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When you purchase insurance, you expect the insurance company to handle a covered claim fairly and pay benefits when they are owed. Unfortunately, disputes can arise when an insurer delays a claim, denies coverage, undervalues losses, or uses questionable claim-handling practices.
Not every disagreement with an insurance company amounts to bad faith. Colorado law does, however, provide protections when insurers unreasonably delay or deny covered benefits.
For policyholders in Denver, recognizing common examples of insurance bad faith can help determine when a difficult insurance claim may involve something more than an ordinary coverage dispute.
Insurance policies create contractual obligations, but Colorado law also recognizes duties relating to good faith and fair dealing.
Colorado statutes prohibit an insurer from unreasonably delaying or denying payment of benefits owed to or on behalf of a first-party claimant. A delay or denial can be considered unreasonable for purposes of the statutory claim when the insurer delays or denies authorization or payment of a covered benefit without a reasonable basis.
Colorado also recognizes common-law bad faith claims, which have their own legal requirements.
This distinction matters because an insurance dispute can involve different legal theories depending on the circumstances.
Our Denver insurance bad faith attorneys can evaluate how an insurer handled a claim and whether its conduct may provide grounds for additional legal action.
An unreasonable denial of covered benefits is one of the most recognizable potential forms of insurance bad faith.
Insurance companies are allowed to investigate claims and dispute coverage when they have a reasonable basis to do so. A denial is not automatically bad faith simply because the policyholder disagrees with the insurer.
Problems may arise when an insurer denies a claim without a reasonable basis.
For example, a Denver policyholder may submit documentation establishing a covered loss, only for the insurer to reject the claim based on a policy exclusion that does not reasonably apply to the circumstances.
The policy language, investigation, evidence available to the insurer, and explanation for the denial can all become important.
Yes. An insurance company does not necessarily need to issue an outright denial for its conduct to create legal concerns.
Colorado law addresses unreasonable delay as well as unreasonable denial of insurance benefits.
Potential warning signs can include:
Some insurance claims legitimately require substantial investigation. A complicated claim involving disputed medical treatment, multiple parties, or unclear coverage may take longer than a straightforward claim.
The key question is whether the delay has a reasonable basis under the circumstances.
A reasonable investigation can be a critical part of proper insurance claim handling.
An insurer that reaches a conclusion without adequately investigating relevant facts may create questions about whether its decision was reasonable.
Imagine that a Denver driver files an uninsured or underinsured motorist claim after a serious collision. The insurer receives medical records, accident documentation, wage-loss information, and other evidence but disregards significant portions of that material before denying benefits.
The way the insurer evaluated the evidence could become relevant in a bad faith dispute.
Claim files can sometimes provide important information about:
Bad faith cases frequently require a close examination of the insurer's claim-handling process rather than merely the final decision.
An insurance company does not have to accept every statement made by a claimant.
However, selectively disregarding significant evidence while relying only on information supporting a denial may raise questions about whether the claim received a reasonable evaluation.
In an injury claim, relevant evidence might include medical records, diagnostic imaging, physician opinions, wage documentation, accident reports, and witness statements.
Suppose a Denver insurer argues that an accident did not cause significant injuries but fails to meaningfully address medical evidence connecting the injuries to the collision.
Whether that conduct supports a bad faith claim will depend on the full circumstances, but ignoring relevant evidence can become an important issue.
A low offer alone does not automatically establish insurance bad faith.
Claims can involve legitimate disagreements over value.
An insurer and policyholder may disagree about the amount of medical expenses related to an accident, the extent of future treatment, lost earnings, or other damages.
However, valuation practices can become relevant when an insurer lacks a reasonable basis for refusing to pay benefits supported by the evidence.
For Denver policyholders, it is important to distinguish between ordinary negotiation and conduct that may amount to an unreasonable delay or denial of covered benefits.
The insurer's explanation and claim file can help reveal the basis for its valuation.
Insurance policies can be difficult to read, but the actual contract controls the coverage available.
A policyholder should be cautious if an adjuster describes coverage in a way that appears inconsistent with the written policy.
Potential issues can involve:
Policyholders should keep a complete copy of their insurance policy and important written communications concerning the claim.
If a Denver insurer says a particular loss is excluded, the policyholder can ask the company to identify the specific provision supporting that conclusion.
Changing explanations can deserve closer examination.
There may be legitimate circumstances in which new information changes an insurer's analysis. However, repeated changes in the justification for denying benefits can raise questions about how the claim was investigated and evaluated.
Keep copies of denial letters, emails, estimates, medical evaluations, and other claim communications.
A timeline can also help document when the insurer received evidence and how its position changed.
This documentation may become important when determining whether a Denver insurance company's conduct had a reasonable basis.
Yes. Insurance bad faith issues can arise in first-party automobile claims, including disputes over uninsured and underinsured motorist coverage.
These claims are unusual because your own insurance company may effectively dispute the amount you are legally entitled to recover from the at-fault driver.
Potential disagreements may involve:
The existence of a dispute does not automatically mean the insurer acted in bad faith.
The question is whether the insurer had a reasonable basis for its claim-handling decisions.
The answer depends on the legal claim being asserted.
Under Colorado's statutory framework, a qualifying first-party claimant whose benefits have been unreasonably delayed or denied may bring an action seeking reasonable attorney fees, court costs, and two times the covered benefit.
Common-law bad faith claims are different and may involve damages caused by the insurer's breach of its duty of good faith and fair dealing.
The facts of the case determine which claims and remedies may be available.
This is another reason a Denver policyholder should not assume that every insurance dispute follows the same legal framework.
Preserving the insurance claim record can be extremely important.
Useful evidence may include:
Avoid relying exclusively on telephone conversations.
After an important conversation with an adjuster, keeping a written record of what was discussed can help preserve details that might otherwise be forgotten.
For Denver policyholders, organized documentation can make it easier to identify unexplained delays, inconsistent positions, and other potential claim-handling problems.
Insurance bad faith can take many forms, including unreasonable delays, unreasonable denials, inadequate investigations, and other claim-handling practices that lack a reasonable basis. Not every difficult insurance claim is bad faith, but Colorado policyholders have legal protections when covered benefits are unreasonably delayed or denied.
If you are dealing with an insurance company that may be acting in bad faith in Denver, our attorneys are here to help. Call us today or connect with us online to schedule a consultation.
