Insurance is well established in our society as a way to limit risk and provide economic security. Both individuals and businesses use various insurance products for everything from cars, health, homes and more. The insurance industry is also among those most subjected to regulation. Each state assigns a department to be responsible for oversight of financial dealings involving insurance companies. States have drafted provisions that specify the standards that companies are to adhere to. According to the recent Colorado Division of Insurance's 2016 Industry Statistical Report, residents of the state spent roughly $33 billion on insurance premiums alone to over 1400 companies. The largest segments of the industry include insurance for accidents, health, annuities & life policies, automobiles, and homeowner's coverage. Considering auto insurance alone, there is certainly a need for it when you review that in 2016 there were 21,910 reported vehicle crashes in the state. The number of accidents that resulted in an injury or fatality totaled over 3,100.
Unfair Claims Settlement Practices Act
The Unfair Claims Settlement Practices Act (UCSPA) was developed largely by the National Association of Insurance Commissioners and has been implemented by the vast majority of states to varying degrees. It is designed to define what practices are fair or unfair. Some states allow the insured party to directly sue the insurance company. Violations may include refusals to pay claims without an investigation, or failure to promptly address claims, etc.
Common Law Actions
Colorado acknowledges the common law action of bad faith against an insurer. Individuals may take legal action against insurance companies who breach their duty to operate in good faith as it relates to the insured. Although this claim is not specified in state statute, it has been the subject of considerable case law over time. The duty to act in good faith is created as a result of entering into an insurance agreement (contract). An insurance policy can be considered as the establishment of a relationship that then creates a duty for actions in good faith. A party bringing an action of a breach of good faith must prove that the insurer was unreasonable in a denial or delay of payment and that it was done knowingly or with disregard.
Colorado Title 10 Statutes
Colorado Statutes § 10-3-1115 and 10-3-1116 contain some of the following provisions:
- Insurers shall not create unreasonable delays or denials of payments for claims owed to first-party claimants. This is commonly referred to as the “prompt payment” statute.
- A delay or denial is deemed unreasonable when it lacks “reasonable basis for the action.”
- The provisions do not apply in Workers' Compensation cases.
- Insurance policies (contracts) may not include provisions that allow the insurer to exercise discretion in interpreting the terms.
- If a court determines that a plaintiff has brought a frivolous action, the court may order them to pay the defendant's legal costs and/or fees.
- Damages may be awarded under bad faith claims that cause losses of earnings or future losses of earnings.
- Damages for emotional distress may be recovered.
- Although rare, punitive damages may be awarded by the court when the party's acts were determined to be willful.
- Damages may be recoverable up to an amount equal to three times the damages if the claim is based on the Colorado Consumer Protection Act.
Why Having an Experienced Attorney is Critical in These Matters?
In actions involving misconduct of insurance companies, it is critical to have an attorney that has the necessary experience in this realm. A good attorney is better versed in the potential tactics that an insurer is likely to employ. They will compile necessary information relating to the claim, such as accident reports, a medical report, and a financial summary or overview. Your attorney may coordinate a lien to cover the costs of medical treatment. They may gather information from witnesses, photographs and other key evidentiary data. An experienced attorney will know the ways of best negotiating a potential settlement on your behalf and assessing the fairness of any settlement offers. If unable to settle, your attorney will be sure that you are prepared for presenting a solid case at trial.