You’re injured in an accident. Of course, you expect the insurance company to pay what your claim is worth. Unfortunately, you may find that your insurance claim is denied. You need to know what to do next. Our Colorado bad faith insurance lawyers explain insurance denials.
What Happens if an Insurance Claim Is Denied?
When insurance claims are denied, the person making a claim can bring legal action. An insurance policy is a contract. Failing to pay a valid claim is a breach of contract. A court can determine whether the claim should be paid, as well as the value of the claim. The individual must file their court case by the time deadline and choose legal representation from an attorney experienced in insurance issues that can assist them with processing and proving their case.
Why Would an Insurance Claim Be Denied?
Here are some reasons that insurance claims are denied:
- Missing information regarding damages – For an insurance company to pay a claim, they need to know the amount to pay. The victim needs to provide the insurance company with the information they need to verify the correct amount.
- Questions of causation – The insurance company pays for damages that result from the accident. If there are questions about preexisting conditions or how the injuries occur, the denial may be based on legal causation between the accident and injuries.
- Legal liability isn’t clear – Insurance claims typically hinge on fault. The person making a claim may need to demonstrate fault to receive payment.
- You didn’t actually file the claim – Sometimes, insurance claims are denied for the simple reason that the individual didn’t follow the proper steps to make a claim. Double-check what’s required to make your claim complete.
- Coverage limitations – An insurance company pays up to the policy limit for a type of loss covered by the policy. If the policyholder doesn’t have a certain type of coverage, like uninsured/underinsured motorist coverage, the gap can result in a denial. In addition, if the claim exceeds the policy limit, the insurer may not pay the entire amount of the claim.
- Another policy should pay first – When there are multiple insurance policies in play, it can become confusing who pays first. Be sure to identify all of the policies that may be involved.
- The policy wasn’t valid and in force – To receive payment under a claim, the insurance policy must be valid and enforced at the time of the accident. If a policy is canceled or goes unpaid, it may result in denial of the claim.
- You didn’t report the accident immediately to the police and the insurer – Most insurance companies require timely reporting of accidents. In addition, Colorado law requires drivers to report accidents to the police. A lack of reporting may make the insurance company question things like damages and legal fault.
- The insurance company is acting in bad faith – Sometimes, insurance companies just don’t pay when they should. When an insurance company delays or denies coverage without a good reason, it’s called acting in bad faith.
What Is Insurance Bad Faith?
Insurance bad faith is the legal liability of an insurance company when they unreasonably deny payment on a claim. Insurance companies that fail to meet their obligations may have additional financial liability for damages and attorney fees. The purpose of insurance bad faith is to prompt insurers to fairly pay claims and provide victims an avenue of relief if the claim is unfairly denied.
What Are Colorado’s Bad Faith Insurance Laws?
Colorado’s bad faith insurance laws are found in Colorado laws 10-3-1115¹ and 10-3-1116². The rules say that an insurance company cannot unreasonably delay or deny payment under an enforceable policy. A victim of insurance bad faith may recover attorney fees and two times the recovered benefit.
The purpose of laws 10-3-1115 and 10-3-1116 is to recognize that individual policyholders are in an unfair bargaining position regarding getting payment of their insurance claim. It may seem like the insurance company has no problem accepting the payment, but the individual has little recourse if the company chooses to drag their feet paying out a claim. Bad faith laws exist to level the playing field for consumers.
What Is the Statute of Limitations for Unreasonable Insurance Claim Denials in Colorado?
The statute of limitations for unreasonable insurance claim denials in the State of Colorado is two years. The victim has two years from the time that they realize they are injured by an unreasonable delay or denial of payment to bring a claim. The timing for when the statute of limitations starts to toll can be tricky to determine since it may not immediately be clear what is happening.
Determining Whether Bad Faith Has Occurred
To determine whether bad faith has occurred, the court looks at the claim from the insured’s position at the time. The insurer cannot gather evidence later in order to defend their actions. Similarly, the insured cannot offer additional evidence to prove after the fact that the insurance company should have paid initially. That’s why it’s important for the insured to seek legal help as soon as possible for assistance with making reports and demanding payment from the insurance company.
Colorado Bad Faith Insurance Statutes and Common Law
Before Colorado enacted its bad faith insurance laws, common law existed to provide insured parties a recourse for an insurance company’s failure to pay. The common law required the victim to demonstrate that the insurance company acted intentionally or with reckless disregard for the insured’s rights. The statutory laws in place today modified the requirement to only that the company refused reasonable payment. See Schultz v GEICO Cas. Co., 429 P.3d 844 (Colo. 2018)³.
Attorneys for Bad Faith Insurance
If your insurance claim has been denied, contact our attorneys to talk about your case. We’re ready to help you get the compensation you need and deserve.