As promised in my post, Statute of Limitations in Colorado, this week I will discuss Colorado’s unreasonable delay statutes. In Colorado, insured’s have a cause of action they can utilize when pursuing a claim for benefits due after a loss pursuant to their policy of insurance. Colorado Revised Statute Section 10-3-1115(1)(a) states:
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.
“First-party claimant” is defined within this section in paragraph (b)(I) as 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. This statute further states in paragraph (b)(II)(B)(2) that for the purposes of an action brought pursuant to this section and section 10-3-1116, an insurer’s delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.
Colorado Revised Statue Section 10-3-1116 provides for the remedies when an insured believes that an insurer violated Colorado Revised Statute Section 10-3-1115. Paragraph 1 of Colorado Revised Statute Section 10-3-1116 states:
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.
Paragraph 4 of Colorado Revised Statute Section 10-3-1116 states:
The action authorized in this section is in addition to, and does not limit or affect, other actions available by statute or common law, now or in the future. Damages awarded pursuant to this section shall not be recoverable in any other action or claim.
This means an insured can bring an action for violation of Colorado Revised Statue Section 10-3-1115 in addition to both a breach of contract action and a common-law bad faith action.
Under Colorado law, the determination of whether an insurer has breached its duties to the insured is one of reasonableness under the circumstances; in other words, the question is whether a reasonable insurer under similar circumstances would have denied or delayed payment of the claim.1
Under Colorado law, for purposes of a statutory claim for unreasonable delay or denial of payment of insurance claim, reasonableness of an insurer’s conduct is determined objectively, based on proof of industry standards.2
Statutes imposing liability on insurers for unreasonable delay or denial of claims are applied prospectively, not retrospectively, to the insurer’s new acts of unreasonable denial and delay in paying benefits due pursuant to the contract of insurance.3 This means in order to have an action for unreasonable denial of insurance benefits the unreasonable denial must have occurred after the enactment of Colorado Revised Statute Sections 10-3-1115 and 10-3-1116. These statutes became effective on August 5, 2008.
Statutes strengthening penalties for unreasonable conduct of an insurance carrier with respect to denial or delay of benefits create a right of action separate from the common law tort of bad faith breach of an insurance contract; language of statutes provides that action under statutes is in addition to, and does not limit or affect, other action available by statute or common law.”4 This means in addition to an unreasonable denial of benefits cause of action an insured can also pursue the common law tort of bad faith breach of an insurance contract. I will be discussing this cause of action in my next blog.
1 Sipes v. Allstate Indem. Co., No. 11-2369, 2013 WL 2467704, (D. Colo. June 7, 2013).
2 Baker v. Allied Property and Cas. Ins. Co., No. 12-10, 2013 WL 1397297 (D. Colo. April 5, 2013).
3 In re Estate of DeWitt, 54 P. 3d 849, 854 (Colo. 2002).
4 Vaccaro v. American Family, 275 P. 3d 750 (Colo. App. 2012).