Colorado’s statutes allowing a policyholder to sue his insurance carrier for “improper denial of claims” (C.R.S. §§10-3-1115 and 1116) continue to be construed to allow policyholders more opportunities for recovery against their insurers. In Etherton v. Owners Ins. Co., a Tenth Circuit Court of Appeals panel determined that the statutory prohibition on unreasonable delay or denial “of a claim for benefits owed to or on behalf of any first-party claimant,” extends to “an insurer’s unreasonable handling of an insured’s claim for benefits” and is “not confined to claims where the payment is due and owing.” Carriers that previously argued against liability where the amount of a claim remains in dispute are cautioned that such an argument will now fail. The panel concluded that, consistent with Colorado State Court cases, the insurer’s delay or denial of a claim because it is “fairly debatable” can be relevant but not necessarily determinative of whether the insurer acted reasonably. The Etherton case also confirms that federal courts interpreting Colorado law will award a successful policyholder what amounts to treble damages: the insured may receive the “covered benefit” under a breach of contract claim and the insured may be entitled to two times the covered benefit under C.R.S. §10-3-1116.
If you have questions about this update, please contact Stephanie Montague.