Last month, the Colorado Court of Appeals gave same additional teeth to C.R.S. 10-3-1115 and -1116, declaring that when a vendor is authorized to assert, and does assert, claims on behalf of insureds, those vendors are protected from insurers’ unreasonable delay and denial of insurance benefits, per C.R.S. 10-3-1116.
Prior to this decision in Kyle W. Larson Enterprises, Inc. v. Allstate Insurance Company,1 only the insured named on the policy was deemed able to assert claims for two times the covered insurance benefit, attorney’s fees and costs per § 10-3-1116. No more.
Contractors Who Have Long Suffered The Consequences Of Insurers’ Refusals To Pay Insurance Benefits No Longer Must Carry The Unpaid Balances Owed For Completed Work—At Least Not Without Recourse Against The Insurer
In Kyle, the roofer contracted with the owners of four homes insured by Allstate to repair their roofs. The contracts provided that the repair costs would be paid from insurance proceeds and granted the roofer full authority to communicate with Allstate regarding all aspects of the insurance claims.
After meeting with Allstate adjustors to determine the scope of work and amount of each claim receiving approval from Allstate for the claims, and the roofer began each repair. Later, the roofer determined additional repairs were required to comply with building codes and to maintain manufacturers’ warranties. The roofer completed the additional repairs and invoiced Allstate. Allstate only paid claim amounts originally agreed to and refused to pay for the additional repairs.
The roofer filed suit as a first-party claimant against Allstate for unreasonable delay and denial of insurance benefits. The trial court ruled the roofer was not a first-party claimant entitled to seek relief under the statutes and granted Allstate’s summary judgment motion. The roofer appealed the portion of the summary judgment dismissing its claim under section 10–3–1116.
The Colorado Court of Appeals overturned the lower court and declared section 10–3–1115 is unambiguous. The Court held under the plain language of the statute and based on the facts in the case, the roofer qualifies as a first-party claimant.
The Court analyzed the specific definitions in the statutes:
Section 10–3–1115 addresses the “[i]mproper denial of claims.” We are concerned here with the following provisions of that statute:
(1) (a) 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.
(b) For purposes of this section and section 10–3–1116:
(I) “First-party claimant” means an individual, corporation, association, partnership, or other legal entity asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy. “First-party claimant” includes a public entity that has paid a claim for benefits due to an insurer’s unreasonable delay or denial of the claim.
(II) “First-party claimant” does not include:
(A) A nonparticipating provider performing services; or
(B) A person asserting a claim against an insured under a liability policy.
The Court noted that the General Assembly’s intent in passing sections 10–3–1115 and 10–3–1116 was to “create a statutory duty for insurers to refrain from unreasonable delay or denial of payment of any claim for benefits owed.”2
Consistent with that intent, we construe section 10–3–1115(1)(b) to include vendors such as Roofer who are authorized to assert, and do assert, claims on behalf of insureds.
. . .
As stated in the next clause of that subsection, a qualifying person or entity must “assert[ ] an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy.” § 10–3–1115(1)(b)(I) (emphasis added). The disjunctive “or” further indicates that the party asserting a claim for policy benefits may be a party other than the insured, so long as that party does so “on behalf of an insured.
In this case, the roofer’s assertion of claims against Allstate was necessarily made “on behalf of” the insureds. Therefore, the roofer meets the statutory criteria for a “first party claimant.”
The Court emphasized the intent of the statutes was to regulate insurers and prevent unfair trade practices.
The aim of this legislation is to prevent unfair and deceptive practices by insurance companies. While we express no opinion on the merits of Roofer’s claims, it is in keeping with the legislative objective to allow Roofer, as a repair vendor acting on behalf of the insured homeowners, to assert a claim for relief under this statute.
This is a victory for policyholders– and the roofers, contractors and vendors they hire to repair their insured losses.
1 Kyle W. Larson Enterprises, Inc. v. Allstate Ins. Co., 11CA2205, 2012 WL 4459112 (Colo. App. Sept. 27, 2012).
2 See § 10–3–1115(1)(a).