Colorado Insurance Commissioner Complaints vs. Bad Faith Lawsuits: Which Path to Choose?

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You know that sinking feeling, right? That knot in your stomach when your insurance company denies your claim out of hand? Or when they just drag their feet forever, trying to avoid paying what you’re owed after a car accident or some terrible property damage? Yeah, we’ve all been there. And if you’re reading this, chances are you’re dealing with exactly that kind of headache right now.

Here’s the deal – you absolutely don’t have to just roll over and take it. In Colorado, you’ve actually got two main ways to fight back: you can file a complaint with the Colorado Insurance Commissioner, or you can go after them with a bad faith lawsuit. But figuring out which one’s the right move for your specific situation? That’s the tricky part.

As someone who’s spent over 30 years helping folks in Colorado Springs and all across our state deal with stubborn insurance companies, I can tell you straight up that picking the wrong path can cost you big time – we’re talking wasted time, lost money, and a whole lot of unnecessary frustration. So, let’s break this down together and figure out which route truly makes the most sense for you. Sound good?

What’s Really Going On When Insurance Companies Act Up

Before we jump into your options, let’s chat about what we’re actually dealing with here. Insurance companies aren’t exactly known for their overflowing generosity, are they? They’re businesses, plain and simple. And like any business, they’re always looking to keep their costs down and their profits up.

But here’s where it gets a little complicated – they also have a legal duty to treat you fairly. This isn’t just about being nice; it’s about following the law. When they don’t, that’s when you start hearing terms like “bad faith.”

The Different Ways Insurance Companies Can Mess With You

Believe me, insurance companies have gotten pretty creative over the years when it comes to avoiding payouts. Some of the most common tricks I see include:

Unreasonable Claim Denials: This is probably the most obvious one. You file a claim, and it gets denied for reasons that just don’t hold water when you actually look at your policy and the facts of your case. It’s like they’re making up excuses.
Lowball Settlement Offers: They’ll throw out an offer that’s way less than what your claim is actually worth, secretly hoping you’ll just get tired and take the money and run.
Endless Delays: They’ll stretch out the investigation process, ask for the same documents over and over, or just generally slow-walk everything. Their hope? That you’ll get so frustrated you just give up.
Cherry-Picking Medical Records: In personal injury cases, they’ll dig through your medical history and only focus on the bits that support their side, completely ignoring everything else that shows how much you’re hurting.
Policy Misinterpretation: They’ll tell you your policy doesn’t cover something when it clearly does, betting that you won’t know enough about insurance law to call them out on it.
Investigation Failures: They simply won’t properly investigate your claim, or they’ll just ignore evidence that clearly supports your position.

The thing is, some of these tactics might just be super annoying business practices, while others cross the line into actual legal violations. That’s where understanding your options becomes super important.

Understanding Colorado Insurance Commissioner Complaints

Let’s kick things off with the first option: filing a complaint with the Colorado Division of Insurance. Think of this as calling in the referee when the other team is playing dirty.

What Exactly Is the Colorado Division of Insurance?

The Colorado Division of Insurance (let’s just call them the “Division” for short) is basically our state’s insurance watchdog. They’re part of the Department of Regulatory Agencies, and their main job is to make sure insurance companies operating here in Colorado follow our state laws and regulations.

These folks have some real bite, too. They can investigate complaints, hit companies with fines, make them change their shady practices, and even pull their licenses if things get really bad. They’re not just a suggestion box – they’ve got actual power to make insurance companies behave.

When Should You Consider Filing a Commissioner Complaint?

Here’s the scoop about commissioner complaints – they tend to work best in certain situations. You might want to go this route when:

Your Issue Fits a Clear Pattern: If what happened to you seems like something the company might be doing to lots of other people, the Division will be super interested. They love cases that help them spot bigger, industry-wide problems.
You Want a Quick Resolution: Commissioner complaints often get resolved much faster than lawsuits. We’re talking weeks or a few months instead of years.
The Dollar Amount Isn’t Huge: If you’re dealing with a relatively small claim – say, under $10,000 – the time and cost of a full-blown lawsuit might not make sense.
You Just Want Your Claim Paid: Sometimes, you don’t care about anything beyond getting what you’re owed. You don’t need extra money for your trouble or want to punish the company; you just want them to do what they should have done in the first place.
The Company Is Licensed in Colorado: This might sound obvious, but the Division can only regulate companies that are actually licensed to do business here in Colorado.

What Can You Actually Expect from the Process?

Let me walk you through what typically happens when you file a complaint with the Division of Insurance.

Filing Your Complaint: You can file online, by phone, or by mail. The process is pretty straightforward – you’ll need to share details about your policy, what happened, and what you want the insurance company to do.
Initial Review: The Division will look at your complaint and decide if it’s something they can help with. Not every complaint falls under their authority, and they’ll let you know if yours doesn’t.
Company Response: If they accept your complaint, they’ll forward it to the insurance company and give them a chance to respond. Companies usually have about 15-20 business days to get back to the Division.
Investigation: Depending on what the company says, the Division might dig deeper. They could ask for more documents, talk to people, or even conduct a formal investigation.
Resolution: In many cases, just having the Division involved is enough to get the insurance company to do the right thing. Companies really don’t like regulatory attention, and they’ll often resolve complaints quickly to make them go away.

The Real Benefits of Going This Route

There are some genuine advantages to filing a commissioner complaint:

It’s Free: You don’t pay a dime to file a complaint. No filing fees, no attorney costs (unless you choose to hire one), nothing.
It’s Relatively Fast: Most complaints get resolved within 30-60 days. Compare that to lawsuits, which can drag on for years.
The State Has Your Back: When the Division contacts an insurance company, it carries a lot of weight. Companies know that regulators can make their lives difficult if they don’t play ball.
It Can Lead to Bigger Changes: Sometimes individual complaints uncover larger problems that lead to regulatory action affecting all policyholders.
No Risk: Unlike a lawsuit, there’s no downside to filing a complaint. The worst thing that can happen is… nothing.

But There Are Some Real Limitations Too

Here’s where I need to be totally honest with you about what commissioner complaints can’t do:

No Money for Your Trouble: The Division can make the company pay your claim, but they can’t award you extra money for all the hassle you went through. If you want compensation for your time, stress, or other losses, you’ll need to look elsewhere.
Limited Enforcement: While the Division has power, they can’t force a company to settle every complaint in your favor. Sometimes they’ll investigate and decide that the company actually acted reasonably.
No Legal Advice: The Division staff can’t give you legal advice or tell you whether you have a good case for a lawsuit.
Regulatory Focus: The Division is primarily concerned with whether companies are following regulations, not necessarily whether they’re treating individual customers fairly in every single situation.

Breaking Down Bad Faith Lawsuits

Now let’s talk about the other option: filing a bad faith lawsuit. This is basically taking the insurance company to court and saying, “You didn’t just mess up – you deliberately treated me unfairly, and I want you to pay for it.”

What Makes a Lawsuit “Bad Faith”?

In Colorado, insurance bad faith isn’t just about getting a claim denied or having to wait longer than you’d like. There are specific legal standards that have to be met.

Unreasonable Conduct: The insurance company has to have acted unreasonably under the circumstances. This doesn’t just mean they made a mistake – it means their conduct was so far outside the bounds of what a reasonable insurance company would do that it crossed a legal line.
Knowledge or Reckless Disregard: In Colorado, you generally need to show that the company either knew their conduct was unreasonable or that they just didn’t care whether it was reasonable (that’s “reckless disregard”).
Damages: You have to have suffered actual harm beyond just not getting your claim paid. This could be financial losses, emotional distress, or other consequences that happened because of the company’s bad faith conduct.

Different Types of Bad Faith Claims

Not all bad faith cases are the same. Here are the main categories you might encounter:

First-Party Bad Faith: This is when your own insurance company treats you unfairly. Maybe you have auto insurance and they won’t pay for your car repairs, or you have homeowner’s insurance and they deny your fire damage claim.
Third-Party Bad Faith: This happens when another person’s insurance company (like the other driver’s auto insurer) treats you unfairly during the claims process.
Failure to Settle: If an insurance company has a chance to settle a claim within policy limits but unreasonably refuses to do so, leading to a judgment against their insured that’s more than those limits.
Failure to Defend: When an insurance company refuses to provide a legal defense for their insured when they’re supposed to under the policy.

When Bad Faith Lawsuits Make Sense

Bad faith lawsuits aren’t right for every situation, but they can be powerful tools when the circumstances are right:

Significant Damages: If you’re dealing with a really large claim, or if the insurance company’s behavior has caused you substantial additional losses, a lawsuit might absolutely be worth pursuing.
Clear Pattern of Unreasonable Conduct: You need more than just a denied claim. You need evidence that the company’s behavior was clearly unreasonable – things like ignoring evidence, twisting policy terms, or completely failing to do a proper investigation.
The Company Won’t Budge: Sometimes insurance companies will just dig in their heels, even when they’re clearly wrong. A lawsuit might be the only way to truly get their attention.
You Want to Send a Message: Bad faith lawsuits can result in punitive damages, which are basically designed to punish the insurance company and stop them from doing the same bad stuff in the future.
You Have Time and Resources: Lawsuits take time, energy, and often some money upfront. You need to be ready for a process that could take years.

What You Can Actually Win in a Bad Faith Lawsuit

This is where bad faith lawsuits can really shine compared to commissioner complaints:

Contract Damages: You can get back the money the insurance company should have paid you under your policy.
Consequential Damages: These are losses you suffered because of the company’s bad faith behavior – things like extra living expenses, lost wages, or costs you had to pay because your claim wasn’t paid.
Emotional Distress Damages: In some cases, you can get money for the stress and anxiety caused by the insurance company’s actions.
Punitive Damages: These are designed to punish the insurance company and can sometimes be a really big deal.
Attorney Fees: In many bad faith cases, you can actually get your attorney fees paid by the insurance company.
Interest: You might also be entitled to interest on the money the company should have paid you from the beginning.

The Challenges You’ll Face

Let me be straight with you – bad faith lawsuits aren’t easy. Here are some of the hurdles you’ll encounter:

High Legal Standards: Colorado courts have set the bar pretty high for what counts as bad faith. You need strong evidence that the company’s conduct was truly unreasonable.
Time and Expense: Lawsuits are expensive and time-consuming. Even if you’re working with an attorney on a contingency fee basis (meaning they only get paid if you win), you might still be responsible for costs like expert witness fees and court filing fees.
Insurance Company Resources: You’re going up against companies with deep pockets and experienced legal teams. They’ll fight hard to avoid being found liable for bad faith.
Uncertain Outcomes: Even with a strong case, there’s no guarantee you’ll win. Juries can be unpredictable, and insurance companies are good at presenting their side of the story.
Stress: Litigation is stressful, period. You’ll be dealing with depositions (where you answer questions under oath), requests for tons of documents, and all the other ins and outs of the legal process.

Comparing Your Two Main Options

So, how do you decide between filing a commissioner complaint and going after them with a bad faith lawsuit? Let me break down the key differences:

Speed and Efficiency

Commissioner Complaints: Usually wrapped up within 30-60 days. The process is pretty streamlined and designed to get quick results.
Bad Faith Lawsuits: Can take anywhere from several months to several years. The legal process is thorough but definitely moves at a slower pace.

If you need a quick fix and don’t care about anything beyond getting your claim paid, a commissioner complaint is probably your best bet.

Cost Considerations

Commissioner Complaints: Completely free to file and pursue. You can totally handle the whole thing yourself if you want.
Bad Faith Lawsuits: Can be expensive. Even with a contingency fee attorney, you might be on the hook for costs. And if you lose, you could be out thousands of dollars.

For smaller claims, the economics of a lawsuit often just don’t make sense.

Potential Recovery

Commissioner Complaints: Limited to getting your original claim paid. No extra money for your trouble or stress.
Bad Faith Lawsuits: Can result in much larger recoveries, including money for your emotional distress, punitive damages, and even attorney fees.

If you’ve suffered significant damages beyond just your original claim, a lawsuit might be worth the extra time and risk.

Strength of Evidence Required

Commissioner Complaints: You just need to show that the insurance company’s conduct broke regulations or was just plain unreasonable.
Bad Faith Lawsuits: You need to meet higher legal standards and have really strong evidence of unreasonable conduct and that they knew it was unreasonable.

If your case feels borderline, you might have better luck with a commissioner complaint.

Control Over the Process

Commissioner Complaints: The Division of Insurance calls the shots on the investigation and resolution process. You give them information, but they make the decisions.
Bad Faith Lawsuits: You and your attorney control the strategy and decision-making (though you still have to follow court rules, of course).

If you want more control over how your case is handled, litigation might be more appealing.

Scenarios: Which Path Makes Sense?

Let me walk you through some common situations and explain which approach typically works best:

Scenario 1: The Denied Auto Claim

Sarah was rear-ended at a red light. The damage to her car was clearly the other driver’s fault, but his insurance company denied her $8,000 repair claim, saying their insured wasn’t responsible for the accident.

Best approach: Commissioner complaint first. The facts are pretty straightforward, the amount isn’t huge, and Sarah just wants her car fixed. A complaint will likely get the insurance company’s attention quickly, and they’ll probably pay the claim rather than deal with regulatory scrutiny.

Scenario 2: The Delayed Disability Claim

Mike has been paying disability insurance premiums for 15 years. When he became disabled due to a back injury, his insurance company has been stringing him along for eight months, asking for the same medical records multiple times and scheduling unnecessary medical exams. He’s lost his house and is facing bankruptcy.

Best approach: Bad faith lawsuit. Mike has suffered significant damages beyond just his original claim. The insurance company’s conduct looks clearly unreasonable, and he desperately needs compensation for all the losses he’s suffered due to their delays.

Scenario 3: The Homeowner’s Water Damage Dispute

Janet’s basement flooded due to a burst pipe. Her homeowner’s insurance company paid for some of the damage but denied coverage for her finished basement, claiming the damage was due to “seepage” (which isn’t covered) rather than a sudden pipe burst. The denied portion is worth about $25,000.

Best approach: This one could go either way! If Janet just wants the claim paid and the facts clearly support her position, a commissioner complaint might work. But if the insurance company is twisting policy language in a way that seems deliberately unfair, a bad faith lawsuit might be worth considering to get the full amount.

Scenario 4: The Pattern of Bad Behavior

Tom’s insurance company has been giving him the runaround for months. They’ve denied his claim three times for different reasons, ignored evidence he’s provided, refused to return his phone calls, and made contradictory statements about what his policy covers. His original claim is for $15,000, but he’s had to take time off work and hire contractors to prevent further damage.

Best approach: Bad faith lawsuit. The insurance company’s conduct shows a clear, ugly pattern of unreasonable behavior, and Tom has suffered additional damages beyond just the claim itself. This is exactly the kind of case bad faith laws were designed to address.

The Strategic Approach: Why Not Both?

Here’s something a lot of people don’t realize – you don’t always have to pick just one path. Sometimes the smart move is to pursue both options, either at the same time or one after the other.

Starting with a Commissioner Complaint

In many cases, I actually recommend starting with a commissioner complaint even if you’re thinking about a lawsuit. Here’s why:

It’s Quick and Free: You can file a complaint while you’re still gathering evidence and deciding whether to go for litigation.
It Might Resolve Everything: If the complaint gets your claim paid, you might not need to file a lawsuit at all!
It Creates a Paper Trail: Having a complaint on file with the Division of Insurance can be super helpful evidence if you decide to file a bad faith lawsuit later.
It Shows You Tried: Courts and juries like to see that you attempted to resolve the issue before resorting to a lawsuit.

When to Move to Litigation

If your commissioner complaint doesn’t resolve the issue, or if it becomes crystal clear that you’ve suffered damages beyond just your original claim, it might be time to switch gears and consider a lawsuit.

The key is timing. In Colorado, you generally have a limited time to file a bad faith lawsuit (usually tied to the statute of limitations for breach of contract claims), so you can’t just wait forever.

Using One to Support the Other

Sometimes information you get through the commissioner complaint process can be helpful in a lawsuit, and vice versa. For example, if the Division of Insurance finds that the company clearly violated regulations, that can be powerful evidence in a bad faith case.

Working with Legal Professionals: When You Need Help

Let’s be honest – while you can definitely handle a commissioner complaint on your own, bad faith lawsuits are complex legal matters that really, really require professional help.

When to Call an Attorney

You should definitely consider talking to an attorney if:

Your Claim Is Large: If you’re dealing with a significant amount of money, the stakes are high enough to justify legal fees.
The Company’s Conduct Seems Clearly Unreasonable: If you’re dealing with obvious bad faith behavior, an experienced attorney can help you document it properly and build a strong case.
You’ve Suffered Additional Damages: If the insurance company’s conduct has cost you money beyond just your original claim, you need someone who understands how to calculate and prove those damages.
The Legal Issues Are Complex: Some insurance disputes involve complicated policy language or coverage issues that really need legal expertise.
You’re Not Comfortable Handling It Yourself: There’s absolutely nothing wrong with wanting professional help, especially when you’re already dealing with a stressful situation.

What to Look for in a Bad Faith Attorney

Not all attorneys are created equal when it comes to insurance bad faith cases. Here’s what you should look for:

Specific Experience: You want someone who regularly handles insurance bad faith cases, not just general litigation attorneys. It’s a specialized field.
Track Record: Look for attorneys who have actually won bad faith cases, not just settled them.
Resources: Bad faith cases can require expert witnesses and extensive investigation. Make sure your attorney has the resources to properly handle your case.
Communication Style: You’ll be working with this person for months or possibly years. Make sure you’re comfortable with how they communicate and that they keep you in the loop.
Fee Structure: Most bad faith attorneys work on contingency, but make sure you fully understand what costs you might be responsible for.

At McCormick & Murphy P.C., we’ve been handling insurance bad faith cases for over 30 years. We totally get how frustrating it can be when insurance companies don’t treat you fairly, and we know how to hold them accountable. You can check out our track record and client reviews to see how we’ve helped other folks in similar situations.

Questions to Ask a Potential Attorney

When you’re interviewing attorneys, here are some good questions to ask:

How many bad faith cases have you handled in the past year?
What’s your success rate in these types of cases?
How do you typically communicate with clients during the case?
What costs might I be responsible for?
How long do you expect my case to take?
What do you think my case is worth?
Have you handled cases against this particular insurance company before?

The Complaint Process: Step-by-Step Guide

Since many people start with a commissioner complaint, let me walk you through exactly how to do it:

Gathering Your Documentation

Before you file anything, you need to get organized. Here’s what you should collect:

Your Insurance Policy: You’ll need the actual policy documents, not just the summary or declarations page.
All Correspondence: Every letter, email, and text message between you and the insurance company.
Claim Documentation: Your original claim, any forms you filled out, estimates, photos, medical records – basically everything related to your claim.
Payment Records: Proof of your premium payments and any payments the company has made.
Notes: If you’ve had phone conversations with the insurance company, write down what was discussed, who you talked to, and when. This could make all the difference later.

Filing Your Complaint

You can file your complaint with the Colorado Division of Insurance in several ways:

Online: Head over to the Division of Insurance website and use their online complaint form. This is usually the fastest and easiest option.
By Phone: Call the Division’s consumer services line. They can help you file a complaint over the phone.
By Mail: You can download a complaint form and mail it in, but this will obviously take longer.
In Person: You can visit the Division’s offices in Denver, but most people find the online option much more convenient.

What Information You’ll Need

The complaint form will ask for specific information:

Your Contact Information: Name, address, phone number, email.
Insurance Company Information: Company name, policy number, agent information.
Description of the Problem: Be super specific about what happened and when. Include dates, names of people you talked to, and exactly what the company did or didn’t do.
What You Want: Be crystal clear about what you want the insurance company to do. Pay your claim? Reconsider a denial? Provide better customer service?
Supporting Documents: You can upload or mail copies of relevant documents.

Following Up on Your Complaint

Once you file your complaint, here’s what you can expect:

Confirmation: You’ll get a confirmation with a complaint number. Keep this handy for your records.
Company Response: The insurance company will have a chance to respond to your complaint. You’ll usually get a copy of their response.
Resolution: In many cases, the company will resolve the issue at this point. If not, the Division might investigate further.
Communication: The Division will keep you updated on the status of your complaint.

Understanding Bad Faith Legal Standards in Colorado

If you’re considering a bad faith lawsuit, you need to understand what Colorado courts actually require. This isn’t just about being unhappy with your insurance company – there are specific legal standards you have to meet.

The Reasonableness Standard

In Colorado, the big question in most bad faith cases is whether the insurance company acted reasonably. This doesn’t mean they have to be perfect or that they can’t make mistakes. It means their conduct has to be within the range of what a reasonable insurance company would do under similar circumstances.

What Courts Look At: Judges and juries will consider things like:
- Did the company properly investigate your claim?
- Did they have a reasonable basis for their decisions?
- Did they communicate with you appropriately?
- Did they follow their own internal procedures?
- Did they consider all relevant evidence?
The Company’s Perspective: Insurance companies will argue that they were just being careful with their money and following standard procedures. They’ll try to show that their conduct was reasonable even if you didn’t like the outcome.

Common Types of Unreasonable Conduct

Here are some examples of behavior that Colorado courts have found to be unreasonable:

Inadequate Investigation: Failing to properly investigate a claim, ignoring relevant evidence, or refusing to consider information that supports the claim.
Unreasonable Delays: Taking way too long to investigate or pay a claim without a good reason.
Misrepresenting Policy Terms: Telling you that your policy doesn’t cover something when it clearly does, or twisting policy language in a way that’s obviously wrong.
Failure to Communicate: Not returning phone calls, failing to explain claim denials, or giving you contradictory information.
Bad Faith Settlement Practices: Making lowball offers without any real justification or refusing to negotiate fairly.

Proving Your Case

In a bad faith lawsuit, you’ll need to prove several things:

Coverage: You need to show that your loss is actually covered under your insurance policy.
Breach of Contract: You need to prove that the insurance company didn’t fulfill their obligations under the policy.
Unreasonable Conduct: This is the very heart of your bad faith claim. You need solid evidence that the company’s conduct was unreasonable.
Damages: You need to show that you suffered harm because of the company’s unreasonable conduct.

Types of Evidence That Help

Strong bad faith cases usually include evidence like:

Internal Company Documents: Emails, memos, and other documents that show what the company was really thinking.
Expert Testimony: Insurance professionals who can testify about industry standards and whether the company’s conduct was reasonable.
Pattern Evidence: Evidence that the company has treated other customers the same way.
Timeline Documentation: Clear records showing delays, missed deadlines, and other problems with the company’s handling of your claim.

Recent Changes in Colorado Insurance Law

Colorado insurance law isn’t static – it changes over time as new laws are passed and court decisions are made. Here are some recent developments you should know about:

2023 Legislative Changes

The Colorado legislature has been pretty active in recent years when it comes to insurance regulation:

Enhanced Consumer Protections: New laws have made it easier for the Division of Insurance to investigate complaints and hit companies with penalties that don’t treat consumers fairly.
Transparency Requirements: Insurance companies now have to be more open about how they handle claims and make decisions.
Time Limits: There are now stricter time limits for how long insurance companies can take to investigate and pay claims.

Court Decisions

Colorado courts continue to refine what counts as bad faith conduct:

Expanded Liability: Some recent decisions have made it a bit easier for consumers to prove bad faith in certain types of cases.
Damage Awards: Courts have been more willing to award significant damages in cases involving clear bad faith conduct.
Procedural Changes: New rules have streamlined some aspects of insurance litigation.

What This Means for You

These changes generally make it easier for consumers to hold insurance companies accountable, both through the regulatory process and through lawsuits. However, insurance companies have also adapted their practices in response to these changes.

The bottom line is that you have more tools available today than you might have had a few years ago, but you still need to understand how to use them effectively.

Making Your Decision: A Practical Guide

Alright, let’s get down to brass tacks. How do you actually decide which path to take? Here’s a practical guide I use when helping clients think through their options:

The Quick Assessment Questions

Start by asking yourself these questions:

How Much Money Are We Talking About?: If your claim is under $10,000 and you haven’t suffered additional damages, a commissioner complaint is probably your best bet. If we’re talking about much larger amounts or you’ve been significantly harmed by the company’s conduct, a lawsuit might be worth considering.
How Clear-Cut Is Your Case?: If the insurance company’s conduct is obviously wrong and you have good documentation, either approach might work. If your case is more complex or borderline, you might need the more thorough investigation that comes with litigation.
What Do You Actually Want?: If you just want your claim paid and don’t care about anything else, start with a commissioner complaint. If you want the company to be held accountable and compensated for all your damages, you’re probably looking at a lawsuit.
How Much Time and Energy Do You Have?: Commissioner complaints are relatively low-maintenance. Lawsuits require significant time and emotional investment.

The Financial Analysis

Let’s talk numbers. Here’s how to think about the financial aspects:

Commissioner Complaints:

Cost: $0
Time investment: Minimal
Potential recovery: Your original claim amount
Risk: None

Bad Faith Lawsuits:

Cost: Could be significant if you lose (for court costs, expert fees, etc.)
Time investment: Substantial
Potential recovery: Could be much larger than your original claim
Risk: You could end up with nothing and be out costs

The Break-Even Point: Generally speaking, if your total damages (including your original claim and any additional losses) are less than about $25,000, the economics of a lawsuit are questionable unless the insurance company’s conduct was particularly outrageous.

The Strength Assessment

Be honest about the strength of your case:

Strong Cases: Clear policy coverage, obvious company misconduct, good documentation, significant damages.
Moderate Cases: Some coverage questions, questionable company conduct, decent documentation, moderate damages.
Weak Cases: Coverage disputes, company conduct that might be reasonable, poor documentation, minimal damages.

Strong cases can succeed with either approach. Moderate cases might do better with commissioner complaints. Weak cases probably aren’t worth pursuing through either method.

The Personal Factors

Don’t forget about the personal aspects:

Your Stress Level: Are you already dealing with a lot? Lawsuits definitely add stress, while commissioner complaints are relatively low-key.
Your Risk Tolerance: Are you comfortable with the uncertainty of litigation, or do you prefer the more predictable commissioner complaint process?
Your Timeline: Do you need a quick resolution, or can you wait for the potentially larger payoff of a successful lawsuit?

Common Mistakes People Make

Over the years, I’ve seen people make the same mistakes over and over again. Here are the big ones to avoid:

Waiting Too Long

Both commissioner complaints and bad faith lawsuits have time limits. Don’t wait until the last minute to take action. The sooner you start, the more options you’ll have.

Not Documenting Everything

I cannot stress this enough – document everything. Every phone call, every letter, every email, every text message, every interaction with the insurance company. You might not think it’s important now, but it could be super important later.

Accepting the First “No”

Insurance companies are counting on you to give up after they deny your claim once. Don’t do it! If you think they’re wrong, fight back.

Not Understanding Your Policy

You can’t effectively challenge an insurance company’s decision if you don’t understand what your policy actually says. Read it carefully, and don’t be afraid to ask questions.

Going It Alone When You Shouldn’t

There’s nothing wrong with handling a simple commissioner complaint yourself, but please don’t try to take on a complex bad faith lawsuit without professional help. It’s just too much.

Focusing Only on the Money

While the financial aspects are important, don’t forget about the other factors. Sometimes the “smaller” option that resolves things quickly is better than the “bigger” option that drags on for years and years.

What Happens After You Make Your Choice

Let’s talk about what you can expect once you’ve decided on your path:

If You Choose a Commissioner Complaint

Week 1-2: File your complaint and gather any additional documentation the Division requests.
Week 3-4: The insurance company responds to your complaint. You’ll get a copy of their response.
Week 5-8: The Division reviews the response and decides whether additional investigation is needed.
Week 8-12: Resolution. In many cases, the company will agree to pay your claim or make other changes to resolve the complaint.
Ongoing: If the Division finds violations, they might take regulatory action against the company.

If You Choose a Bad Faith Lawsuit

Month 1-2: Meet with attorneys, gather evidence, and file your lawsuit.
Month 3-6: Discovery process begins. Both sides request documents and take depositions.
Month 6-12: Continue discovery, possibly bring in expert witnesses, and engage in settlement discussions.
Month 12-24: Trial preparation, mediation, and possibly trial.
Month 24+: If you win, there might be appeals or post-trial motions.

If You Do Both

Immediate: File a commissioner complaint while consulting with attorneys about a potential lawsuit.
Short-term: See if the complaint resolves the issue. If not, proceed with the lawsuit while the complaint is still pending.
Long-term: Use information from both processes to strengthen your position.

The Bottom Line: Making the Right Choice for You

Here’s what it all comes down to: there’s no one-size-fits-all answer to whether you should file a commissioner complaint or pursue a bad faith lawsuit. The right choice depends on your specific situation, your goals, and your resources.

But here are some general guidelines that I’ve found helpful over the years:

Start with a commissioner complaint if:

Your claim is relatively small (under $25,000).
You just want your claim paid and don’t care about additional damages for your trouble.
The insurance company’s conduct seems unreasonable but not necessarily illegal in a big way.
You want a quick, low-risk resolution.
You’re not ready to commit to the time and expense of litigation.

Consider a bad faith lawsuit if:

You’re dealing with a large claim or significant additional damages.
The insurance company’s conduct is clearly unreasonable and has caused you substantial harm.
You want to hold the company accountable and send a clear message.
You have strong evidence and are prepared for a potentially long fight.
The potential recovery justifies the time, expense, and risk of litigation.

Think about doing both if:

You want to try the quick, free option first while keeping your legal options open.
You’re dealing with a moderate-sized claim that could go either way.
You want to create a paper trail and gather more evidence before deciding on litigation.

Remember, you absolutely don’t have to make this decision alone. If you’re unsure which path makes sense for your situation, it’s totally worth talking to an experienced insurance attorney. Most of us offer free consultations, and we can help you understand your options without any commitment.

At McCormick & Murphy P.C., we’ve been helping Colorado residents deal with insurance companies for over 30 years. We understand how frustrating it can be when companies don’t treat you fairly, and we know how to hold them accountable. Whether you need help with a commissioner complaint or you’re ready to file a bad faith lawsuit, we’re here to help. You can reach us at (719) 800-9407 or visit us at 929 W Colorado Ave, Colorado Springs.

The most important thing is that you don’t just accept unfair treatment from your insurance company. You have rights, and you have options. Whether you choose to file a commissioner complaint, pursue a bad faith lawsuit, or try both approaches, the key is to take action. Insurance companies are counting on you to give up and go away. Don’t let them win.

Your insurance company has a legal duty to treat you fairly. When they don’t, you have the power to do something about it. The question isn’t whether you should fight back – it’s which weapon you should choose for the battle.