Nobody likes paying insurance premiums, but we do anyway, assuming that if something bad happens, the insurance company will be there to help us get through it. For most people, that is the case; the insurance company pays out what they need to, and everyone moves on. But, unfortunately, this is not everyone’s experience. Sometimes an insurance company unreasonably delays or denies a claim. If that happens, you may have an insurance bad faith case against the company and be entitled to a penalty of up to double the value of your claim plus attorney fees.
The Legal Grounds for a Claim
Colorado law allows you to make an insurance bad faith claim on two legal grounds—a common law basis and a statutory basis. You can file both at the same time, and here’s what they mean:
- Common Law Claim: Applies in instances where an insurance company unreasonably refused or delayed payment and there was an intentional and reckless disregard for your rights under the contract.
- Statutory Claim: Applies in instances where an insurance company unreasonably delayed or denied payment, which is considered a violation of your rights. You do not have to prove intentional and reckless disregard for a statutory claim.
What Is Unreasonable?
In Colorado, the Unfair Claims Settlement Practices Act governs bad-faith insurance claims. Under this law, you have a claim against an insurance company if it acted unreasonably in delaying or denying a home, auto, health, or disability insurance claim. The company knew it was acting unreasonably under the circumstances. Here are some common examples of unreasonable practices.
- Delaying Settlements – If liability is clear in a particular claim, failure to offer a prompt settlement can constitute bad faith on the part of the insurance company.
- Failure to Investigate – If a claim arises under one of their policies, an insurance company has a clear duty to investigate that claim. Failure to do so is not a valid basis for denying or delaying a claim.
- Undervaluing Claims – When an insurance company knows that a claim has a certain value, attempting to settle that claim for a lower amount may be bad faith behavior.
- Requiring Unnecessary Documentation – Insurance claims commonly involve a lot of paperwork that may mean work for the claimant. Still, if the company is intentionally flooding the claimant with unnecessary documents, that is unreasonable.
- Failure to Respond to Communications – While they are not required to respond to claimants instantaneously, insurance companies must respond to communications reasonably promptly.
- Misrepresentations – If an insurance company knowingly misrepresents the facts of the case or the claimant’s rights under the policy, it is a clear case of bad faith.
What Can You Do?
Patience is a necessary virtue when dealing with insurance companies, but that doesn’t mean you have to let them walk all over you. Document all your interactions with the company—the dates, people’s names, and discussion topics in case you need it for reference. It may not be easy to pinpoint exactly when it happens, but at some point, you may get the impression that the insurance company is not behaving properly. If that happens, the best option is to speak with an attorney.
Do you suspect you have an insurance bad faith case? Often, knowing that a lawyer represents you will spur the insurance company to action. If it doesn’t, our team can move forward with litigation to get you the compensation you deserve. Contact us today to schedule a consultation.