Opinion ID: 2817247
Heading Depth: 3
Heading Rank: 2

Heading: Common Law and Statutory Bad Faith

Text: Ms. Williams claims Owners acted unreasonably and in bad faith as follows: (1) Owners’ investigation was unreasonable because Owners did not begin to investigate until after January 13, 2012, when it received Ms. Williams’s demand for payment under her UIM coverage, despite being informed in 2009 of the probability of a UIM claim; (2) Owners refused to pay her the $75,000 settlement offer as an undisputed minimum, even though a final settlement amount had not been reached; (3) Owners’ settlement offers of $50,000 and $75,000 were unreasonable, given her documentation to support her claim for $100,000, and Owners did not explain the bases for the settlement offers; (4) Owners’ agent did not consult a medical professional concerning her questions about Ms. Williams’s claimed injuries; and (5) Owners’ record-keeping was inadequate.
For a common law bad faith claim, because this is a “direct or first-party [claim], [the tort of bad faith processing of an insurance claim] requires proof of unreasonable conduct and knowledge that the conduct is unreasonable or a reckless disregard of the fact that the conduct is unreasonable.” Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1276 (Colo. 1985) (en banc). “Under Colorado law, it is reasonable for an insurer to challenge claims that are ‘fairly debatable.’” Zolman v. Pinnacol Assurance, 261 P.3d 490, 496 (Colo. Ct. App. 2011). -7- Ms. Williams also brings claims under Colo. Rev. Stat. §10-3-1115(1)(a), which provides: “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.” Section 10-3-1115(2) imposes an unreasonableness standard “for the purposes of an action brought pursuant to this section and section 10-3-1116.” Section 1116, in turn, creates a private right of action for certain remedies for violations of section 1115, and authorizes damages of two times the covered benefit plus attorney fees and court costs. These statutes “impose on insurers a . . . standard of liability in addition to and different from that required to prove a claim for breach of the common law duty of good faith and fair dealing.” Kisselman v. Am. Family Mut. Ins. Co., 292 P.3d 964, 973 (Colo. Ct. App. 2011). An insurer breaches the statutory duty if there was “no reasonable basis to delay or deny the claim for benefits.” Id. at 974 (internal quotation marks omitted); see also section 10-3-1115(2) (stating “an insurer’s delay . . . was unreasonable if the insurer delayed . . . authorizing payment of a covered benefit without a reasonable basis for that action”). In contrast to a common law bad faith claim, “the only element at issue in the statutory claim is whether an insurer denied benefits without a reasonable basis.” Vaccaro v. Am. Family Ins. Group, 2012 COA 9, ¶ 44, 275 P.3d 750, 760; see id. ¶ 44 (stating that a finding that a UIM claim was “fairly debatable” for common law purposes “would not alone establish that [the insurer’s] actions . . . were reasonable as a matter of law.”). -8- Both the common law and the statutes impose liability if the insurer acted unreasonably. Both types of claim are evaluated objectively, based on industry standards. Savio, 706 P.2d at 1276 (common law claim); Fisher v. State Farm Mut. Auto. Ins. Co., 2015 COA 57, ¶ 53, 2015 WL 2198515, at  9 (statutory claim). Ms. Williams had the burden to establish that Owners acted unreasonably. See Bankr. Estate of Morris v. COPIC Ins. Co., 192 P.3d 519, 523 (Colo. Ct. App. 2008). The issue of unreasonableness is usually a question of fact, but “in appropriate circumstances, as when there are no genuine issues of material fact, reasonableness may be decided as a matter of law.” Id. at 524.
We first address Ms. Williams’s claim that Owners unreasonably delayed investigating her claim. Ms. Williams asserts that Owners should have begun its investigation in 2009 upon being informed of the probability of a UIM claim, not in 2012 when it received her demand for payment. To carry her burden to show that Owners acted unreasonably in violation of industry standards, Ms. Williams relies on excerpts from the deposition of her expert witness, Bradley Levin. Mr. Levin testified that Owners’ request for additional documentation to support the wage loss claim was not unreasonable, but Owners should have requested additional information from Ms. Williams about her wage loss claim in January, 2012. He did not say Owners should have made the request in 2009. See Sanderson v. Am. Family Mut. Ins. Co., 251 P.3d 1213, 1220 (Colo. Ct. App. 2010) (holding plaintiff’s UIM -9- claims did not accrue until his lawsuit against the underinsured driver was resolved where insurance policy provided for UIM coverage only after liability policies had been exhausted). Mr. Levin did not testify that his opinion that Owners should have asked for additional documents in January was based on industry standards. Owners received Ms. Williams’s demand package on January 13, 2012. On February 6, Owners requested further documentation. On February 29, 2012, Owners offered $75,000. Thus, 46 days elapsed between Ms. Williams’s demand and Owners’ offer. We conclude that under these circumstances, no reasonable jury could find that Owners unreasonably delayed investigating Ms. Williams’s UIM claim. We next determine that Owners’ refusal to pay Ms. Williams the $75,000 settlement offer as an undisputed minimum does not warrant a finding of bad faith or unreasonable conduct. Indeed, the Colorado Court of Appeals has stated in dicta that “an assertion that [an insurer] breached its duty under section 10-3-1115 by failing to pay [its insured] the initial settlement offer is inconsistent with Colorado law.” Fisher, 2015 COA 57, ¶ 15 (addressing claim advanced at trial that insurer unreasonably delayed paying insured’s medical expenses, which were owed regardless of settlement offer). Ms. Williams asserts that Owners’ settlement offers of $50,000 and $75,000 were unreasonable, given her documentation to support her claim for $100,000. But she does not address, or even acknowledge, Owners’ reservations about her medical - 10 - expenses—her symptoms worsened over time, some injuries were degenerative rather than traumatic, and she was in a subsequent accident. Similarly, she offers no response to Owners’ challenges to her wage loss claim—the evidence does not contain a doctor’s limitation on her ability to work, she did not proffer admissible evidence that she hired and paid others to perform her work, and the spreadsheet she prepared herself was inadequate to substantiate her lost wages. Rather, she argues merely that she presented “ample evidence establishing that Owners disregarded relevant medical opinions,” Aplt. Opening Br. at 37, and she “put forward evidence showing that Owners ha[d] no reasonable excuse for failing to perform the contract,” id. at 47. These arguments consisting of mere conclusory allegations are insufficient to warrant appellate review. See Palma-Salazar v. Davis, 677 F.3d 1031, 1037 (10th Cir. 2012) (declining to address conclusory statements (collecting cases)). Ms. Williams also claims that Owners’ failure to explain its offers of $50,000 and $75,000 showed bad faith. But the correspondence between Owners and Ms. Williams demonstrated that Owners had questions about her medical and wage loss claims. Upon receipt of additional documentation after making the $50,000 offer, Owners increased its offer to $75,000. And if Ms. Williams was confused about the basis for the offer, she could have asked, but there is no indication that she did.2 2 Ms. Williams relies on Colo. Rev. Stat. § 10-3-1104(1)(h)(XIV), which lists as an unfair or deceptive insurance practice a failure to promptly explain the basis for a (continued) - 11 - We next address Ms. Williams’s claim that Owners’ agent acted unreasonably and in bad faith by not consulting a medical professional to resolve her concerns about Ms. Williams’s claim for damages related to medical expenses. Ms. Williams again relies on her expert witness’s opinion. Mr. Levin opined that as a layperson, the agent evaluating a claim must have a reasonable basis for rejecting the claim and may not reject a treating physician’s statement without first consulting a medical professional. But Mr. Levin did not state whether this procedure was an industry standard, a condition imposed by law, or merely his personal opinion of how this claim should have been handled. Moreover, when asked whether the Owners agent had the capacity or training to evaluate a medical claim without consulting a medical professional, Mr. Levin replied, “She may or she may not.” Aplt. App. at 106. Mr. Levin did not explain how Owners’ evaluation of the claim was deficient. Consequently, this opinion does not demonstrate that Owners unreasonably or in bad faith challenged Ms. Williams’s medical claim or that Owners violated industry standards. Last, we consider Ms. Williams’s claim that Owners’ record-keeping was inadequate. Mr. Levin stated that industry standards require an insurer to keep detailed records concerning a claim and that Owners’ internal records did not meet this standard. He did not opine, however, that this failure had any impact on Owners’ settlement offer. Even if it applied to our facts, this section does not create a private right of action. Colo. Rev. Stat. § 10-3-1114. - 12 - actions toward Ms. Williams. Thus, Ms. Williams has not shown that Owners’ inadequate record-keeping resulted in any unreasonable actions toward her.