d at 920-21. The rules required the surface owner's consent for disposal of waste on the site as well as notice about site reclamation. Id. at 932. We held that these administrative rules did not overrule the common law rule of reasonable surface use, emphasizing that these administrative rules neither established the standard of care for an operator nor created a private right of action in tort. These rules provided the jury with valid, but not conclusive, evidence of the standard of care owed by the operator. And, most importantly here, we held that because the standard of care was within the common knowledge and experience of ordinary persons, the trier of fact was allowed to determine the legal duty owed to the landowner without the aid of expert testimony. Id. at 931. Although Gerrity concerns the standard of care in a negligence claim, its reasoning applies here. Like the rules in Gerrity, the Unfair Claims Practices Act regulates the conduct of the insurance industry but does not create a private right of action. [16] Farmers Group, Inc. v. Trimble, 658 P.2d 1370, 1377-78 (Colo.App.1982), aff'd, 691 P.2d 1138 (Colo.1984). This Act sets forth standards for when the commissioner of insurance may find that an insurance company is engaged in an unfair or deceptive trade practice. Section 10-3-1104(1)(h) of the Act defines an unfair claims settlement practice as, among other things, refusing to pay claims without conducting a reasonable investigation based on all available information, or not providing a reasonable explanation of a denial of a claim. [17] While the Unfair Claims Practices Act does not establish a standard of care actionable in tort, it may be used as valid, but not conclusive, evidence of industry standards just like the administrative regulations in Gerrity. If the reasonable investigation and denial of an insured's claim is within the common knowledge and experience of ordinary people, then expert testimony is not required. See Gerrity, 946 P.2d at 931.