2021 Colorado Code
Title 10 - Insurance
Article 3 - Regulation of Insurance Companies
Part 11 - Unfair Competition - Deceptive Practices
§ 10-3-1115. Improper Denial of Claims - Prohibited - Definitions - Severability

1. 1. A person engaged in the business of insurance shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.
   2. For the purposes of this section and section 10-3-1116:
      1. “First-party claimant” means an individual, corporation, association, partnership, or other legal entity asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy. “First-party claimant” includes a public entity that has paid a claim for benefits due to an insurer's unreasonable delay or denial of the claim.
      2. “First-party claimant” does not include:
         1. A nonparticipating provider performing services; or
         2. A person asserting a claim against an insured under a liability policy.

2. Notwithstanding section 10-3-1113 (3), for the purposes of an action brought pursuant to this section and section 10-3-1116, an insurer's delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.
3. If any provision of this section or its application to any person or circumstance is held illegal, invalid, or unenforceable, no other provisions or applications of this section shall be affected that can be given effect without the illegal, invalid, or unenforceable provision or application, and to this end the provisions of this section are severable.
4. The general assembly declares that this section is a law regulating insurance.
5. This section and section 10-3-1116 shall not apply to insurance issued in compliance with the “Workers' Compensation Act of Colorado”, articles 40 to 47 of title 8, C.R.S.
6. This section and section 10-3-1116 shall not apply to title insurance issued pursuant to article 11 of this title or to life insurance issued pursuant to article 7 of this title.
7. The provisions of this section and section 10-3-1116 do not apply to any claim payment that is delayed or denied because of the insurer's participation in the child support enforcement mechanism established in section 26-13-122.7, C.R.S.

History. Source: L. 2008: Entire section added, p. 2172, § 5, effective August 5. L. 2016: (7) added,(HB 16-1165), ch. 157, p. 490, § 1, effective January 1, 2017.

Law reviews. For article, “CRS §§ 10-3-1115 and -1116: Providing Remedies to First-Party Claimants”, see 39 Colo. Law. 69 (July 2010).

This section and § 10-3-1116 impose on insurers a statutory standard of liability in addition to and different from that required to prove a claim for breach of the common law duty of good faith and fair dealing as expressed in § 10-3-1113 . Kisselman v. Am. Family Mut. Ins. Co., 292 P.3d 964 (Colo. App. 2011).

Under the plain language of this section and § 10-3-1116 (1) , an insured can argue that benefits were unreasonably denied when an insurer denies a claim outright, and the insured can assert unreasonable delay when the insurer pays on a claim but disputes the value of that claim, thereby delaying payment of the claim's full value. Soicher v. State Farm Mut. Auto. Ins. Co., 2015 COA 46 , 351 P.3d 559.

Where insurer did not reject claim for benefits and made a partial payment to the insured but failed to pay the full amount being sought, the case does not involve the unreasonable denial of a claim; rather, it involves an alleged unreasonable delay in paying the benefits purportedly due. Soicher v. State Farm Mut. Auto. Ins. Co., 2015 COA 46 , 351 P.3d 559.

The reasonableness of an insurer's decision to deny or delay benefits to its insured must be evaluated based on the information that was before the insurer at the time it made its coverage decision. Schultz v. GEICO Cas. Co., 2018 CO 87, 429 P.3d 844.

Failure to pay the undisputed part of a claim is a violation of this section. An insurer may not withhold payment on the undisputed part of a claim merely because it disputes another part of the claim. Withholding the undisputed amount is an unreasonable delay of payment. State Farm Mut. Auto. Ins. Co. v. Fisher, 2018 CO 39, 418 P.3d 501.

Denial of a fairly debatable claim may nonetheless be unreasonable. Home Loan Inv. Co. v. St. Paul Mercury Ins. Co., 827 F.3d 1256 (10th Cir. 2016).

An insurer cannot create new evidence to support an earlier claim decision. Schultz v. GEICO Cas. Co., 2018 CO 87, 429 P.3d 844.

The district court abused its discretion in ordering an independent medical examination after the coverage decision at issue had already been made. Schultz v. GEICO Cas. Co., 2018 CO 87, 429 P.3d 844.

Liability under this section and § 10-3-1116 is not limited to claims-handling conduct. Home Loan Inv. Co. v. St. Paul Mercury Ins. Co., 827 F.3d 1256 (10th Cir. 2016).

The exclusion of title insurers from this section and § 10-3-1116 is not construed to approve the ruling in Hedgecock v. Stewart Title Guar. Co., 676 P.2d 1208 (Colo. App. 1983), that an insured was entitled to attorney fees as part of the damages for breach of a title insurance contract, but rather that the title insurance industry does not have a history of delaying or denying claims. First Citizens Bank v. Stewart Title Guar., 2014 COA 1 , 320 P.3d 406.

Where an adversarial proceeding is filed and a genuine disagreement as to the amount of compensatory damages exists, the duty to negotiate is suspended, and there is no duty to advance payment of claims. Baker v. Allied Prop. & Cas. Ins. Co., 939 F. Supp. 2d 1091 (D. Colo. 2013 ).

A claimant is not precluded from establishing a claim for compensatory damages pursuant to this section until the amount of damages to which he or she is legally entitled to collect from the underinsured motorist (UIM) has been determined. Fisher v. State Farm Mut. Auto. Ins. Co., 2015 COA 57 , 419 P.3d 985, aff'd, 2018 CO 39, 418 P.3d 501.

An insurer is legally obligated to not unreasonably delay or deny payment of medical benefits, even if there is a dispute as to the total amount of benefits owed on the other components of the UIM claim. Fisher v. State Farm Mut. Auto. Ins. Co., 2015 COA 57 , 419 P.3d 985, aff'd, 2018 CO 39, 418 P.3d 501.

This section does not require that an insurer agree to a certain amount of damages before an unreasonable delay and denial can occur. Etherton v. Owners Ins. Co., 829 F.3d 1209 (10th Cir. 2016).

This section proscribes an insurer's unreasonable handling of an insured's claim for benefits, not simply the unreasonable delay or denial of payments the insurer has determined are owed. Etherton v. Owners Ins. Co., 829 F.3d 1209 (10th Cir. 2016).

This section is not confined to claims where a payment is due and owing. It proscribes unreasonable denials, and if an insurer denies a claim for benefits, the payment is not due and owing. Etherton v. Owners Ins. Co., 829 F.3d 1209 (10th Cir. 2016).

Completion of a contractual insurance appraisal process, unlike arbitration, does not preclude breach of contract and statutory bad faith claims as a matter of law under this section and § 10-3-1116 . The appraisal process determines the value of insured property, it does not determine the insurance company's liability for breach of contract or statutory bad faith delay. Andres Trucking Co. v. United Fire & Cas. Co., 2018 COA 144 , __ P.3d __.

This section applies to claims for disputed benefits, not simply those where the amount is due and owing. Etherton v. Owners Ins. Co., 829 F.3d 1209 (10th Cir. 2016).

This section requires for liability only that a first-party claim be denied without a reasonable basis. Etherton v. Owners Ins. Co., 829 F.3d 1209 (10th Cir. 2016).

Fair debatability can be a relevant but not necessarily a determinative factor as to whether an insurer acted reasonably. Etherton v. Owners Ins. Co., 829 F.3d 1209 (10th Cir. 2016).

This section does not apply to a third-party administrator or a plan advisor. “A person engaged in the business of insurance” includes only those individuals or entities against whom a common law claim of bad faith breach of insurance would lie. Riccatone v. Colo. Choice Health Plans, , 315 P.3d 203 .

The court will not read into a statutory definition new requirements that are not contained in the statute. Nothing in this section requires a contractual relationship with the insurer or a right of subrogation as a prerequisite to the ability to assert a claim “on behalf of” an insured. Kyle W. Larson Enters. v. Allstate Ins., 2012 COA 160 M, 305 P.3d 409.

This section is unambiguous, and, under the plain language of the statute, “first-party claimant” includes repair vendors asserting an entitlement to benefits owed on behalf of an insured under an insurance policy. Because the repair vendor was “asserting an entitlement to benefits owed . . . on behalf of” the insureds, the repair vendor is a first-party claimant for purposes of this section and § 10-3-1116 . Kyle W. Larson Enters. v. Allstate Ins., 2012 COA 160 M, 305 P.3d 409.

Punitive or exemplary damages are not an available remedy for an unreasonable delay or denial cause of action created by this section and § 10-3-1116 . A claim premised on recovering reasonable attorney fees and court costs and two times the covered benefit is not a claim for “a wrong done to the person or to personal or real property” under § 13-21-102 (1)(a) . It is no more a claim for a wrong done to the person or to personal or real property than the underlying claim for breach of insurance contract -- and the law is settled that punitive damages are unavailable for breach of contract. Residences at Olde Town Square Ass'n v. Travelers Cas. Ins. Co. of Am., 430 F. Supp. 3d 743 (D. Colo. 2019 ).