As a follow up to my blog of November 5, 2014, Fair and Impartial Appraisers in Colorado, I wanted to write on DORA Regulation 5-1-14 which deals with penalties against insurance companies for failing to promptly address first party property claims in Colorado.

All insurers that write property policies shall make a decision on a claim and/or pay benefits due with sixty (60) days of receipt of a valid and complete claim unless there is a reasonable dispute between the parties, provided that the insured has complied with the terms of the policy.

The Commissioner of Insurance may impose the following penalties on an insurance company for failure to make a decision/prompt payment within sixty (60) days:

  1. For a claim under $100, a fine of $20.
  2. For a claim over $100, 8% annual interest computed from the time a valid and complete claim was received, the dispute was resolved or the insured complied with the terms of the policy, until the time the benefits due are paid.

In addition, a civil penalty may be assessed of $100 per day for each day that benefits are delayed more than 60 days.

A valid and complete claim is deemed received by the insurer when:

  1. All information necessary to prove the claim has been received;
  2. A reasonable investigation has been completed;
  3. The terms of the policy have been complied with;
  4. Coverage has been established;
  5. No additional investigation is necessary;
  6. All repairs have been completed and the insured has given authorization to pay; and/or
  7. Negotiations or appraisals have been competed; and/or
  8. Any litigation has been finally and fully adjudicated.

A reasonable dispute may include:

  1. Necessary information has not been submitted;
  2. Conflicting information has been submitted;
  3. The insured is not in compliance with the terms of the policy;
  4. Coverage has not been determined;
  5. Additional investigation is necessary;
  6. Litigation is commenced; or
  7. Negotiations or appraisals are in process.

A reasonable investigation may include:

  1. Police or fire reports;
  2. Scene investigations;
  3. Photographs;
  4. Surveillance information;
  5. Statements;
  6. Repair estimates;
  7. Reports from experts;
  8. Financial information;
  9. Information on prior, concurrent or subsequent claims; or
  10. Other relevant information.

In an action instituted under this regulation, the insured must prove to the Commissioner of Insurance that a valid and complete claim was submitted to the insurer. An insurer must prove that a reasonable dispute existed between the parties. Noncompliance with the regulation may result in sanctions, civil penalties, cease and desist orders and/or suspensions or revocations of licenses. The effective date of this regulation was September 1, 2012.

The penalties that can be assessed against insurance companies are not extravagant. An important part of this regulation is that it gives guidance as to what ‘reasonable dispute’ means. There are many claims that go to appraisal for resolution. One prerequisite for appraisal is a dispute between the parties. Hopefully this gives you some guidance that is helpful for deciding whether the appraisal process is a good choice for your claim.