What Is Insurance Bad Faith?

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Insurance bad faith is a stunningly common occurrence. When you purchase insurance, you do so in order to protect yourself against economic losses arising from injury, poor health or property damage. When you purchase this insurance, the insurer has a duty to provide you coverage and to uphold the terms of the policy you purchased.

It does not always shake out that way.

If an insurer fails to uphold its express or implied duties to the insured party, that is what is known as insurance bad faith. An insurer may act in bad faith for a variety of reasons, many of which boil down to one thing: their bottom line.

Insurers may commit deceptive acts, deliberately misinterpret their own policies or records, delay action to avoid resolving a claim, make arbitrary demands for proof of damages and more in the interest of avoiding or minimizing payout to claimants.

Schultz v. Geico and Insurance Bad Faith in Colorado

In 2018, the Colorado Supreme Court considered the case of Schultz v. Geico Casualty Company, which centered on the standard for insurance bad faith in Colorado. The decision discussed claims for common law bad faith and statutory unreasonable delay or denial of benefits. In their conclusion, the court explained that an insurance company’s actions must be evaluated based on the evidence presented prior to the insurance company’s final decisions, and that the company cannot create new evidence to support earlier coverage decisions.

The final opinion also restated Colorado’s standard for common law bad faith, which requires the insured to establish that “the insurer acted unreasonably and with knowledge of or reckless disregard for the fact that no reasonable basis existed for denying the claim.”

This decision was a positive one for insurance policyholders in Colorado. It reaffirms that insurance companies cannot hire “litigation experts” to further argue for an insurance company’s unreasonable delay or denial of claims.

The bottom line is that insurance companies are often not looking out for policyholders, but instead for their own profit. If you believe that your insurance company is denying you the rightful benefits that you signed up for, contact an insurance bad faith lawyer in Colorado.

Written on behalf of Galen Trine-McMahan by AskTheLawyers.com™