Opinion ID: 6322942
Heading Depth: 2
Heading Rank: 2

Heading: An Action for Unreasonable Delay or Denial of

Text: Insurance Benefits Proceeds Against an Insurer q10 In 2008, the General Assembly enacted “An Act Concerning Strengthening Penalties for the Unreasonable Conduct of an Insurance Carrier.” Ch. 422, sec. 5, §§ 10-3-1115 to -1116, 2008 Colo. Sess. Laws 2171, 2172-74. The law created, inter alia, two new provisions: (1) section 10-3-1115, which prohibits the unreasonable delay or denial of payment for a claim for insurance benefits, and (2) section 10-3-1116(1), which establishes a cause of action for an insured whose claim for insurance benefits has been unreasonably delayed or denied. q11 Specifically, section 10-3-1115(1)(a) announces the following prohibition: “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.” And_ section 10-3-1116(1) creates a cause of action under the following circumstances: “A first-party claimant as defined in section 10-3-1115 whose claim for payment of benefits has been unreasonably delayed or denied may bring an action in a district court to recover reasonable attorney fees and court costs and two times the covered benefit.” q12 Skillett argues that these provisions allow first-party claimants to bring suit not only against their insurers, but also against individual insurance adjusters. In support of this argument, she points out that section 10-3-1115(1)(a) refers to “[a] person engaged in the business of insurance.” (Emphasis added.) She then looks to section 10-3-1102(3), C.R.S. (2021), which defines “person” in part 11 of Title 10 to include “adjusters.” Although the court of appeals had previously rejected this argument, see Riccatone, 9] 43-45, 315 P.3d at 210-11, a federal court recently accepted it, Seiwald, 2020 WL 6946563, at , leaving uncertainty for both state and federal courts as to the proper interpretation of the Statutes. 13 In resolving that uncertainty, we note that Skillett is correct that section 10-3-1102(3) includes “adjusters” among “persons.” But that section does not make its definitions absolute. Rather, those definitions apply “unless the context otherwise requires.” § 10-3-1102. Throughout sections 10-3-1115 and 10-3-1116, the context makes clear that first-party claimants whose insurance claims have been unreasonably delayed or denied may bring suit against their insurers, but not against individual claims adjusters. q14 Most importantly, section 10-3-1115(2) establishes the standard by which a cause of action for unreasonable delay or denial of insurance payments is measured, explaining that, “for the purposes of an action brought pursuant to this section and section 10-3-1116, an insurer’s delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.” (Emphases added.) In other words, insureds may bring suit under section 10-3-1116(1), and section 10-3-1115(2) explains what they must show to prove unreasonable delay or denial; namely, that the insurer's delay or denial was “without a reasonable basis.” § 10-3-1115(2); see also Am. Fam. Mut. Ins. Co., 99, 418 P.3d at 1184 (explaining that sections 10-3-1115 and 10-3-1116 “operate concomitantly through cross-reference”). 415 Reading these provisions to allow for adjuster liability leaves unnecessary statutory gaps. Under such a reading, section 10-3-1115(2) would explain what standard applies when assessing whether an insurer's delay or denial was unreasonable, but it would offer no guidance for evaluating an adjuster’s conduct. That, presumably, would be left for judicial development, but without legislative guidance. Moreover, section 10-3-1115(2) refers to instances where the insurer “delayed or denied authorizing payment of a covered benefit.” (Emphasis added.) Because the insurer—not any individual employee—authorizes payment, this language indicates that an action for unreasonable delay or denial of insurance benefits is triggered by a decision of the insurer, not the adjuster. qi6 Similarly, section 10-3-1116(1) allows first-party claimants to bring suit when their “claim for payment of benefits has been unreasonably delayed or denied.” (Emphasis added.) The “payment of benefits” is made by and on behalf of the insurer —not the adjuster. Likewise, “first party-claimants” are those who “assert[] an entitlement to benefits owed...under an insurance policy.” § 10-3-1115(1)(b)(I) (emphasis added). Insurers and insureds — not adjusters — are the parties to an insurance policy. They are the ones who undertake obligations under such policies, and it is the insurer — not the adjuster — who may be obligated to pay insurance benefits. And section 10-3-1116(1) allows first-party claimants whose claims for benefits are unreasonably delayed or denied to recover “reasonable attorney fees and court costs and two times the covered benefit.” (Emphasis added.) It would seem odd to allow an insured to recover two times 10 the covered benefit from an adjuster, who is not a party to the insurance policy that establishes the covered benefit and has not otherwise undertaken any obligation to pay the covered benefit. q17 Other parts of the statutory context likewise indicate that an action for unreasonably delayed or denied insurance benefits proceeds against the insurer. Under the statute’s child support enforcement exemption, for example, sections 10-3-1115 and 10-3-1116 “do not apply to any claim payment that is delayed or denied because of the insurer’s participation in the child support enforcement mechanism established in section 26-13-122.7, C.R.S.” § 10-3-1115(7) (emphasis added). And under section 10-3-1118(5), C.R.S. (2021), “[a]n insurer is not liable for a claim . . . under sections 10-3-1115 and 10-3-1116 because the insurer solely provides the insured with the required amount of time” to respond to its written requests or to cure alleged failure to cooperate. (Emphases added.) These provisions carve out exceptions for the liability of insurers, yet make no reference to adjusters. gis The only language in the Statutes that supports Skillett’s argument is the use of the word “person” in section 10-3-1115(1)(a) and the attendant inclusion of “adjusters” as “persons” in section 10-3-1102(3). Given the statutory command that the definitions included in section 10-3-1102 only apply “unless the context 11 otherwise requires,” we conclude that individual adjusters are not personally subject to suit under the Statutes.