You pay your insurance premiums every month. When you are seriously injured and need that coverage to pay, your insurer is supposed to act in good faith — investigate your claim promptly, evaluate it fairly, and pay what it owes without unreasonable delay. When they don’t, Colorado law gives you powerful tools to hold them accountable. Here is what insurance bad faith means in Colorado and what your options are.
What Is Insurance Bad Faith?
Insurance bad faith occurs when an insurer unreasonably delays, denies, or underpays a valid claim. In Colorado, this is not just a moral failing — it is an actionable legal violation governed by specific statutes. Both first-party claims (your own insurance, such as UIM or UM coverage) and third-party claims (the at-fault party’s liability insurer) can give rise to bad faith exposure, though the statutory remedies discussed below apply specifically to first-party claims.
Colorado’s Bad Faith Statutes
C.R.S. § 10-3-1115 — The Prohibition
This statute makes it unlawful for an insurance company to unreasonably delay or deny payment of a claim for benefits owed to a claimant. It applies to any insurer operating in Colorado and covers both outright denials and unreasonable delays in processing valid claims.
“Unreasonable” is evaluated based on what a reasonable insurer would do under similar circumstances — not what this particular insurer chose to do. Common examples of conduct that courts have found unreasonable include:
- Failing to investigate a claim promptly after receiving notice
- Denying a claim without a reasonable basis in the facts or policy language
- Offering settlement amounts so low they bear no reasonable relationship to the claim’s value
- Misrepresenting policy terms to reduce or avoid payment
- Requiring burdensome documentation that is not reasonably necessary to evaluate the claim
- Conditioning payment on an injured person’s execution of a release that goes beyond the claim at issue
C.R.S. § 10-3-1116 — The Remedy
This is where Colorado’s bad faith law has real teeth. A first-party claimant whose insurer violates § 10-3-1115 is entitled to:
- Two times the covered benefit that was unreasonably delayed or denied
- Reasonable attorney fees and court costs
That two-times multiplier applies to the actual benefit owed — not just the amount delayed. If your insurer owed you $150,000 under your UIM policy and unreasonably delayed paying it, your bad faith claim could be worth an additional $300,000 on top of the underlying benefit.
First-Party vs. Third-Party Bad Faith
The statutory remedies under §§ 10-3-1115 and 10-3-1116 apply to first-party claims — meaning claims against your own insurer. The most common context is underinsured motorist (UIM) or uninsured motorist (UM) claims where your own carrier is disputing or delaying payment.
Third-party bad faith — where the at-fault driver’s insurer acts in bad faith toward you — is governed by Colorado common law. It typically arises when a liability insurer fails to settle within policy limits when it had a reasonable opportunity to do so, exposing its insured to an excess verdict. These claims are more complex and are usually pursued by the insured against their own carrier.
The Colorado Division of Insurance
Colorado’s Division of Insurance regulates insurer conduct and enforces the Colorado Insurance Code. If your insurer is engaging in systematic bad faith practices, a complaint to the Division of Insurance (doi.colorado.gov) can trigger a regulatory investigation. However, a complaint to the Division does not substitute for a legal claim — you still need to pursue your remedies in court to recover the two-times benefit and attorney fees available under § 10-3-1116.
How Bad Faith Claims Interact With Your Personal Injury Case
In Colorado car accident cases, bad faith most commonly arises in UIM litigation. After you exhaust the at-fault driver’s liability limits and your own insurer refuses to fairly evaluate your UIM claim, the insurer’s conduct during that process becomes the basis for a parallel bad faith claim. We pursue both simultaneously — the underlying UIM claim for the value of your injuries, and the bad faith claim for the two-times multiplier — which dramatically changes the insurer’s settlement calculus.
Frequently Asked Questions
Q: Does bad faith apply to all types of insurance claims?
Colorado’s statutory bad faith remedies under §§ 10-3-1115 and 10-3-1116 apply to first-party insurance claims — primarily UM/UIM, health insurance, and property claims. Third-party bad faith (against the at-fault party’s insurer) is available under common law but involves different standards and remedies.
Q: How do I know if my insurer is acting in bad faith?
Warning signs include: unreasonable delays in responding to your claim, low offers with no explanation, requests for documentation that goes far beyond what is needed, misrepresentations about your policy coverage, and conditioning payment on unreasonable demands. If something feels wrong about how your insurer is treating your claim, call an attorney.
Q: What is the statute of limitations for a bad faith claim in Colorado?
Bad faith claims based on the statutory violation under § 10-3-1115 are subject to Colorado’s two-year statute of limitations for statutory claims (C.R.S. § 13-80-102). Time matters — do not delay in consulting an attorney if you suspect bad faith.
Q: Can I pursue bad faith even if my underlying claim is still unresolved?
Yes. In Colorado, bad faith claims can be brought as part of the same lawsuit as the underlying first-party claim. You do not need to resolve your UIM or other first-party claim before asserting bad faith — in fact, pursuing them together is often the most effective approach.
Holding Your Insurer Accountable
Insurance companies have vast resources and experienced defense teams. When your own insurer turns against you, you need an attorney who understands both the underlying personal injury claim and the bad faith statute. At Mandelaris Law, we handle UIM and insurance bad faith claims throughout Colorado and know how to use Colorado’s statutes to their maximum effect.
If your insurer is delaying, denying, or lowballing a valid claim, call us at (303) 357-9757 for a free consultation. We work on contingency — you pay nothing unless we recover for you.