When an accident occurs, you expect your insurance to cover you – that's what insurance does, right?
That's the same in Colorado as it is everywhere else. When it comes time to file a claim after an accident, all you want is to make sure that your car is repaired or replaced, your injuries are taken care of, and your family is protected.
Sometimes, however, your insurance company might not be what they promised in those commercials. They might not hold up their end of the bargain. They might delay or even completely deny your claim.
Then you're standing next to your battered car, wondering where it all went wrong.
What are you supposed to do?
Technically, there are two types of bad faith claims. There are first-party insurance bad faith claims, which is when an insurance company unreasonably refuses to pay a claim or fails to properly investigate a claim. These are your direct claims, your single-party, “I bought insurance and now I'm asking my insurance company to pay up” claims.
Then there are third-party insurance bad faith claims, which are when insurance companies unreasonably fail to defend, indemnify or settle a claim within policy limits, or they improperly fail to investigate a claim. This is when the insured (first party) buys insurance from the insurer to protect against claims from another (the third party).
Bad faith claims in Colorado protect insurers from insurance companies and are governed by the Unfair Claims Settlement Practices Act. This was enacted so that consumers would be protected if insurance companies decided to unreasonably (and the key word is “unreasonably,” we're going to be using it a lot) deny or delay claims relating to home, auto, health and disability insurance. The insurer also has to have knowledge of the fact that its actions were unreasonable under the circumstances.
Insurers are obliged to act in good faith and to engage in fair deals.
Again, it has to be a “reasonable” denial of payment in order for the insurer to win its case.
According to the Revised Statutes, “the determination of whether the insurer's delay or denial was reasonable shall be based on whether the insurer's delay or denial was negligent.”
The next paragraph discusses whether the insurer knew that the unreasonable delay or denial was with “reckless disregard.” Legally, this is a form of gross negligence – without concern of injury to others.
Here are some of the types of unfair claim settlement practices that insurers have been known to use, according to the Revised Statutes:
Colorado relies both on statutory law and case law for how these claims are handled. The state now uses case law to punish insurers for the unreasonable delay or denial of coverage. This allows for penalties of twice the unpaid benefit on top of the benefit itself, plus attorneys' fees.
If you think your insurer is treating you unfairly, first of all, don't panic.
Take a step back from the situation. Sometimes we think our insurer is drowning us in unnecessary paperwork or asking for the same thing multiple times, but just like when we refinance our house or apply for a loan, very often these things are necessary. Don't jump the gun and immediately think, “My insurer is acting unreasonably!”
You will first want to speak with the adjuster's supervisor. Have all your ducks in a row and inform that person that you've complied with the adjuster's requests, supplied all necessary information multiple times – and yet X, Y and Z have occurred. Make sure to cite specific examples of how the adjuster has acted, and use dates and times if you can.
If this doesn't sway the insurance company's position, you can try filing a claim with the state insurance board. They will investigate your complaint, and if they agree with your findings, they will fine the insurance company for acting in bad faith.
Meanwhile, you should hire an attorney in order to protect your interests and make sure that your claim is actually resolved. If you need help finding one, make sure to check out the Enjuris law firms in Colorado!