Should You Sue Your Insurance Company for Your Claim Denial in Colorado?

Resolving a denied or underpaid insurance claim in Colorado may require more effort than you hoped it would, but at the end of the day, getting the settlement you rightfully deserve for your property damage is not just paramount for your family’s safety and protection in your home, but it’s also required to fulfill the insurance company’s contractual commitment to you.

Colorado law requires insurance companies to make reasonable settlement offers based on the policy coverage and damages received to the property. If they don’t do this, they may be acting in bad faith. Acting in bad faith is illegal and could be grounds for litigation.

What to Know About Bad Faith Law in Colorado

Colorado maintains a robust bad faith law. Bad faith insurance is when an insurance company fails to fulfill its obligations to the policyholder in a fair and reasonable manner. Generally, just having your claim denied or being in a dispute over a payment is not enough to pursue bad faith litigation in Colorado, but there are situations in which suing your insurance company may be the right path to follow.

Examples of bad faith practices in Colorado include: 

• Failing to investigate promptly – Insurers must promptly and thoroughly investigate claims. If an insurer fails to investigate a claim in a timely manner or ignores crucial evidence supporting the claim, it can be evidence of bad faith. Failing to investigate can also include things like sending out incompetent, inexperienced, or improperly trained adjusters; undergoing lazy or cursory inspections; making definitive comments without all the knowledge and information related to the claim; or just being unprofessional. It can even mean using experienced adjusters but who are biased or work as shills. 

• Unreasonable delays – These can be things like taking too long to provide a copy of the policy, taking weeks or months for an initial inspection, constantly having to play phone tag with the insurance company’s representative (either the desk adjuster or the independent adjuster), having a representative ask you for the same document you’ve already sent multiple times, and so on. 

• Unreasonably denying benefits – If the insurance company denies a valid claim without a reasonable basis, it could be considered bad faith. This might include misinterpreting policy language, applying exclusions in an unreasonable manner, or ignoring facts that support the claim. In general, unreasonable denials can be trickier and typically require you to defeat a standard that the outcome was “reasonably debatable.” For example, if the insurer unreasonably denies benefits, someone on the homeowner’s behalf needs to be able to blow their assertion out of the water and prove it’s wrong rather than just not right.

• Offering a lowball amount – Offering substantially less than the value of the claim without a valid reason for doing so can indicate bad faith. Insurers are expected to make fair and reasonable offers based on the policy terms and the extent of the covered loss. That said, lowballs can be tricky, too – everything with insurance law in Colorado is nuanced! 

In short, while we know almost all initial attempts by insurance companies are lowballed, there’s a need to competently estimate the competing value on behalf of the homeowner. Why? Because if an inexperienced public adjuster or contractor acts on the insured’s behalf and inflates the comparative estimate to the point of being unreasonable, it can not only negate the bad faith claim, but it can also blow up coverage. In doing so, it could allow the insurance company to claw back or reclaim benefits they already paid. This is yet another reason why having the right people on your side is VERY important.

• Delaying payments – Unreasonable delays in processing or paying a valid claim can be evidence of bad faith. Insurers are required to handle claims promptly and efficiently.

• Misrepresentation information – Providing false or misleading information to the policyholder regarding coverage, benefits, or the claims process can constitute bad faith. For example, if they say they’ll pay you for your cabinets and then they don’t, that’s bad faith.

Moreover, insurance companies are required to have competent personnel in place. Inexperienced or unprofessional adjusters could be triggers for bad faith litigation. So too is failure to train their employees and conducting lazy inspections. 

To prove bad faith, it’s crucial to document all communications with your insurance company. Hang on to letters, emails, texts and claim documentation. Keep records of phone calls and any other interactions you have with your provider. It can also be useful to gather third-party opinions from experts such as engineers or contractors. These experts can provide insights into the damages and the insurer’s handling of the claim, which can strengthen your case.

Contact Us at Kandell, Kandell & Petrie for Help

To learn more about bad faith demands in Colorado and ask your questions about insurance law, contact our team at Kandell, Kandell & Petrie. We have more than 50 years of combined legal expertise and are here to ensure you receive the relief you deserve for your insurance claim in the greater Denver area and throughout Colorado.