Insurance Bad Faith – Business Clients*
Including Unreasonable Denial and Delay Claims Under C.R.S. §§ 1115/1116
Businesses buy insurance to protect themselves against certain risks, such as liabilities of the company, officers and directors, bad conduct by their employees, accidents caused by the company’s products, decisions or employees, damage to the company’s own property, interruption of business income due to a calamity, or any number of other types of losses. In return for paying a premium, your insurance company promises to assume those risks by paying insurance benefits in accordance with the policy when the business gets sued or otherwise suffers a loss.
Unfortunately, too often insurance companies fail to pay the benefits they promised they would pay, or fail to do so promptly and in the proper amounts. This action by the insurance company may be bad faith (a breach of the duty of good faith and fair dealing).
If you suspect that your company’s insurance company is acting in bad faith by refusing to live up to their promises and provide your business the insurance coverage included in the policy, your business may be entitled to file a bad faith claim against the insurance company.
The same goes for officers and directors of the business, who are entitled to receive the benefits the insurance company promised to provide to them in the policy in the event they are sued.
Getting knowledgeable legal counsel involved early is critical to placing the business in the strongest position possible to maximize the opportunity to hold the insurance company responsible to honor its obligations, and to do so sooner rather than later. This is also true for Directors and Officers liability insurance, which often is provided on a “claims made” basis, making the providing of timely notice a requirement of coverage.
Businesses often have multiple policies covering different risks. It is important to have a person with expertise in reading policies counsel the business on which policy or policies to direct the claim.
- Failure to pay a valid claim
- Failure to pay a valid claim in a timely manner
- Advising or suggesting a claimant not to hire an attorney
- Misrepresenting the facts or the policy provisions
- Failure to settle a claim within the stated policy limits
- Failure to properly defend their insured against lawsuits
- Duty of good faith and fair dealing, no bad faith
- Pay in a timely manner, no low-balling
- Conduct thorough investigation
- Explain your policy to you, and let insured know what information is needed to adjust the claim
- Explain any claim denials to you
- Make a prompt decision regarding coverage upon receipt of a valid and complete claim (in Colorado, 60 days)
You may be entitled to:
- Amount of benefits due under your policy
- TWO TIMES the denied or delayed benefit amount, plus attorney fees and losses if the denial or delay was unreasonable (in Colorado)
- Resulting economic losses
- Punitive damages
- Ask the adjuster to confirm in writing all requests for information.
- Do your best to give the insurance company the information they ask for, within reason.
- If you question why the insurance company needs certain information, ask them why they need it.
- Confirm in writing all promises and representations the adjuster and insurance company make to you (e-mail works well for this).
- Be politely assertive.
- You are allowed to challenge the insurance company’s adjustment numbers (including the scope of the damage caused by the loss, the replacement cost, rates of depreciation, and more), even those generated by use of a computer program, but get your own estimates.
- Ask insurance company to provide to you their estimates and basis of all adjustments and payments.
- Ask your insurance company to explain to you anything you do not understand. They are obligated by law to do so.
- Talk to a lawyer knowledgeable in the area of insurance and bad faith.
* For bad faith litigation involving personal injury claims, please find more detailed information here.