When an insurance policy in Colorado is not enough

People in Colorado who suspect their insurance provider has been acting in bad faith should take action.

In July of this year, FOX31 Denver reported that people in Colorado may soon see a sharp increase in their auto insurance policies. In fact, the state may see one of the largest rise in premiums across the country. An increase in traffic fatalities last year along with busier roadways could account for the increase.

As taxing as this may be on a consumer's wallet, it is also troublesome when situations arise in which the policy does not pay out what it should. Bad faith claims are a serious problem, and policyholders should know how to spot illegal activity.

What is insurance bad faith?

Someone who pays for an insurance policy, like car insurance, is essentially handing over money now so the company will pay for damages in the event of an auto accident later. In other words, the provider makes a promise and is expected to act in good faith when investigating, negotiating, settling and making payments on claims.

However, there are several ways for a provider to act in bad faith, such as committing the following:

  • Having an adjuster lie about or fraudulently represent the claim
  • Refusing to give the policyholder an explanation for a low settlement
  • Unreasonably delaying payment on a claim
  • Failing to administer a proper investigation into the situation
  • Trying to offer far less than what is owed on a claim

It is also considered bad faith to refuse to pay for a claim that is valid or for refusing to provide documentation about the claim.

What can I do about it if it happens to me?

First, the party may want to alert the company that he or she believes it is acting in bad faith, which may be enough to prompt the provider to take corrective action. Though this could be done over the phone, it may be best to put the assertion in writing so the person has proof of contacting the provider.

When that does not work, Colorado law specifically states that the policyholder or a third party can seek relief through filing a lawsuit. These suits can help someone recover all the money he or she is owed based on the policy. Punitive damages, or damages that seek to specifically punish the provider, may also be awarded.

It is also possible to file a complaint with the Colorado Division of Insurance. The DOI can investigate a claim and help pursue fair payment. However, this may take longer than working with an attorney to settle a claim. People who have questions about this topic should speak with a personal injury attorney in Colorado.