Addressing Bad Faith Litigation in Colorado

 Posted on July 31, 2026 in Personal Injury

When you pay for auto insurance, Colorado law says your insurer must honor the contract and pay valid claims. However, insurance companies do not always keep that promise. Sometimes an insurer denies or unreasonably delays a valid personal injury claim under its own policy, such as a medical payments or uninsured/underinsured motorist claim. That conduct may amount to bad faith. A Larimer County, CO bad faith insurance attorney can review what happened and determine whether you have grounds to hold the insurer accountable in 2026.

What Is Bad Faith Litigation in Colorado?

Bad faith happens when an insurer unreasonably denies or delays a covered claim. It can also involve failing to follow Colorado's claim handling standards, which are established by state statutes, court decisions, and Division of Insurance regulations. 

C.R.S. § 10-3-1104 identifies unfair claim settlement practices. Although this law generally does not create a separate private cause of action, violations may help show that an insurer acted unreasonably.

What Are the Signs of Bad Faith Insurance in Colorado?

Colorado's Division of Insurance is the state agency that oversees how insurers handle claims and investigates consumer complaints when they get it wrong. According to the Colorado DOI Annual Complaint and Recoveries Report, the division recovered $3,880,700 for Coloradans through auto insurance complaints during the 2024–2025 fiscal year. The figure shows that complaints to state regulators can sometimes lead to additional payments for policyholders.

Insurers acting in bad faith tend to use a familiar set of tactics. Common examples include:

• Causing delays by asking for duplicate paperwork, conducting overly broad investigations, or taking an unreasonable amount of time to investigate or pay a claim

• Offering lowball settlements that fall well below what the claim is actually worth

• Denying valid claims without running a reasonable investigation

• Failing to communicate promptly and clearly about the status of a claim

• Misrepresenting or ignoring the terms written into the policy

Not all of these tactics are obvious right away, and an insurer rarely admits it is acting in bad faith. Instead, the warning signs show up slowly through missed deadlines and vague answers.

What Types of Bad Faith Claims Can You File in Colorado?

Colorado recognizes more than one legal path for holding an insurer accountable. The facts surrounding the insurer’s conduct determine which claims may apply. The main types include:

• Breach of contract, when the insurer fails to pay what the policy promises

• Common-law bad faith, when the insurer acts unreasonably and knows that its conduct is unreasonable or recklessly disregards that fact

• Statutory bad faith, when the insurer violates the claim handling rules set out in Colorado law

An attorney can determine which claims and remedies the facts support.

What Damages Can You Recover in a Colorado Bad Faith Claim?

The compensation available depends on the type of claim. A successful breach of contract claim may allow a policyholder to recover unpaid policy benefits. Under C.R.S. § 10-3-1116, a first-party claimant whose covered benefit was unreasonably delayed or denied may recover two times the covered benefit, reasonable attorney fees, and court costs.

A policyholder who proves common-law bad faith may recover other losses caused by the insurer’s conduct, potentially including emotional distress. In a common-law bad faith case involving fraud, malice, or willful and wanton conduct, exemplary damages may also be available under C.R.S. § 13-21-102.

What Steps Should You Take If You Suspect Bad Faith in Colorado?

The right response to suspected bad faith depends on which tactic the insurer used. Still, a few steps apply in almost every case:

• Request a copy of your insurance policy and review the sections that apply to your claim.

• Keep a log of every conversation with your insurer, including emails, texts, and phone calls.

• Get a written explanation for any denial, including the specific facts and legal reasons behind it

• Insist on prompt, clear communication going forward.

• Speak with a bad faith litigation attorney about whether the conduct rises to the level of bad faith.

Contact a Larimer County, CO Bad Faith Insurance Attorney

Most insurance companies act in good faith and stand behind their policies. However, when an insurer chooses a different path, Fort Collins, CO bad faith litigation lawyers at Hoggatt Law Office, P.C. can help. Attorney Hoggatt is a member of the Colorado Trial Lawyers Association and Workers' Compensation Education Association. Call 970-225-2190 today to schedule your free consultation.

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