Colorado Supreme Court Decides 3 Bad Faith Cases that Favor the Policyholder and Consumer
On May 29, the Colorado Supreme Court issued 3 new decisions on bad faith law that favor policyholders and consumers. Two of the cases involved bad faith by American Family toward their own policyholders on homeowners policies.
In Barriga vs. American Family, the court held that the remedy provided in a 2008 law allowing a policyholder to recover “two times the covered benefit” when the insurance company has unreasonably failed to pay or untimely paid benefits owed means the policyholder can collect not only the actual benefit owed, but also two times that amount. The statute is Colorado Revised Statute 10-3-1115 & 1116. By example, if the insurance company unreasonably failed to timely pay $100,000 in benefits owed to their own insured, and did so without a reasonable basis, then that insured can collect not only the original $100,000, but also another $200,000, for a total of $300,000.
In Rooftop Restoration vs. American Family, the court held that the statute of limitation that applies to 10-3-1115 & 1116 claims is not one year; meaning that a two year statute of limitation will apply to these claims. Insurance companies have been arguing in court, sometimes successfully, that a one year statute of limitation applies to such claims, but the Colorado Supreme Court resoundingly rejected this argument.
The third case is Estate of Casper vs. Guarantee Trust Life Ins. Co. In this case, the court held that all of the remedies allowed for in 10-3-1116 (two times the covered benefit, attorney’s fees and costs) are “actual damages” and not penalties. This is very important when applying the long-standing Colorado statutory limitation on the recovery of punitive damages of one time the amount of “actual damages”. So, the law in Colorado now is that, IF a policyholder can proves a case for punitive damages to be assessed against the insurance company, the cap on the amount awarded will be one times the amount awarded for all “actual damages”, including not only the amount of any unpaid benefit owed, any proven non-economic loss (such as emotional distress), but also the 10-3-1116 remedies (two times the covered benefit, attorney’s fees and costs).
If you have any questions about these new laws or any insurance bad faith, please contact Burg Simpson shareholder Tom Henderson by calling 303-792-5595.