Court Opinion

ID: 9851835
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:20:22.204874+00
Date Added: 2024-06-11T09:22:16.356209
License: Public Domain

NEIGHBORS, Justice,
concurring in part and dissenting in part:
I concur with the court’s opinion except insofar as it sets forth a two-part test for measuring the duty of care owed by an insurer to a “first-party” insured (Part III of the opinion).
We held in Farmers Group, Inc. v. Trimble, 691 P.2d 1138 (Colo.1984), that insurers owe an insured a duty of reasonable care (a negligence standard) when defending claims made by third parties against the insured. When required by the insurance contract to defend such claims, the insurer can be liable for damage caused to the insured by the insurer’s negligence in investigating, defending, and settling a third-party claim.
In my view, the facts in this case (a first-party claim) are not materially distinguishable from those in Trimble (a third-party claim), and I would apply the Trim-ble reasonableness standard to Savio’s claim of insurer misconduct. The reason set forth for using a higher standard of insurer conduct in the third-party context {Trimble) is that the insured in those cases has surrendered his right to the insurer to investigate and defend third-party claims, while in the present case the insured retains the full ability to negotiate his claim against insurer and litigate the claim if necessary.
This distinction is unimportant. In both situations the insured can at any time negotiate with the insurer or resort to litigation when the insured believes that the insurer has acted unreasonably in dealing with either first or third-party claims. In this case and the Trimble ease, the insured asserted claims of insurer misconduct against the insurer. The' fact that the insured has surrendered rights to defend against third parties in the Trimble situation is not, in my mind, a relevant distinction when both involve claims of insurer misconduct (and not conduct of third parties).
It has long been recognized that an insurer owes a duty of good faith and fair dealing to its insured. The insurance contract gives rise to the duty when the insured pays a premium to obtain financial security against calamity and peace-of-mind rather than a commercial advantage. Trimble, 691 P.2d at 1141. In view of this quasi-fiduciary relationship, insurers should be held to the same standard of reasonable conduct when the “underlying claim” is by a third party or by the insured himself. In my view, the Trimble negligence test should be applied to Savio’s claim.
I would affirm the judgment of the court of appeals and would direct that the case be remanded to the district court for reinstatement of Savio’s claim.