• COVERAGE ALERT: Modifications to Title 10 of the Colorado Revised Statutes
  • September 18, 2008
  • Law Firm: McCormick, Barstow, Sheppard, Wayte & Carruth LLP - Fresno Office
  • The Colorado Legislature has enacted legislation amending certain portions of and adding provisions to Title 10 of the Colorado Revised Statutes with the stated purpose of strengthening penalties for the "unreasonable conduct of an insurance carrier . . ." (Colorado House Bill 08-1407.) Under Section 10-3-1115, 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." A "first-party claimant" specifically excludes a person asserting a claim against an insured under a liability policy.

    Under the revised statute, an insurer’s delay or denial of a claim is considered unreasonable "if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action."

    The statute specifically allows for a private right of action by a first party claimant "to recover reasonable attorneys fees and court costs and two times the covered benefit." However, if the court finds the action is brought frivolously, "the court shall award costs and attorney fees to the defendant in the action."

    Finally, the revised statute also increases the potential administrative penalties to be imposed by the Insurance Commissioner from $1,000 to $3,000 for each individual act in violation of any law, rule or prior lawful order of the Insurance Commissioner and, also, increases the aggregate amount of such penalties from $10,000 to $30,000. In those cases where the insurer is deemed to have known or reasonably should have known that its conduct was in violation of any law, rule or prior lawful order, the individual penalties are increased from $10,000 to $30,000, while the aggregate penalty limit is increased from $150,000 to $750,000.