Colorado Bad Faith Insurance Attorney

In Need of an Experienced Bad Faith Insurance Attorney in Colorado?

When an insurance company denies a valid claim without a reasonable basis, Colorado law provides remedies that go beyond simply recovering the benefits you were owed. Under Colorado’s bad-faith insurance statutes, an insurer that unreasonably denies or delays payment of a covered benefit may be liable for twice the amount of the covered benefit, plus attorneys’ fees and court costs.

Those additional remedies matter. They change the financial calculus of litigation for both sides and create real consequences for insurers that mishandle claims. They also mean that a bad-faith claim is often worth pursuing even when the underlying benefits at stake might not justify litigation on their own.

McDermott Law, LLC, represents Colorado policyholders whose disability insurance claims, life insurance claims, and other insurance claims have been unreasonably denied or delayed. Shawn E. McDermott has more than 30 years of experience in insurance disputes and has handled bad faith claims under Colorado’s statutes throughout his practice. Call (303) 964-1800 for a free consultation.

Colorado Bad Faith Insurance Law

Colorado has two statutes that address unreasonable insurance claim handling. Colorado Revised Statutes section 10-3-1115 prohibits an insurer from unreasonably delaying or denying payment of a claim for benefits owed to a first-party claimant. Section 10-3-1116 provides the remedy: a claimant who proves a violation is entitled to two times the covered benefit owed, plus attorney fees and court costs.

These statutes apply to first-party claims, meaning claims you make against your own insurance policy rather than a claim against someone else’s insurer. Disability insurance, life insurance, and long-term care insurance denials are the most common contexts in which these statutes come into play.

The standard under the statute is whether the insurer’s denial or delay was unreasonable. This is a lower bar than what is required to prove common law bad faith, which typically requires showing that the insurer acted with knowledge of or reckless disregard for the lack of a reasonable basis for denial. The statutory standard focuses on whether the insurer’s conduct was reasonable, not on the insurer’s state of mind.

When Does a Disability Insurance Denial Become Bad Faith?

Not every denial is a bad-faith denial. Insurers are entitled to investigate claims, request documentation, and make coverage determinations. The question is whether the denial or delay had a reasonable basis, given the facts and the policy language at the time.

Denial decisions that are frequently challenged as unreasonable under the Colorado statutes share common characteristics.

Ignoring Treating Physician Evidence Without Justification

When an insurer’s internal reviewer reaches a conclusion that directly contradicts the treating physician’s opinion without any credible medical basis for doing so, that conflict may support a bad faith claim. The insurer does not have to accept the treating physician’s opinion in every case, but it needs a reasoned basis for rejecting it. A paper review that ignores documented functional limitations without explanation is a different matter from a genuine medical dispute.

Applying Policy Definitions Unreasonably

When an insurer interprets policy language in a way that is not supported by the plain meaning of the contract or by any reasonable reading of the applicable provisions, that interpretation may be actionable as unreasonable under the statute. Coverage disputes that turn on strained readings of policy language, particularly exclusions and definitional provisions, are a recurring context for bad faith claims.

Selective Use of Medical Evidence

An insurer that relies on isolated entries in a claimant’s medical records while ignoring the overall weight of the evidence may be engaging in conduct that is unreasonable under the statute. The denial rationale needs to be supported by the record as a whole, not just the pieces that support the insurer’s preferred conclusion.

Unreasonable Delay Without Explanation

Section 10-3-1115 covers unreasonable delay as well as unreasonable denial. An insurer that sits on a complete claim without making a decision, requests documentation that has already been provided, or repeatedly postpones a coverage determination without a reasonable basis for doing so may be liable under the statute even if it ultimately pays the claim.

Terminating Benefits Without a Genuine Change in Condition

When an insurer terminates ongoing disability benefits on the basis of a periodic review, and the termination is not supported by any genuine evidence that the claimant’s condition has changed, that termination may be actionable as unreasonable. The use of a single IME report that conflicts with years of treating physician documentation, or surveillance evidence that does not actually contradict the claimed functional limitations, is a common factual pattern in bad-faith termination claims.

The Critical Limitation – ERISA Preemption

Colorado’s bad faith statutes do not apply to disability insurance claims governed by ERISA. ERISA, the federal law that regulates most employer-provided benefit plans, preempts state insurance law for covered plans. A claimant with an employer-provided disability plan whose claim is governed by ERISA cannot use Colorado’s bad faith statutes to seek two times damages or attorney fees.

This is not a technicality. It is a fundamental feature of how ERISA works, and it is one of the reasons the type of policy matters so much when evaluating a disability claim.

Bad-faith claims under Colorado law are available to claimants with individually purchased disability, long-term care, life, and other non-ERISA coverage. Certain group plans that are exempt from ERISA, such as government employer plans and some church plans, may also fall outside ERISA preemption. Determining whether your policy is subject to ERISA is one of the first questions to resolve when evaluating a potential bad-faith claim.

Bad Faith Claims and Disability Insurance

Disability insurance claims are among the most common contexts for bad faith claims in Colorado. The combination of complex medical evidence, contested policy definitions, and the financial incentives insurers have to limit long-term benefit payments creates conditions in which unreasonable claim handling is not uncommon.

The firm handles bad faith claims in connection with several types of coverage.

Individual Disability Insurance Policies

Individually purchased disability insurance, often called IDI policies, are the most common vehicle for bad faith claims in disability insurance. These policies are not governed by ERISA, which means Colorado’s bad faith statutes apply directly. When an insurer unreasonably denies an IDI claim, the two-times remedy and attorney fee provision can make litigation economically viable even for claimants whose monthly benefit amounts might otherwise be too small to justify the cost of a lawsuit.

Long-Term Care Insurance

Long-term care insurance claims are frequently denied on the basis that the claimant does not meet the policy’s definition of a qualifying condition or a sufficient level of care need. When those denials are not supported by a reasonable reading of the policy or the claimant’s actual condition, they may support a bad faith claim under the Colorado statutes.

Life Insurance Denials

Life insurance denials, particularly denials based on pre-existing condition exclusions, contestability provisions, or disputed cause-of-death determinations, are another common context for bad faith claims. The financial stakes in life insurance cases are often significant, and the statutory remedy of two times the benefit amount is a meaningful driver of case value.

How a Colorado Bad Faith Insurance Case Proceeds

A bad faith insurance case under Colorado’s statutes begins the same way as any insurance coverage dispute: with a review of the policy, the denial letter, and the underlying claim file. The first question is whether the insurer had a reasonable basis for its denial or delay. If it did not, the statutory remedy follows.

Bad faith claims under sections 10-3-1115 and 10-3-1116 can be brought in Colorado state court. The claimant must prove both that benefits were owed under the policy and that the insurer’s denial or delay was unreasonable. The application of these statutes depends on the specific facts of each case.

In practice, bad faith claims often proceed alongside breach of contract claims for the underlying benefits. The contract claim seeks the benefits owed. The bad faith claim seeks the statutory multiplier and attorney fees. The two claims are tried together, with the bad faith claim resolved only if the claimant first establishes that benefits were owed and wrongfully withheld.

Cases involving strong bad faith facts sometimes settle before trial because the exposure for the insurer, including the potential for the statutory remedy and attorney fees, significantly increases the cost of litigation compared to a simple benefits dispute.

How McDermott Law Handles Bad Faith Insurance Cases

Evaluating a potential bad faith claim starts with the same review that begins any insurance dispute: reading the policy and the denial letter together to understand what the insurer said and whether that reasoning holds up. The additional question in a bad faith case is whether the insurer’s conduct meets the statutory standard for unreasonableness, and that question requires looking at how the insurer conducted its review, not just the outcome it reached.

Shawn McDermott has handled bad-faith insurance claims in Colorado for more than 30 years. The firm works with claimants on disability, life, and long-term care insurance bad faith claims and handles both the underlying coverage dispute and the statutory bad faith claim together in the same proceeding.

The review process typically starts with the insurer’s claim file, which the policyholder is entitled to request. How the insurer documented its decision, what evidence it reviewed, and whether it followed its own procedures are all relevant to whether the conduct was reasonable. Cases with the strongest bad faith facts tend to involve insurers that ignored treating physician evidence without a credible counter-opinion, applied policy language in ways unsupported by the text, or terminated long-standing benefits without any genuine change in the claimant’s condition.

Settlement is a realistic outcome in bad-faith cases with strong facts. The statutory exposure, including two times the covered benefit plus attorney fees, changes the financial calculus for insurers compared to a simple benefits dispute and often brings cases to resolution before trial.

Nationwide Representation Including Colorado

McDermott Law represents disability claimants nationwide, including throughout Colorado and the Rocky Mountain region. Because most disability insurance disputes are governed by federal ERISA law or insurance contracts, the firm handles cases by phone and video conference and does not require in-person meetings, regardless of where the client is located.

Colorado clients include those in Denver, Colorado Springs, Boulder, Fort Collins, Greeley, Longmont, Loveland, Grand Junction, Pueblo, Castle Rock, Durango, and communities throughout the state. The firm also represents claimants in Kansas, New Mexico, Nebraska, Utah, Wyoming, Oklahoma, and Montana.

If your claim was denied anywhere in the country, call (303) 964-1800 to discuss your situation.

Talk to a Colorado Bad Faith Insurance Attorney

McDermott Law, LLC offers free consultations for policyholders whose claims have been unreasonably denied or delayed. Call to discuss your situation at (303) 964-1800

Free consultation. No fee unless we win.