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How Insurance Companies Should Handle Claims

Here are some other suggestions for how insurers should handle claims. A version of this appeared in the Colorado Claims Association Fall Quarter 2004 newsletter.

  1. An insurer should investigate an insured's claim for benefits. Source: C.R.S. Section 10-3-1104(1)(h)(IV), Novell v. American Guaranty & Liability Ins. Co., 15 P.3d 775 (Colo. App. 1999).
  2. An insurer should give equal consideration to the interests of the insured as it does to its own interests with neither interest being superior. Bailey v. Allstate Insurance Co., 844 P.2d 1336 (Colo. App. 1992), Egan v. Mutual of Omaha Insurance Company, 598 P.2d 452 (Cal. 1979), cited with approval in Farmers Insurance Group, Inc. v. Trimble, 805 P.2d 419 (Colo. 1993).
  3. An insurer should not deny a claim based on surmise, speculation or conjecture. Rawlings v. Apodaca, 726 P.2d 565, 572 (Ariz. 1986).
  4. Insureds can recover damages for emotional distress alone for unreasonable delays by their insurers in providing benefits under a policy even if the insurer ultimately pays all benefits owed under the policy. Goodson v. American Standard Ins. Co., 89 P.3rd 409 (Colo. 2004), Burgess v. Mid-Century Ins. Co., 841 P.2d 325 (Colo. App. 1992).
  5. An insurer's decision to deny a claim should be based on file information contained at the time of denial. Pfeiffer v. State Farm Mutual Auto Insurance Company, 940 P.2d 967 (Colo. App. 1996, aff'd on other grounds, 955 P.2d 1008 (Colo. 1998).
  6. An insurer should exercise a quasi-fiduciary duty to its insured in the context of the insured making a claim for uninsured or underinsured motorist benefits. Brekke v. State Farm Mutual Automobile Ins. Co., 105 P.3rd 177 (Colo. 2004), Peterman v. State Farm Mutual Auto Insurance Co., 961 P.2d 487 (Colo. 1998). Handling uninsured or underinsured motorist claims should not be adversarial.
  7. An insurer should not deny a claim without substantial justification. Giampapa v. American Family Mutual Auto Insurance Company, 64 P.3d 230 (Colo. 2003).
  8. A willful and wanton breach is a refusal to pay insurance benefits when due. This is established when an insurer acts without justification and in disregard of the plaintiff's rights. Pham v. State Farm Mutual Auto Ins. Co., 70 P.3d 567, 572 (Colo. App. 2003). An insurer is responsible for non-economic damages caused by its willful and wanton denial of an insured's claim for first-party benefits. Giampapa v. American Family Mutual Auto Insurance Company, supra.
  9. An insurer must keep an insured reasonably apprised of the status of the insured's claim for benefits. C.R.S. Section 10-3-1104(1)(h)(II)(V)(VI)XIV).
  10. An insurer should not investigate, evaluate or deny a claim based on biased, one-sided information.Rawlings v. Apodaca, supra, Mariscal v. Old Republic Life Insurance Co., 50 Cal. Rptr. 224, 227, (Cal. App. 1996).
  11. An insurer must be honest with its insured and third-party claimants. Weigel v. Hardesty, 37 Colo. App. 541, 549 P.2d 1335 (1976)
  12. An {insurer's} attorney may be liable to the insured if the attorney engages in fraudulent or malicious conduct toward the insured. Weigel v. Hardesty, supra.
  13. An insurer should provide its insured with factual reasons for why the insurer is denying or delaying payment of an insured's claim for benefits. C.R.S. Section 10-3-1104(1)(h)(XIV).
  14. Insurers should not try to "low ball" insureds for unreasonably low amounts. Zilisch v. State Farm Mutual Auto Insurance Co. 995 P.2d 276 (Ariz. 2000)
  15. An insurer should tender to its insured the amount of benefits to which the insurer agrees the insured should be paid for which the insurer does not dispute. Borland v. Safeco Insurance Co., 147 Ariz. 195, 709 P.2d 552 (1985).
  16. An insurer should compensate an insured for financial losses, including interest on the benefits, caused to the insured by the insurer's unreasonable delay in investigating and evaluating an insured's claim. Bowen v. Farmers Insurance Exchange, 929 P.2d 14 (Colo. App. 1996).
  17. An insurer should not take advantage of the insured's vulnerable condition after experiencing a covered loss. Zilisch v. State Farm Mutual Auto Ins. Co., supra.

Insurers choosing to deviate from these industry standards may harm their policyholders and insureds. They may become responsible to pay for the covered loss in addition to the human losses they cause through improper claims handling.

In addition, you may be able to recover "punitive damages" against the insurance company if the company willfully and wantonly denied your claim.

A willful and wanton denial is a refusal to pay insurance benefits when due. This is established when an insurance company acts without justification. When this occurs, the insurance company is responsible for non-economic damages, like mental anguish, emotional grief and inconvenience, caused by its willful and wanton denial of a claim.

If you believe you have been victimized by insurer misconduct and are looking for answers, we offer help. Call or email us today if you have questions about the way your claim is being handled.

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