Mile-High Justice: A Colorado Lawyer’s Guide to Tackling Bad Faith in Car Crash Injury Claims

Jon Topolewski
By: Jon Topolewski
PublishedOct 23, 2023
11 minute read

You pay car insurance premiums to comply with state law. You choose an insurer, a plan, and a payment method. Over time, you barely think about the money your insurer regularly scoops out of your bank account. You take comfort in the promise that you’ll be covered if you’re ever in a wreck. But … What if they break that promise? This is a Colorado lawyer’s guide to tackling bad faith in car crash injury claims.

Bottom Line:

You don’t have to tolerate getting jerked around by your auto insurance after a wreck. Colorado bad faith law protects drivers and policyholders. You could recover not only the amount of benefits you should have received in the first place, but double that amount. Plus, you could be reimbursed for attorney fees and other costs. The better informed you are, the less the insurance company gets away with.

A Colorado Lawyer's Guide to Tackling Bad Faith in Car Crash Injury Claims


In This Legal Guide:

The Basics of Auto Insurance in Colorado 

Anyone driving or parking on public roads in Colorado must have proof of auto insurance. Economic loss due to traffic accidents alone approaches $250 billion per year in the United States. Imagine how different society would look without insurance to restore people to their normal lives.

State law requires all drivers to carry liability insurance. Minimum liability coverage is:

  • $25,000 per person for bodily injury or death
  • $50,000 in total for bodily injury or death, and
  • $15,000 for property damage per accident.

Liability provides basic compensation to the other driver when the insured is considered more at-fault. It also usually compensates:

  • Family members driving your vehicle,
  • Anyone who had permission to drive your vehicle, and
  • Wrecks with rental cars.

Liability insurance will not cover your own injuries or vehicle damage. If you want coverage, you need other optional coverage in Colorado.

Other supplemental coverage plans include:

Medical Payments Coverage 

“Med Pay” covers reasonable medical expenses for injuries sustained in a car accident, regardless of fault. This is valuable to have when you don’t want to wait for the other driver’s liability coverage to come through.

Med Pay doesn’t require any deductibles or copays. All Colorado automobile insurance companies are required to offer this option. Med Pay coverage starts at $5,000, but for a higher premium price, you can get $10,000, $25,000 or even $100,000 worth of coverage.  An insured can reject this coverage, but that rejection must be in writing.

Uninsured/Underinsured Motorist Coverage 

Despite the state mandate, around one-eighth of Colorado drivers lack insurance. This is where UM/UIM coverage comes in particularly handy. UM/UIM coverage, short for uninsured motorist/underinsured motorist, stands in for the at-fault driver’s insufficient or non-existent insurance. UM/UIM pays for your medical costs and damages, without you having to sue the other driver first.

Colorado law requires that UM/UIM plans offer coverage equal to the bodily injury liability coverage of the insured motorist. For example: If your liability coverage is $25,000 per person and $15,000 for vehicle damage, that’s how much your UM/UIM should compensate you.  Like med pay, an insured can reject this coverage, but that must be done in writing.

Profit Motive vs. Greed 

On the whole, insurance companies are a force for good. Their profit motive inspires competitive innovation and excellent customer service. Of course, the same motive also invites greed — and greed can go too far.

When insurers fail to live up to their obligations to their insureds, whether or not they’ve done so by putting their bottom line ahead of yours, they act in bad faith.

What is Auto Insurance Bad Faith? 

Auto insurance bad faith occurs when a provider will not promptly or fairly pay a legitimate claim. In other words, the insurance company attempts to renege on its obligations to a policyholder.

Remember, you pay your premiums in good faith, trusting that your insurance will be there when you need it. Therefore, if you’ve been in a crash, and your insurer unreasonably:

  • denies your claim,
  • delays investigating or processing your claim, or
  • offers less money than your claim is worth,

… they could be violating Colorado law, which states:

“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.”Colorado Revised Statutes 10-3-1115 (1) (a).

Of course, insurance companies have a responsibility to verify claims. Therefore, it’s completely reasonable when they:

  • review policy coverage and limits
  • investigate the cause of the wreck, injuries, and damages
  • request documentation and evidence supporting the claim
  • verify the driver’s compliance with policy terms and conditions, and
  • apply deductibles

Why Does Auto Insurance Bad Faith Occur? 

Profit is a driver of bad faith. Despite an insurance corporation’s public image, it doesn’t gratify its shareholders by generously paying claims. Rather, the model is to maximize money coming in (premiums) and minimize payouts.

Insurance adjusters who approve and deny payouts have every incentive to challenge claims. In fact, that’s their job. The thing is, some claims are easier to challenge than others. So when there’s no justification to deny a claim outright, insurers get creative.

For example, they write policies with complex and often conflicting exclusions, or use vague language to create loopholes.

Fortunately, experienced attorneys can decipher confusing policy language and then use laws to challenge it.

Examples of Bad Faith in Auto Insurance 

Facing delays and resistance after filing an auto insurance claim can make you feel tiny against a corporate giant. Insurers use this apparent power imbalance to intimidate drivers they don’t want to fully compensate. However, looks can be deceiving.

Colorado law places policyholders and insurance companies on equal footing. As long as you fulfill your obligations — paying premiums, abiding by policy rules — you have a right to have your terms honored.

Colorado’s Unfair Claims Protection Act defines the following bad faith actions by insurers:

Unreasonable Denial

Your insurer cannot deny some or all of your claim without investigating and providing a reason — Colo. Rev. Stats. 10-3-1104 (1) (h) (IV).

If they do, well, that is a clear case of bad faith. You can sue your car insurance company if they deny some or all your claim without giving a specific reason. By this we mean an insurer may agree to pay some of your damages, but not everything.  Even in this scenario, failure to provide a reason for the denial of even part of your claim can be the basis of a bad faith case.

Unreasonable Delay 

Insurers must avoid undue delays when processing claims. — C.R.S. 10-3-1104 (1) (h) (V).

A significant delay, regardless of intent, even when the insurer eventually pays, is considered bad faith. In other words, it should not take your insurer 11 months to do what it could have done in 30 days. Even if they finally pay you, it was unreasonable for them to delay all that time.

Colorado law offers two legal remedies for unreasonable delays:

  1. Initiate a contract lawsuit to recover unpaid benefits, costs, and interest, and
  2. Pursue double damages, attorney fees and costs for unreasonable delays, even if the insurer eventually pays.
Misrepresenting Contract Terms 

Misrepresenting policy terms, limits, or exclusions when entering the contract can lead to an actionable bad faith claim. — C.R.S 10-3-1104 (1) (h) (I).

Misrepresentation can occur when insurers misstate terms and policy exclusions.

For example: An insurance adjuster tells you that your policy only covers functional damage to your vehicle, when in fact, it also covers cosmetic damage.

Adjusters sometimes use misrepresentation to get out of paying on claims. For example: You believe you’ll be found at least partially responsible after a crash. Your policy adjuster then warns you that filing a claim could get you charged with insurance fraud. This is false, as you can file an insurance claim even if you’re found negligent.

Always Consult an Attorney 

Insurance adjusters count on policyholders to believe, or at least not challenge, their false statements and exaggerations. The vague and complex language in policy contracts is designed to make drivers even more dependent on adjusters.

Never abandon your claim without first consulting an attorney.

Lax or Nonexistent Investigation of a Claim 

By law, insurers must promptly and fully investigate claims. They must use all necessary resources to do so. — C.R.S 10-3-1104 (1) (h) (III)

This is one of the more frustrating ways insurance companies avoid paying claims. Typically, insurers will not agree to a payout until they’ve independently verified the information in a claim. Then they stall, increasing the likelihood of an inconclusive finding, and hope that you will accept a lower settlement.

Worse, some insurance investigators only look for ways to deny your claim. They ignore evidence that supports a payout to you and embrace opposite findings. This is blatant bad faith behavior. Your insurance provider should investigate and evaluate claims in a way that benefits both them and the policyholder.

Underpaying a Claim 

Insurance companies should not underpay on claims, forcing individuals to sue them for the full amount they owe. — C.R.S 10-3-1104 (1) (h) (VII).

When you’re injured in a wreck, you should not have to negotiate prices. Your priority is getting prompt and proper medical treatment. However, the at-fault driver’s insurance may deem certain costs as “extra,” deciding to pay only what it considers fair.

For example: Your post-wreck medical costs come to $31,000. After reviewing costs for similar treatment, however, your insurer decides to pay only $15,000. This is unacceptable. First, it potentially leaves you responsible for the other $16,000 you’ve been billed. Second, it creates an unreasonable delay as you try to get the insurer to pay what it owes.

You can file an unreasonable delay case against the insurer, even if they eventually issue a full payment.

Note: If your costs exceed the policy limits, the billed insurer must still pay up to those limits.

Failing to Defend Against a Lawsuit 

Your insurer may be obligated to defend you in related legal actions. — C.R.S 10-3-1104 (1) (h) (VI)

Insurance companies — especially in automobile policies — are supposed to cover specific risks. One of those risks is that you will cause harm to someone else. Your car insurance company must defend you if you are sued by someone you’ve injured.

Your insurance should spare you the cost of litigation if someone you’ve injured sues you. The insurance company has a duty to defend you regardless of fault or policy specifics. Refusing to defend you without reason is considered an act of bad faith.

If coverage for a specific incident is unclear, insurers still must defend their policyholder. If it’s later found outside the policy’s coverage, the insurer can seek reimbursement.

Bad Faith Behavior: Signs to Look For

How do you know if your insurance carrier is acting in bad faith?

Colorado law sets no specific limit on how long an insurer has to settle a claim. Furthermore, it can be difficult to tell when an adjuster intends to do you wrong.

Still, there are signs that can indicate your insurance company, or its adjuster, isn’t acting in your best interests. Here’s how to spot bad faith behavior:

Look at Results, Not Intent 

Intent is difficult to gauge, and even harder to prove. Fortunately, Colorado’s bad faith insurance law doesn’t focus on intent. Why? Well, first, the negligence standard (Hyperlink 4) does not mention intent. Therefore, the insurance company does not have to intend to delay or defraud you. If they fail to do what is reasonable, they act in bad faith.Second, insurance is big business. This means the bad faith outcome — intended or not — isn’t necessarily coming from the claims adjuster. Many adjusters are simply overworked. They toil under pressure, handling hundreds of claims at a time and cannot get to some fast enough.

Your Claim Gets Shuffled Around 

Bad faith outcomes often stem from poor company management. You may initially have a sympathetic adjuster handling your claim, but it can suddenly get transferred before reaching a settlement. The trusted adjuster disappears, and you are left dealing with a less responsive and sympathetic person. Your claim was on the fast track. Now it’s stuck in limbo.

This process can also happen in reverse. You submit your claim to an adjuster who waits months to get back to you. Then one day they reassign your claim to someone new. This new adjuster is considerate, efficient, and acts with urgency to resolve your claim. However, none of this excuses the months of unreasonable delay.

Unprofessional Inconsistency 

Some insurance companies make you wonder who you’re dealing with. You submit your claim with the necessary documents attached. You are told to expect a call or an email, but nothing happens. You send a follow-up email, and get no message in return. You try to call. You navigate their automated answering system, then get stuck waiting on hold. Or worse, you get disconnected, and you can’t decide if it’s worth trying again.

You could also go over your claim with an adjuster after finally reaching them. The adjuster tells you everything looks fine with it. However, you receive a letter days later indicating the opposite: Due to exclusions F, H, and P, your claim lacks necessary information, or lacks documentation you didn’t even know you needed. Whether intentional or not, this inconsistency creates frustration, confusion and unreasonable delay.

Making You Do the Work 

When filing a claim after an accident, policyholders may forget a simple fact: The insurance company is supposed to be working for you, not the other way around.

After all, you don’t spend eight hours a day working in an insurance office. Your adjuster does. They should be walking you through your policy, explaining in clear terms what’s covered and what’s not. They should list in detail the forms and documentation you need. In fact, they should help you fill them out. They should be taking steps to process and investigate your claim.

Unfortunately, policyholders are too often left on their own. They must read cryptic letters and forms that don’t explain enough. They must consult their policy and see what coverages they have. However, these policies are hardly written to be understood.

Fighting Back Against Auto Insurance Bad Faith 

Remember: No matter how small you feel taking on an insurance company that’s mistreated you, you’re not powerless. Their policies might be vague, perhaps by design. However, Colorado law is pretty clear about what insurance companies cannot get away with.

Document Your Interactions with Insurance 

While insurers usually act in good faith, you never know when you’ll get a bad one. This is why it’s important to take note of your insurer’s actions, even before you suspect bad faith. Cover your legal bases before pursuing litigation by doing the following:

  1. Review your insurance contract to ensure your claim is covered before filing a bad faith lawsuit. Gather evidence.
  2. Keep a log of all communication and interactions with the insurance company, just as your adjuster will.
  3. If your claim is denied, request the reason for the denial in writing. You may also request a review, either by your insurer, or Colorado’s insurance regulatory agency. Document all interactions. A lack of specific reasons in the denial letter is a red flag.
  4. Send a final written demand, allowing the insurance company at least a week to respond. Keep a copy of the demand letter. Your attorney can do this for you.
  5. File a complaint with the Colorado Division of Insurance if necessary, but note that settlement options may be limited.
  6. Hire an experienced insurance litigation attorney with a successful record in handling bad faith cases.
  7. Initiate a bad faith lawsuit, considering jurisdiction and additional claims such as fraud and breach of contract. Seek compensation and damages.
Three Legal Claims 

Colorado bad faith cases typically involve three legal claims: Breach of Contract, Common-law Bad Faith, and Statutory Bad Faith.

These are explained in greater detail in our main bad faith insurance guide. Whichever claim or combination of claims your attorney sues under, winning still depends on establishing unreasonable denial or delay.

Establishing Unreasonable Denial or Delay 

A jury will decide whether your insurer’s conduct was unreasonable. However, you can prevail by proving any of the following:

  • Total failure by the insurer to investigate your claim
  • Failure to conduct a reasonable investigation based on available information
  • The insurer not providing an adequate reason for denying your claim, and/or
  • Evidence of any in-house policies rewarding adjustors for stifling policyholder claims.

Damages and Compensation in Auto Insurance Bad Faith Claims

Typical damages for an auto insurance bad faith claim are spelled out in C.R.S 10-3-1116(1). If you prevail against your bad faith insurer, you may recover “reasonable attorney fees and court costs and two times the covered benefit.”

In insurance bad faith claims, compensation for damages can be divided into economic and non-economic categories.

Economic damages recover direct financial losses resulting from the insurer’s bad faith conduct. For example: You filed a $34,600 claim after an automobile wreck, but your insurer denied it without providing justification. You would recover $34,600.

Non-economic damages compensate for harm that can’t be measured in bill statements. These are awarded only in common-law bad faith claims, but consider:

  • Frustration from your claim being unreasonably denied or delayed,
  • Inconvenience due to your insurer’s lack of financial coverage,
  • emotional distress, and
  • punitive damages.

Punitive damages may be awarded when insurers act willfully and brazenly in bad faith. The amount of punitive damages takes into account both the insured’s losses and the insurer’s financial status.

For example: A large national insurance corporation worth billions of dollars might not feel a $60,000 punitive “slap on the wrist” for behaving badly. An amount in the hundreds of thousands, or even millions, would more suit the punitive purpose.

Breaking Down and Adding Up Compensation 

Non-economic damages are awarded only in common law bad faith claims. However, your attorney can file suit under both statutory and common law bad faith. If both lawsuits prevail, the damages from each are added together.

For example: Under a statutory bad faith suit, you are awarded twice the $34,600 you sought in your insurance claim, plus $18,000 in attorney fees and costs. With attorney fees added, it totals $87,200.

You also prevail in a common law bad faith suit. Here, your economic damages remain the same at $34,600. The jury also awards you $50,500 in non-economic damages.

When the statutory and common law bad faith awards are combined, your grand total is $121,800 plus the contract damages of $34,600.

Steer Auto Insurance Bad Faith Towards Justice 

Your car insurance company is always there to collect your premiums. So when it uses shady tactics to deny or delay your coverage, fight back. You deserved the prompt and reliable service your premiums paid for. You deserve compensation if your claim was unjustly denied or delayed. If you believe your auto insurer has acted in bad faith, let’s talk. Call 303-688-0944 to begin your case assessment with an insurance litigation attorney.

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