I will be focusing my next month of blogging on how to prove and win a first-party bad faith case in Colorado. In proving a bad faith case, the first source I look to is the Colorado Revised Statutes, specifically, C.R.S. §§10-3-1113 (Trier of Fact in Civil Actions) and 10-3-1104 (Unfair Methods of Competition–Unfair or Deceptive Acts or Practices).

These statutes define the insurer’s duty of good faith and fair dealing. With these statutes in mind, I structure my client intake and interview process to gather facts necessary to determine whether an insurance company violated the duty of good faith and fair dealing it owed to the policyholder.

C.R.S. §10-3-1113 states:

(1) In any civil action for damages founded upon contract, or tort, or both against an insurance company, the trier of fact may be instructed that the insurer owes its insured the duty of good faith and fair dealing, which duty is breached if the insurer delays or denies payment without a reasonable basis for its delay or denial.

(2) Under a policy of liability insurance, 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.

(3) Under a policy of first-party insurance, the determination of whether the insurer’s delay or denial was reasonable shall be based on whether the insurer knew that its delay or denial was unreasonable or whether the insurer recklessly disregarded the fact that its delay or denial was unreasonable.

(4) In determining whether an insurer’s delay or denial was reasonable, the jury may be instructed that willful conduct of the kind set forth in section 10-3-1104(1)(h)(I) to (1)(h)(XIV) is prohibited and may be considered if the delay or denial and the claimed injury, damage, or loss was caused by or contributed to by such prohibited conduct.

C.R.S. §10-3-1104(1)(h)(I) to C.R.S. §10-3-1104(1)(h)(XV) defines unfair claim settlement practices as follows:

(h) Unfair claim settlement practices: Committing or performing, either in willful violation of this part 11 or with such frequency as to indicate a tendency to engage in a general business practice, any of 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.

Discussing the above statutes with a prospective client in regard to an insurer’s claims handling conduct is the ideal place to start in determining whether the client may have first-party bad faith claim.

  • Shirley Heflin

    Dear Attorney Furtado:

    I read your blog last week about the Hansen case and that – coupled with this blog entry – makes it clear that Colorado is a “policyholder friendly” State.

    It’s so refreshing to read about another state that actively looks out for the insured. I’m not saying that there’s not room for improvement of course, but it would seem that MLG will not face as huge a battle as it faces in other states in making insurance companies “behave,” give insureds what they pay for, etc.

  • David Furtado


    Thank you for taking the time to read my blog. In Colorado the Plaintiff’s bar works extremely hard to keep the legislature informed of the actions insurers take that adversely affect their policyholders. With this information we lobby to pass statutes such as the unreasonable delay statutes that assist attorneys for the policyholders, the courts, and the juries in ensuring policyholders have recourse for an insurance company’s poor conduct.

  • Colorado appears, through the relevant statutes, to be a friendly state towards policy holders, but this doesn’t bode very well for the insured (consumer) when Colorado’s Department of Regulatory Agencies (DORA) deploy no bite, let alone a bark. The agency regularly fails to provide recourse, even when insurers openly fail to provide good faith dealings. Some big name insurers would rather risk litigation than simply provide a good faith dealing, especially with staff attorneys who bear large case loads, and it seems all but certain they take the folks at DORA “out to lunch” on a regular basis.

    As a provider of insurance claim services to first party insurers, property owners, and third party claimants (under policy assignment) this is a shocking reality to be aware of in Colorado.

    Having good attorneys who recognize the importance of first party bad faith cases is a big help to consumers, but it would be nice if DORA used a fraction of it’s ability to provide recourse for consumers. DORA consistently claims to be over-burdened and without resources to review matters that fit well into the bad faith statute. DORA can’t necessarily force the payment of a claim, but they can “bite back” on behalf of the consumer with hefty fines and penalties for bad faith practices.

    I would go so far as to say that DORA openly hides evidence of bad faith for insurers on a regular basis. The question may be, aside from a policy holder’s right to sue, should DORA have an independent oversight committee to deal with these issues?

  • David

    So if the insurance company is blaming the insured for the delaying a claim and the insured is blaming the insurance company for the delay who do you i sue.?

    I have contacted d.o.r.a and filed a complaint and went nowhere.