Insurance Bad Faith When Experience Matters

Insurance Companies owe a duty of good faith and fair dealing to their own insured (their clients, and are prohibited from engaging in deceptive practices toward third parties making claims against the policies of their insured. Insurance Companies routinely delay, and unreasonably deny claims that they should pay. This is because the Insurance Company’s only interest is to make and keep money. In other words, every insurance company is always focused on not paying legitimate claims. This frequently causes them to violate the law.

1. Unfair Claims Practices Act – C.R.S. §10-3-1104.

This is the Statute in Colorado That Governs What Insurance Practices Are Illegal. Among other acts, Bad Faith Insurance Practices include the following:

  • (I) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue; or

  • (II) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies; or

  • (III) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; or

  • (IV) Refusing to pay claims without conducting a reasonable investigation based upon all available information; or

  • (V) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; or

  • (VI) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear; or

  • (VII) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds; or

  • (VIII) Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application; or

  • (IX) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured; or

  • (X) Making claims payments to insureds or beneficiaries not accompanied by statement setting forth the coverage under which the payments are being made; or

  • (XI) Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration; or

  • (XII) Delaying the investigation or payment of claims by requiring an insured or claimant, or the physician of either of them, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information; or

  • (XIII) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; or

  • (XIV) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement; or

  • (XV) Raising as a defense or partial offset in the adjustment of a third-party claim the defense of comparative negligence as set forth in section 13-21-111, C.R.S., without conducting a reasonable investigation and developing substantial evidence in support thereof. At such time as the issue is raised under this subparagraph (XV), the insurer shall furnish to the commissioner a written statement setting forth reasons as to why a defense under the comparative negligence doctrine is valid.

  • (XVI) Excluding medical benefits under health-care coverage subject to article 16 of this title to any covered individual based solely on that individual's casual or nonprofessional participation in the following activities: Motorcycling; snowmobiling; off-highway vehicle riding; skiing; or snowboarding; or

  • (XVII) Failing to adopt and implement reasonable standards for the prompt resolution of medical payment claims;


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2. Insured’s Performance Under the Contract

The single most important thing that a person must due after experiencing a loss under an insurance policy is to read and comply with the “Duties After Loss” Section of The Insurance Policy. This section of the insurance policy will list the things that the insured must due after a loss, such as taking precautions to minimize the damage to the property, and document the loss. Unless and until the insured complies with all of these listed duties after a loss, the insurance company does not have a legal duty to perform – to pay the claim. Moreover, there can be no bad faith by the insurance company if the insured has not first performed under the contract. So, performing all of the “Duties After Loss is the most important thing a person can do after experiencing a loss.

3. Reasonable Time –

Reasonable Time - Unlike Other States, Colorado does not define a “reasonable time” with a specific number of days. However, Colorado does define reasonable time by reference to industry standards, which in turn looks to neighboring states specific number of days. Although the facts of each case require individual evaluation of “reasonableness” the insurance company frequently denies or delays with little or no reason, and their behavior is almost always “unreasonable.”

4. Lawsuit – Damages – Attorney’s Fees – C.R.S. §10-3-1116

(1) 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.


So, if the Insurance Company unreasonably Denies or Delays a claim, you are entitled to Twice the Value of the Claim and Attorney’s Fees.