Bad Faith Breach of Insurance Contract
Just like normal contracts, an insurance policy is a contract wherein there is an implied duty of good faith and fair dealing between the parties. Indeed, when you spend thousands of dollars on insurance premiums, you probably have an expectation that you'll be protected when a loss happens. However, that is not always the case.
Insurance companies dedicate substantial resources to avoidance of paying claims. Often, when a claim is filed, the adjuster might employ various tactics, such as interviewing you for inconsistencies, avoidance/non-responsiveness, or pushing for a quick resolution. Or, the claim is baselessly denied. In other words, the insurance company is acting in bad faith.
“First-party bad faith cases involve an insurance company refusing to make or delaying payments owed directly to its insured under a first-party policy such as life, health, disability, property, fire, or no-fault auto insurance.” - Goodson v. Am. Standard Ins. Co., 89 P.3d 409, 414 (Colo. 2004)
How Do I Prove Insurance Bad Faith?
Keep all records of communications between you and the insurer. To prevail on a common law bad faith claim against your insurance company, you'll need to prove:
- That you were damaged;
- The insurer acted unreasonably, for example, in denying the claim;
- The insurer knew that its conduct was unreasonable or recklessly disregarded the fact that its conduct was unreasonable; and
- The insurer's unreasonable conduct was a cause of your damages.
Furthermore, an insurer's implied duty of good faith and fair dealing extends to the advertisement, marketing, and purchase of insurance policies. Whether the insurer breached this duty is determined objectively based on industry standards, including administrative rules and regulations, which may assist in establishing those standards.
However, statutes also protect you in insurance bad faith. C.R.S. Sections 10-3-1115 - 1116 provide an insured whose claim for insurance benefits has been unreasonably delayed or denied a private right of action in addition to and separate from a common-law claim for first-party bad faith breach of insurance contract.
If you were involved in an accident or loss where someone else is at fault or their insurance is implicated, you may be a third-party claimant. Insurance bad faith still applies even in third-party claim situations.
What Damages Can I Obtain for Insurance Bad Faith?
Penalties for insurance bad faith can be severe. If you can prove your insurance company acted in bad faith, you could potentially recover:
- noneconomic losses or injuries that you had or will probably have in the future;
- economic losses that you had or will probably have in the future;
- damages for physical impairment or disfigurement;
- attorneys fees;
- punitive damages;
- treble damages. [note: to get attorneys fees and treble damages, there is a level of proof needed, including showing a deceptive trade practice]
Make the Insurance Company Pay.
If you are in a situation where an insurance company has wrongfully denied your claim or is engaging in other avoidant conduct, you may have a bad faith claim. Contact us today by phone or by completing a consultation request form to see how we can help.
The information contained on this website is provided for informational purposes only. It is not legal advice and should not be construed as providing legal advice on any subject matter. Laws frequently change and therefore this content is not necessarily up to date, nor comprehensive. Contact us or another attorney with any legal questions specific to your matter. You may request a consultation by completing our consultation request form