Colorado Court of Appeals Finds Insurance Company Conduct “Unreasonable”
Today, the Colorado Court of Appeals issued a decision in favor of a policyholder and against an insurance company that delayed payment of benefits owed. After the policyholder and insurance company disagreed on how much was owed under the policy for hail damage to the roofs at a townhome complex, they used the appraisal process allowed in the policy to determine how much the insurance company owed for the loss. After the appraisal award was issued, the policy required the insurance company to pay the award within 30 days. Instead of paying it within 30 days, the insurance company tried to leverage that amount owed to extract a settlement of other claims. The policyholder refused and the insurance company ended up paying the amount owed 84 days after the appraisal award (54 days after the 30 day deadline).
The Court of Appeals found this conduct by the insurance company to be unreasonable as a matter of law. The Court held that the insurance company was holding payment of the benefits owed “hostage” when it tried to use that payment to induce settlement of other claims that had not gone to appraisal. By finding this conduct by the insurance company to be unreasonable, the insurance company is now responsible to pay to its policyholder not only the benefit owed, but also two times that amount, plus attorney’s fees and costs, under Colorado’s prompt payment statute – C.R.S. Section 10-3-1115 and 10-3-1116.
The Court also allowed the policyholder to seek discovery of the history of the relationship between the insurance company and its “expert” roofer, on whose opinion it had relied before the appraisal, which will be important in the bad faith case that will now go forward in the trial court.
Bad faith lawyer and Burg Simpson shareholder, Tom Henderson, made the following comment on the decision, “It is a good day when the Courts validate a policyholder’s refusal to relent to the insurance industry’s never-ending effort to use its control of the purse strings to extract unfair gains.”