Understanding Bad Faith Insurance Claims in Colorado

 Posted on July 14, 2025 in Personal Injury

Dealing with an insurance company can be stressful, especially in the aftermath of a car accident or slip-and-fall incident when you are faced with unexpected financial losses. Insurance adjustors are known to protect the company’s bottom line above all else. However, bad faith litigation allows you to seek justice if an insurer wrongs you, and a Fort Collins, CO bad faith litigation attorney can help you understand your rights and fight for compensation. In Colorado, insurance companies have clear legal duties to act in good faith when handling claims. When they fail to uphold these duties, policyholders may have a claim for bad faith.

What Duties Do Colorado Insurance Companies Owe Policyholders?

Insurance companies in Colorado are legally required to treat policyholders fairly and honestly. For example, C.R.S. § 10-3-1104 makes it unlawful for insurance companies to engage in unfair claim settlement practices. Under the law, insurers must investigate and process claims promptly. They have to pay valid claims without unnecessary delays and communicate clearly and truthfully with policyholders. They also have to provide reasonable explanations for any denials. These legal duties exist to ensure that people who pay for insurance coverage actually receive the benefits they are entitled to when something goes wrong.

Signs of Bad Faith Tactics From an Insurance Company

Sometimes, it is obvious that an insurance company is not playing fair. Other times, it is more subtle. Some common signs that an insurer may be acting in bad faith include:

• Delaying claims without a valid reason

• Denying claims without a proper explanation

• Offering extremely low settlements that do not reflect the value of your claim

• Ignoring the evidence you have submitted to support your claim

• Changing the terms of your policy after you file a claim

Under C.R.S. § 10-3-1113, Colorado law allows policyholders to pursue damages against insurers who act unreasonably in handling claims. This statute recognizes that bad faith conduct can cause financial harm and emotional distress beyond the original loss.

Can You Sue an Insurance Company for Acting in Bad Faith in Colorado?

Colorado law gives you the right to sue your insurance company if it acts in bad faith. You may be able to recover the amount originally owed under your policy, along with additional damages for financial losses caused by the delay or denial. Courts also award compensation for emotional distress you suffered because of the insurer’s actions. In certain cases, punitive damages may be available. These types of damages punish especially wrongful conduct and deter similar behavior in the future. Under C.R.S. § 13-21-102, Colorado law allows courts to award punitive damages if the insurer’s actions were fraudulent, malicious, or willful. 

Colorado courts recognize two types of bad faith claims. First-party bad faith occurs when your own insurance company refuses to pay benefits that are owed under your policy. Third-party bad faith arises when your insurer fails to defend or settle a claim properly on your behalf, which can expose you to greater financial risk and liability.

Schedule a Free Consultation With a Larimer County, CO Bad Faith Insurance Litigation Attorney

If your insurance company is delaying, denying, or underpaying your claim, a Fort Collins, CO bad faith litigation lawyer at Hoggatt Law Office, P.C. can help. We will review your case, explain your rights, and fight to hold your insurance accountable. Call us today at 970-225-2190 to schedule a free consultation. Se habla Español.