Colorado’s statutory bad faith cause of action can be brought in addition to a claim against the insurer to recover an owed contractual benefit. More importantly, as Jonathan Bukowski discussed in a previous blog post, a cause of action under Colorado’s bad faith statute is not limited to a wronged policyholder, but can be made by vendors of the policyholder, such as roofers or restoration contractors.
What exactly may a wronged policyholder, or wronged vendor of the policyholder, recover under Colorado’s bad faith statutes? The answer is two times the delayed or denied claim benefit plus attorneys’ fees and costs.
For example, we will assume that an insurance carrier unreasonably delayed, but eventually made payment of $400,000.00 in covered damages. The insurance carrier has also denied payment of $100,000.00 in damages. The policyholder or vendor has brought a claim for breach of contract in the amount of $100,000.00 and a Colorado statutory bad faith claim for unreasonable delay of $400,000.00 in covered damages and unreasonable denial of $100,000.00 in covered damages. We will further assume that the case has proceeded to a jury, with the jury finding for the policyholder or vendor on both of its claims.
Unreasonable Delay: $400,000.00
Unreasonable Denial: $100,000.00
Breach of Contract: $100,000.00
Under this first example, the prevailing policyholder or vendor would be entitled to an award of $100,000.00 plus interest on its claim for breach of contract. The policyholder or vendor would also be entitled to $1,000,000.00 (twice the amount determined by the jury to have been unreasonably delayed and denied) plus attorney fees and costs on its claim for statutory bad faith.
Breach of Contract Damages: $100,000.00
Colorado Bad Faith Damages: $1,000,000.00
Attorney Fees: $(To Be Determined By The Court)
Costs: $(To Be Determined By The Court)
For this second example, we will assume that the insurance carrier unreasonably delayed, but eventually made payment of $500,000.00 in covered benefits. There is no claim for breach of contract. However, the policyholder or vendor has made a claim for Colorado statutory bad faith due to the unreasonable delay of $500,000.00 in covered damages. We will further assume that the case has proceeded to a jury, with the jury finding for the policyholder or vendor on its claim for Colorado statutory bad faith for unreasonable denial in the amount of $400,000.00.
Unreasonable Delay: $400,000.00
Under this second example, the prevailing policyholder or vendor would be entitled to an award of $800,000.00 (twice the amount determined by the jury to have been unreasonably delayed) plus attorney fees and costs on its claim for statutory bad faith.
Colorado Bad Faith Damages: $800,000.00
Attorney Fees: $(To Be Determined By The Court)
Costs: $(To Be Determined By The Court)
It is important to understand that a claim for unreasonable delay or denial may be brought together or independent of a policyholder/vendor’s right to recover the contractual benefit owed to them by an insurance carrier. Similarly, an award under Colorado’s bad faith statute is not reduced by what has been paid or awarded for contractual damages. In fact, the jury is not asked to determine bad faith damages, but simply asked whether the insurance carrier has delayed or denied payment of covered benefit without a reasonable basis. If the answer is yes, the jury is asked to determine the amount of benefits unreasonably delayed or denied and judgment is entered for the prevailing policyholder or vendor in an amount equal to two times the unreasonably delayed or denied benefit.