Insurance Bad Faith: An Overview

The word “insurance” comes from the Latin phrase securus, which translates to “without worry.” In the modern world, insurance is meant to provide certainty, security, and peace of mind by providing assistance when it’s most needed.

When you purchase an insurance policy, you enter into a contract with your insurance company. The contract is centered on an expectation that you and the insurer will act honestly and fairly in the event that a disaster strikes. You may file a claim, or have a claim filed against you, and reasonably expect that your insurance company will help protect you.

When an insurer delays resolution of a claim, denies coverage for a claim, or engages in other dishonest or unfair acts, it engages in “bad faith” and strips away the very security the insurance was designed to provide. Bad faith insurance claims may be brought when an insurer unreasonably denies, delays, or underpays claims made by policyholders. Travelers Ins. Co. v. Savio, 706 P.2d 1258 (Colo. 1985); Goodson v. Am. Standard Ins. Co., 89 P.3d 409 (Colo. 2004); Kisselman v. Am. Fam. Ins. Co., 292 P.3d 964 (Colo. App. 2011). Even if some aspects of your claim are unresolved, an insurer cannot unreasonably delay or deny payment of undisputed aspects of your claim, including damages for pain and suffering. Fear v. Geico Cas. Co., 560 P.3d 974, 981 (Colo. 2024).

Bad faith insurance claims may also be brought when an insurer acts unreasonably in investigating, defending, or settling a claim brought by a third person against the insurance company’s insured. Farmers Grp., Inc. v. Trimble, 691 P.2d 1138 (Colo. 1984) (en banc). Examples of bad faith conduct include:

• Unreasonable Delay: an insurer delays investigating or paying a covered benefit without a valid reason.
• Unjust Denial: an insurer denies a covered claim without a reasonable basis.
• Failure to Communicate: an insurer fails to timely and adequately communicate with a policyholder about the status of their claim.
• Failure to Settle a Claim or Underpaying a Claim: an insurer refuses to settle a claim or offers to settle a claim for an amount significantly less than what is reasonably owed.
• Misinterpretation of Policy Language: an insurer deliberately or recklessly misinterprets policy language in favor of denying coverage rather than providing coverage for a claim.
• Failure to Defend: an insurer fails to adequately protect your interests in the event you are sued for a claim under your policy.
• Failure to Indemnify: an insurer fails to adequately protect you from having to pay for a loss or harm for which you are found liable.

Bad faith insurance conduct causes a distinct type of harm that goes beyond dollars. It can prevent you from putting your home back together after a disaster, postpone necessary medical care, cause business disruptions, and force families to absorb financial and emotional strain, adding stress and uncertainty to already difficult times.

If you suspect your insurer has acted in bad faith during the claims-handling process, you can protect your rights:

• Document Everything: save all letters, emails, portal communications, and correspondence between you and your insurance company.
• Document the Impact: keep track of how the insurer’s bad faith conduct is affecting you, including out-of-pocket expenses and disruptions to daily life.
• Ask for Clear Explanations: you have the right to understand why your claim is delayed or denied.
• Don’t Assume the Insurer is Always Right: insurance companies sometimes rely on the opinions of reviewers who never examine you, your property, or speak with individuals with knowledge of the facts. A denial does not mean your claim lacks merit.
• Seek Professional Advice: consult with a lawyer who has experience in bad faith insurance litigation.

Many people abandon valid claims because the process feels overwhelming. Speaking with an attorney can provide clarity, and peace of mind when it’s most needed. Contact the attorneys at Levin Sitcoff if your insurance company is not providing you with the certainty, security, and peace of mind that you expect.