Colorado Court of Appeals: “Bad Faith Statute” Also Applies to Those Who Assert Claims on Behalf of Insureds
The Colorado Court of Appeals in Kyle W. Larson Enterprises, Inc., Roofing Experts d/b/a The Roofing Experts v. Allstate Insurance Company, 2012 COA 160 (Sept. 27, 2012), has now held that the so-called Colorado “bad faith statute” applies not only to insureds, but also to those who assert claims on behalf of insureds under an insurance policy.
In Larson Enterprises, a roofing repair vendor (contractor) brought a claim under the Colorado “bad faith statute” (C.R.S. §§10-3-1115 and 1116) against an insurance company (Allstate) on behalf of an Allstate insured customer. The contractor was given authority by the customer to communicate directly with Allstate regarding their claims based on repair work done by the contractor on the customer’s property. The contractor alleged that Allstate unreasonably denied and/or delayed payment of a covered benefit under the customer’s insurance policy. Allstate argued that the contractor did not have standing to bring such a claim. The Colorado Court of Appeals disagreed, expressly holding that the statute applies not only to insureds, but also to those who assert claims for payment under the policy “on behalf of” the insured.
This is a significant Colorado decision. It will likely benefit both consumers and contractors in the handling and prompt payment of insurance claims. Contractors would be wise to consider accepting full responsibility for handling all dealings with their customers’ insurance company regarding scope of work and payment, as it would give them the added leverage of the statute to ensure prompt payment (or if not, to seek treble damages – three times to amount of the covered benefit being unreasonably denied or delayed, plus attorneys fees). Consumers/insureds would likely benefit from not having to deal with the hassle of negotiating with their insurer over repairs in areas where the insureds typically are unaware (or at least far less sophisticated about) what repairs are necessary to make them whole.
As with any significant legal matter, however, one size does not fit all circumstances. The difficulty will be in the details of each individual insurance claim, and in how this new opinion will play out over time. But for now, if consumers/insureds, contractors and insurance companies ignore this decision, it is at their own peril. This decision must be considered when handling and/or seeking prompt payment under an insurance policy for repairs.
Whether you are a consumer who has suffered harm or a contractor who has provided services, if an insurance company is unreasonably delaying or denying payment to you of any covered benefit under an insurance policy, seek legal advice promptly so as to protect your rights!