The Colorado Supreme Court issued two opinions favorable to Colorado policyholders earlier this week:

  1. American Family Mutual Insurance Company v. Barriga; and
  2. Rooftop Restoration, Inc. v. American Family Mutual Insurance Company.

Both cases address the unreasonable delay or denial of insurance benefits statute in Colorado. This post addresses the Barriga opinion, and the Rooftop Restoration, Inc. will be discussed in the coming days.

In Barriga,1 the Colorado Supreme Court considered whether an award of damages under section 10-3-1116(1), C.R.S. (2017), must be reduced by an insurance benefit unreasonably delayed but ultimately recovered by an insured outside of a lawsuit.

As background, in 2009 a fire damaged an apartment building owned by Mr. and Mrs. Barriga. After the fire, the policyholders and American Family Mutual Insurance Company (“American Family”) coordinated for a contractor to begin repairs at the apartment building, and American Family made various payments to and on behalf of the Barrigas, totaling $209,816.43. After substantial repair work had been completed, the contractor submitted a revised estimate of the cost of repairs based on additional necessary repairs and asbestos remediation.

In response to the revised estimate, American Family invoked appraisal, which resulted in an award of $322,141.79. American Family paid the award, less the prior payment of $209,816.43.

Mr. and Mrs. Barriga then sued American Family for breach of contract, common law bad-faith breach of insurance contract, and unreasonable delay and denial of insurance benefits under section 10-3-1116(1). The jury found for the Barrigas on all claims, awarding damages of $9,270 for breach of contract and $136,930.80 for benefits unreasonably delayed or denied.

Section 10-3-1116(1) provides that a plaintiff “whose claim for payment of benefits has been unreasonably delayed or denied may…[recover] two times the covered benefit” (emphasis added).

The trial court determined that the verdict on the statutory claim comprised two parts: (1) $9,270 in benefits unreasonably denied; and (2) $127,660.80 in benefits unreasonably delayed.

The trial court first doubled the total statutory verdict ($136,930.80 x 2 = $273,861.60), then reduced that amount by $127,660.80—the amount of benefits unreasonably delayed but eventually paid outside litigation—resulting in a total award of $146,200.80.

The Colorado Supreme Court found that “an award under section 10-3-1116(1) must not be reduced by an amount unreasonably delayed but eventually paid by an insurer because the plain text of the statute provides no basis for such a reduction.”

The Colorado Supreme Court further found that “the general rule against double recovery for a single harm does not prohibit a litigant from recovering under claims for both a violation of section 10-3-1116(1) and breach of contract.”

This opinion clarifies the intent of this statute, which places pressure on insurance carriers to pay what’s rightfully owed to the policyholder promptly to avoid the application of double damages after unreasonably denying and/or delaying claims.

A full copy of the Colorado Supreme Court opinion can be found here.
1 Am. Family Mut. Ins. Co. v. Barriga, No. 15SC934, 2018 CO 42 (Colo. May 29, 2018).