The first thing an insurance company does when you make a claim (or someone makes a claim against you) is determine whether the claim (or "loss") is covered under the insurance policy. Frankly, they are most likely trying to figure out how NOT to cover the claim! However, if they fail/refuse to provide coverage of a loss that is covered under the terms and conditions of the insurance policy, this amounts to bad faith insurance practices. Colorado has adopted the "reasonable expectations" doctrine when it comes to insurance coverage analysis. In other words, the issue becomes what would a purchaser of the insurance policy expect to be covered when he or she purchased the coverage. Also, any ambiguities with the terms of the contract are interpreted against the insurer and in favor of the insured.
Insurance companies have a duty to respond fully and timely to claims, investigate claims with due diligence and within a reasonable amount of time, and to pay claims without unreasonable delay. Where an insurance company simply takes too much time (either on purpose or through a lack of diligence) they may be liable for bad faith insurance practices. It is important to put things in writing when dealing with an insurance company, so that if there is unreasonable delay, you can prove it. Sometimes, if you have documented the fact of delay, and provide THAT to the insurance carrier, they may go ahead and pay the claim at that point to head off a future bad faith claim against them.
Failure to pay benefits.
An insurance company has a duty to pay benefits under the insurance policy once they have received adequate proof that those benefits are, in fact, due. Here again, documenting the fact that you provided such proof, what exactly that proof was that you provided, and when you provided it, will assist you in pursuing a bad faith claim in the event the insurance company does fail to pay benefits. Ironically, the more you document your claim, the more likely they are to pay it in the first place!
Forcing the insured to arbitrate or litigate without a reasonable basis.
Where an insurance company unreasonably refuses to settle a claim fairly, the insured really has two choices: (1) accept the low settlement offer; or (2) demand arbitration or file a lawsuit. So, unless you are willing to accept a "lowball" amount to resolve your claim, you go with option #2, and litigate the matter. Since litigating your claim is more time-consuming, costly and stressful, it is bad faith for an insurance company to handle a claim in a way that forces folks to litigate in circumstances where they should just pay the claim and be done. However, "difference of opinion" on value is generally not going to be considered bad faith. This is obviously a very slippery slope. What matters here is whether the carrier's "opinion on value" is formed with due investigation and a reasonable interpretation of the facts and evidence.
Wherever an insurance company's representatives have deliberately told a lie, failed to disclose material facts or issues, or mislead an insured, they have engaged in bad faith insurance practices. Dishonesty is a clear act of bad faith.
Unfairly using the threat of cancellation or rate increases to force a low settlement.
Yes, it is true that if you cause an accident, and a claim(s) is made against you and your insurance policy, your rates will likely increase, and in some circumstances your coverage could even be canceled. However, there are specific laws in Colorado which absolutely prohibit an insurance carrier from raising rates, canceling coverage, or taking ANY ACTION WHATSOEVER, to punish or retaliate against an insured for making a claim on their insurance policy for medical payments benefits or uninsured/underinsured motorist coverage. After all, you paid a premium for such coverages, so a carrier can't then punish you for making a claim.
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