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Insurance Bad Faith Claim Before Colorado Supreme Court

Jul 8th, 2015

Bad Faith Insurance Claim

The Colorado Supreme Court heard argument on Thursday, June 4, 2015 in American Family Mutual Insurance Company v. Hansen, Case No. 14SC99, an insurance bad faith case. At the court of appeals level, the court held that an insurance company’s characterization of a claim for coverage as “fairly debatable” is not enough to establish that the insurance company acted reasonably when it delayed or denied payment of insurance benefits.

At trial, the jury found that the insurance company unreasonably delayed and denied coverage to its insured pursuant to C.R.S. 10-3-1115 and 10-3-1116, and the court thereafter awarded statutory penalties, including attorney fees, costs, and “two times the covered benefit,” or $150,000 ($75,000 x 2). The court of appeals clarified that the appropriate statutory penalty is double the amount of benefits owed and for which payment was delayed–not double the amount of damages awarded by the jury. American Family appealed the ruling, which upheld the trial court’s award of $150,000 plus attorney fees and costs.

Oral arguments at the Colorado Supreme Court are available in audio format, and via streaming video.