Dealing with Insurance Companies in Colorado: Your Rights and the Good Faith Rule

Table of Contents show

You know that feeling, right? You’ve been paying your insurance premiums like clockwork for years – sometimes for decades! You never miss a payment, always doing your part. Then, out of nowhere, disaster strikes. You need to file a claim, and suddenly, your insurance company, the one you trusted to have your back, starts acting… well, weird. They’re slow, unresponsive, or just plain deny your claim for reasons that make no sense.

Yep, that frustrating “runaround” is exactly what Colorado’s covenant of good faith and fair dealing is designed to protect you from.

Believe me, I’ve seen too many good folks get burned by insurance companies that seem to completely forget their promise when you need them most. That’s why I want to chat with you about what this important legal protection actually means for you as a Colorado resident, and even more importantly, what you can do when your insurance company isn’t playing fair.

So, What’s This “Covenant of Good Faith and Fair Dealing” All About?

Let’s break it down. The covenant of good faith and fair dealing isn’t some super fancy legal term that only lawyers care about. Nope, it’s a very real protection that’s baked right into every single insurance contract you sign here in Colorado.

Think of it this way: when you buy insurance, you’re not just getting a piece of paper. You’re stepping into a relationship. You pay your premiums, and in return, the insurance company promises to have your back when things go wrong. The covenant of good faith and fair dealing is like the unspoken, but very real, rule that says both of you need to be honest and fair with each other throughout that relationship. It’s about trust and doing the right thing.

Two Ways Insurance Companies Can Act Badly (Legally Speaking)

Colorado recognizes two main types of “bad faith” claims, and knowing the difference can be a big deal for your case.

First-Party Bad Faith is when your own insurance company treats you unfairly. This is probably what most people think of when they hear “insurance bad faith.” Maybe your auto insurer is dragging their feet on your collision claim after a fender bender, or your homeowner’s insurance is offering you way too little after a pipe bursts and floods your basement. It’s about your claim against your company.

Third-Party Bad Faith is a little trickier, but super important. This happens when your insurance company fails to properly defend you against a claim from someone else, or doesn’t settle a reasonable claim against you within your policy limits. Let’s say someone sues you for $100,000 after an accident, and your insurance company has a chance to settle for $50,000 (which is within your policy limits). But they refuse, and you end up with a court judgment for $200,000 – far more than your policy covers. That’s third-party bad faith, and it can leave you on the hook for a lot of money.

Colorado’s Unique Take

Here’s where Colorado really stands out. Unlike some states that make you prove your insurance company was being truly evil or malicious (like, twirling a mustache and cackling while denying your claim), Colorado uses what’s called a “reasonableness” standard. You don’t have to show they were trying to screw you over; you just need to prove they weren’t being reasonable in how they handled your claim. That’s a huge win for you as a policyholder!

How Colorado Courts Look at Bad Faith Cases

Colorado courts have developed a pretty clear way of looking at these kinds of cases, and it’s helpful to know how they approach things.

The “Reasonableness” Check

When a Colorado court looks at whether your insurance company acted in bad faith, they’re basically asking one main question: “Would a reasonable insurance company have acted the same way in this situation?”

Again, this is good news for you. It means you don’t have to prove your insurance company was intentionally trying to be a villain. You just have to show they weren’t acting like a responsible, fair company should.

What Courts Think About

Colorado courts consider several things when deciding if an insurance company acted reasonably:

How strong your claim was. If you had a rock-solid claim that any fair person would approve, and your insurer still denied it, that’s a big red flag.
How much they actually investigated. Did your insurance company truly look into your claim, or did they just give it a quick glance and rubber-stamp a denial?
How they talked to you. Were they honest about why they were denying your claim, or did they just give you the runaround and keep you in the dark?
Did they follow their own rules? Insurance companies have internal guidelines they’re supposed to follow. If they ignored their own playbook, that’s not a good look.

Examples of Bad Faith in Colorado

Let me paint you some pictures of what bad faith actually looks like in everyday life.

The Endless Delay Game

Sarah’s house floods during one of Colorado’s famous spring snowmelts. She files a claim with her homeowner’s insurance, hoping they’ll send an adjuster out quickly so she can start repairs and get her life back on track.

Instead, her insurance company takes three months to send anyone out. When the adjuster finally shows up, they say the delay has made it impossible to tell what damage was from the original flood versus what happened during those three months of sitting water. “Claim denied!” they say.

This is classic bad faith. A reasonable insurance company would have investigated promptly, not let evidence rot while they dragged their feet.

The “Lowball and Don’t Budge” Move

Mike gets rear-ended on I-25, and his car is totaled. The other driver’s insurance company accepts responsibility – no question about who’s at fault. But when it’s time to pay for Mike’s car, they offer him $8,000 for a vehicle that every comparable listing shows is worth $15,000.

When Mike provides solid evidence of his car’s actual value, the insurance company doesn’t budge. They don’t explain why their valuation is so low, and they don’t provide their own comparable sales data. They just keep saying, “$8,000 is our final offer.”

That’s bad faith. A reasonable insurance company would either explain their valuation clearly or adjust their offer when presented with solid evidence.

The “Fishing Expedition” for Your Records

After a serious car accident, Janet files a claim for her medical expenses and ongoing treatment. Her insurance company asks for her medical records related to the accident – totally fair. But then they demand records going back 20 years for completely unrelated conditions, like her childbirth 15 years ago.

When Janet’s lawyer asks why they need records from her childbirth for a back injury claim, the insurance company can’t give a straight answer. They just keep saying they need “all medical records” to process the claim.

This kind of blanket demand for irrelevant information is often a bad faith tactic designed to delay the claim or hope you’ll just give up.

The Legal Story: Key Colorado Cases

Colorado’s bad faith law didn’t just appear out of nowhere. It’s been shaped by decades of court decisions, and understanding a few of the important cases can help you see how the law applies to your situation.

Goodson v. American Standard Insurance Co. (1982)

This Colorado Supreme Court case is basically the cornerstone of bad faith law in our state. The court said that insurance companies have a duty to settle claims in good faith and that they can break this duty even if they weren’t trying to be dishonest.

What this means for you: You don’t have to prove your insurance company was trying to be evil. You just have to show they weren’t being reasonable.

Farmers Group, Inc. v. Trimble (1985)

This case made it clear that in Colorado, you can sue for bad faith even if your insurance company eventually pays your claim. The key is whether they acted unreasonably during the process of handling your claim, not just the final outcome.

This is huge because it means insurance companies can’t just drag out your claim for months and then pay up at the last minute to avoid any consequences.

American Family Mutual Insurance Co. v. Allen (2010)

This more recent case really hammered home that insurance companies need to conduct reasonable investigations. They can’t just deny claims without doing their homework first.

The court also made it clear that if an insurance company’s investigation is inadequate, that can be evidence of bad faith, even if they had some reason to question the claim initially.

What Insurance Companies Must Do Under Colorado Law

Knowing what your insurance company is legally required to do can help you spot when they’re not living up to their end of the bargain.

Their Job: Investigate Properly

Your insurance company can’t just take your word for what happened, but they also can’t ignore your claim or investigate it half-heartedly.

They must investigate promptly. There’s no specific deadline in the law, but “promptly” generally means within a few weeks for straightforward claims, not months and months.
The investigation must be thorough. They need to look at all relevant evidence, not just cherry-pick facts that support denying your claim.
They must investigate fairly. This means they can’t start your claim assuming you’re lying or looking for reasons to deny it.

Their Job: Communicate Clearly

Insurance companies can’t just disappear on you during the claims process.

They must respond to your calls and emails. If you reach out with questions about your claim, they need to get back to you within a reasonable time.
They must explain their decisions. If they deny your claim or offer less than you think you deserve, they need to tell you why in clear, understandable terms.
They must be honest. They can’t mislead you about your coverage, the claims process, or what they found in their investigation.

Their Job: Settle Fairly

When it comes to settling claims, insurance companies have some specific obligations.

They must consider your interests, not just their own. This is super important in third-party claims where you might be personally liable for amounts above your policy limits.
They must evaluate settlement opportunities reasonably. If there’s a fair chance to settle a claim within policy limits, they need to seriously consider it.
They can’t refuse reasonable settlements just to save a buck. If they turn down a fair settlement offer and you end up worse off because of it, that could be bad faith.

Red Flags: How to Spot Bad Faith Behavior

After years of handling these cases, I’ve learned to recognize the warning signs that an insurance company might be acting in bad faith. Here’s what to watch out for:

Communication Warning Signs

They suddenly stop returning your calls. If your adjuster or claims representative becomes impossible to reach, that’s a definite red flag.
They keep changing their story. If the reason for delaying or denying your claim keeps shifting, they might be making it up as they go along.
They demand irrelevant information. Asking for your complete medical history when you’re filing a property damage claim is a classic stalling tactic.
They won’t put things in writing. If they’re only willing to discuss important aspects of your claim over the phone, they might be trying to avoid creating a paper trail.

Investigation Warning Signs

They take forever to start investigating. While there’s no hard deadline, waiting months to even begin looking into your claim is unreasonable.
They don’t talk to key witnesses. If there are obvious people they should talk to about your claim and they don’t, that’s a problem.
They ignore evidence that supports your claim. Cherry-picking only the facts that help them deny your claim is classic bad faith behavior.
They don’t use qualified experts. If they hire someone to evaluate your claim who clearly doesn’t have the right expertise, that’s suspicious.

Settlement Warning Signs

They make lowball offers without any explanation. Offering significantly less than your claim is worth without showing their math is a huge red flag.
They refuse to negotiate. A reasonable insurance company will at least discuss their valuation with you if you disagree.
They ignore deadlines. If there are time limits involved in your claim (like policy deadlines or statute of limitations), and they’re cutting it close without explanation, that’s concerning.
They make settlement conditional on unrelated waivers. Asking you to give up rights that have nothing to do with your current claim is a common bad faith tactic.

What You Can Get Back (Damages)

If you can prove your insurance company acted in bad faith, Colorado law allows you to recover several types of damages. This is where things can get really important from a financial standpoint.

What You Should Have Gotten (Contract Damages)

First, you’re entitled to exactly what you should have received under your insurance policy in the first place. This includes:

The full amount of your claim. If your insurance company wrongly denied a $50,000 claim, you’re entitled to that $50,000.
Interest on the unpaid amount. The money you should have received months or years ago is worth more than the same amount today, and Colorado law recognizes that.
Consequential damages. If the insurance company’s delay or denial caused you additional losses (like having to pay for temporary housing because they wouldn’t fix your roof), you might be able to recover those too.

More Than Just the Policy (Tort Damages)

But here’s where it gets really interesting. In Colorado, insurance bad faith is considered a “tort” (a civil wrong that causes a claimant to suffer loss or harm resulting in legal liability for the person who commits the tortious act), which means you might be entitled to additional damages beyond just your original claim.

Emotional distress damages. Dealing with a bad faith insurance company can be incredibly stressful, and Colorado courts recognize that this stress has real value.
Economic losses beyond the policy. If the insurance company’s bad faith caused you to lose income, incur extra expenses, or suffer other financial harm, you might be able to recover those losses.
Punitive damages. In cases where the insurance company’s conduct was particularly outrageous, you might be entitled to punitive damages. These aren’t about compensating you; they’re designed to punish the company and stop them from doing the same thing to someone else.

Your Legal Fees Covered (Attorney’s Fees)

In many bad faith cases, you can also recover your attorney’s fees. This is a huge deal because it means you don’t have to worry about your recovery being eaten up by legal bills. Colorado has a specific rule that can make the insurance company pay your lawyer’s fees on top of your settlement or judgment.

The Claims Process: Your Friendly Guide

Understanding how the claims process should work can help you spot when your insurance company is going off the rails.

When You First File Your Claim

When you file a claim, your insurance company is supposed to acknowledge it quickly and start their investigation. In Colorado, “quickly” typically means within a few days to a week, not weeks or months.

Write everything down. From day one, keep records of every phone call, email, and piece of paper related to your claim. This documentation could be super important if you end up in a bad faith dispute.
Be thorough, but honest. Give them all the information they need, but don’t exaggerate or embellish. If they catch you in even a small lie, it can hurt your credibility later.
Ask questions. Don’t be shy! Ask your adjuster to explain the process, timeline, and what they need from you. A good insurance company will be happy to walk you through it.

The Investigation Phase

This is where a lot of bad faith problems start. Your insurance company has a duty to investigate your claim reasonably, but what does that actually mean?

They should investigate promptly. While the complexity of your claim affects how long an investigation should take, your insurance company shouldn’t sit on your claim for weeks without explanation.
They should investigate thoroughly. This means looking at all relevant evidence, not just the pieces that support their preferred outcome.
They should keep you informed. You shouldn’t have to wonder what’s happening with your claim. Your insurance company should update you regularly on their progress.

Settlement Talks

If your insurance company accepts your claim, the next step is usually discussing how much they’ll pay. This is another area where bad faith can sneak in.

They should make reasonable offers. Your insurance company’s initial offer doesn’t have to be perfect, but it should be in the ballpark of fair.
They should explain their valuation. If you disagree with their offer, they should be able to show you how they came up with their number.
They should negotiate fairly. This means actually considering your evidence and arguments, not just sticking to their initial offer no matter what.

Building Your Bad Faith Case

If you think your insurance company is acting in bad faith, you need to start building your case right away. Here’s what you should be doing:

Document, Document, Document!

I can’t stress this enough – documentation is absolutely key in bad faith cases.

Keep a claim diary. Write down every phone call, including who you talked to, when, and what was discussed. This might seem like overkill, but it can be invaluable later.
Save all written communications. Every email, letter, and text message related to your claim should be preserved. Don’t assume you can get copies from the insurance company later.
Photograph everything. If your claim involves property damage, take tons of photos before, during, and after any repairs. The insurance company’s photos might not tell the whole story.
Keep receipts and records. Any expenses you incur because of the delay or denial of your claim could be recoverable damages.

Get Expert Help When You Need It

Depending on your type of claim, you might need expert opinions to back up your case.

Property damage claims might require contractors, engineers, or appraisers to evaluate the damage and repair costs.
Personal injury claims typically need medical experts to explain your injuries and treatment needs.
Business interruption claims might require accountants or business valuation experts.

Don’t wait for your insurance company to hire experts. If you think you need expert support for your claim, get it yourself.

Know When to Call a Lawyer

Look, I’m not saying you need a lawyer for every insurance claim. But there are definitely situations where having legal representation can make a huge difference.

Your claim is large. If you’re looking at significant money – whether it’s property damage, medical bills, or lost income – the stakes are high enough that you should consider getting professional help.
The insurance company is being unreasonable. If you’re seeing multiple red flags and the insurance company won’t budge, it might be time to bring in reinforcement.
You’re not comfortable handling negotiations. There’s no shame in admitting that dealing with insurance companies isn’t your strong suit. That’s what lawyers are for!

At McCormick & Murphy P.C., we’ve been handling insurance bad faith cases since 1995. We understand how frustrating it can be when your insurance company isn’t treating you fairly, and we’re here to help level the playing field.

Common Insurance Company Playbook Tactics

Over the years, I’ve seen insurance companies use the same tricks over and over again. Knowing what to expect can help you recognize when you’re being manipulated.

The Paper Chase

This is where the insurance company keeps asking for more and more documentation, hoping you’ll either give up or they’ll find some tiny technicality to deny your claim.

They might start by asking for basic info, which is totally reasonable. But then they ask for more detailed records. Then they want records from other sources. Then they need the records in a different format. Before you know it, you’ve been chasing paperwork for months, and your claim still hasn’t moved forward.

How to handle it: Provide reasonable documentation promptly, but don’t be afraid to ask why they need specific information. If their requests seem excessive or irrelevant, that might be a sign of bad faith.

The Lowball and Stall

This tactic involves making an obviously inadequate settlement offer and then dragging out negotiations as long as possible. The hope is that you’ll get so frustrated that you’ll just accept their low offer to get it over with.

You might see this with property damage claims where they offer you half of what your damaged property is actually worth. When you object and provide evidence of the real value, they don’t increase their offer much. Instead, they ask for more information, schedule another inspection, or find other ways to delay.

How to handle it: Don’t accept the first offer if it’s clearly inadequate. Do your homework on what your claim is actually worth, and don’t be afraid to push back with evidence.

The “Expertise” Shell Game

This is where the insurance company hires “experts” who aren’t really qualified to evaluate your claim, or they ignore their own experts when the opinions don’t go their way.

For example, they might hire a general contractor to evaluate specialized structural damage, or a family doctor to review complex surgical procedures. When these unqualified experts give opinions that favor the insurance company, they treat those opinions as gospel. But if their own qualified expert supports your claim, suddenly that expert’s opinion doesn’t matter.

How to handle it: Pay attention to the qualifications of any experts the insurance company uses. If they’re not appropriately qualified, point that out. Consider hiring your own qualified expert to provide a second opinion.

The Fake Deadline

Insurance companies sometimes create artificial urgency to pressure you into accepting inadequate settlements.

They might tell you that their settlement offer expires in 48 hours, or that if you don’t accept their offer by a certain date, they’ll withdraw it and deny your claim entirely. This is usually nonsense – they’re just trying to pressure you into making a quick decision without fully considering your options.

How to handle it: Don’t let artificial deadlines pressure you into bad decisions. Ask what the real deadline is and why. If they can’t give you a good explanation, the deadline is probably fake.

Different Claims, Different Challenges

Different types of insurance claims come with their own unique challenges and potential bad faith issues.

Auto Insurance Claims

Car accident claims are probably the most common type of insurance claim, and they come with their own set of potential problems.

Who’s at fault? Liability disputes are common. Your insurance company might agree an accident happened but argue about who was at fault. This is often legitimate, but sometimes insurance companies will dispute obvious liability just to avoid paying claims.
Medical bill disagreements. These can be tricky. Your insurance company might agree you were injured but question whether specific treatments were necessary or related to the accident. This is where having good medical documentation becomes super important.
Car value disputes. When your car is damaged or totaled, insurance companies sometimes use outdated or inappropriate comparable sales to undervalue your vehicle.

Homeowner’s Insurance Claims

Property damage claims can be complex, and there are several areas where bad faith commonly occurs.

Coverage arguments. This happens when your insurance company claims that your policy doesn’t cover the type of damage you experienced. Sometimes this is legitimate, but other times insurance companies interpret policy language unreasonably narrowly to avoid paying claims.
What caused it? Causation disputes occur when your insurance company agrees that damage happened but claims it was caused by something not covered by your policy. For example, they might claim that water damage was caused by flooding (not covered) rather than a burst pipe (covered).
How much damage? Scope of damage disputes happen when your insurance company agrees that covered damage occurred but disagrees about how extensive the damage is or what repairs are necessary.

Health Insurance Claims

Health insurance bad faith often involves coverage denials or delays in approving necessary medical treatment.

Prior authorization games. This happens when your insurance company requires prior approval for treatment but then drags out the approval process or denies approval for medically necessary care.
“Experimental” treatment denials. Insurance companies sometimes label established treatments as “experimental” or “investigational” to avoid covering them.
Network problems. These can arise when your insurance company claims that in-network providers aren’t actually in-network, or when they don’t have enough specialists in your area.

Disability Insurance Claims

Disability insurance bad faith often involves arguments about whether you’re actually disabled or whether your disability truly prevents you from working.

Surveillance tactics. It’s common in disability cases for insurance companies to hire private investigators to follow you around, hoping to catch you doing something that contradicts your claimed disability.
Medical exam disputes. This happens when insurance companies require you to be examined by their own doctors, who conveniently conclude that you’re not as disabled as you claim.
“You can do some work.” Vocational disputes occur when insurance companies claim that even if you can’t do your old job, you can do some other type of work.

Working with Insurance Adjusters

Understanding how to work effectively with insurance adjusters can actually help prevent bad faith situations from developing in the first place.

Know What to Expect

Insurance adjusters are not your best friends, but they’re not necessarily your enemies either. They’re professionals doing a job, and that job is to investigate claims and settle them for reasonable amounts.

Good adjusters will be responsive, thorough, and fair. They’ll explain the process to you, keep you informed, and make reasonable settlement offers based on solid evidence.
Bad adjusters might be unresponsive, sloppy in their investigations, or unreasonable in their settlement offers. Sometimes this is because they’re overworked or poorly trained, but sometimes it’s because they’re trying to save their company money by shortchanging claimants.

How to Talk Effectively

The way you communicate with your adjuster can have a big impact on how your claim is handled.

Be professional but friendly. You don’t have to be buddies with your adjuster, but being pleasant and professional can make the process smoother for everyone.
Be responsive. If your adjuster asks for information or documentation, provide it quickly. Delays on your end can slow down the entire process.
Be organized. Keep your documentation neat and provide information in a clear, logical way. This makes the adjuster’s job easier and shows that you’re taking the process seriously.
Ask questions. Don’t be afraid to ask about the process, timeline, or anything else you don’t understand. Good adjusters will be happy to explain things to you.

When to “Go Up the Ladder”

If you’re having problems with your adjuster, don’t just suffer in silence. Most insurance companies have ways to escalate complaints.

Talk to the adjuster’s supervisor. If your adjuster is being unresponsive or unreasonable, ask to speak with their supervisor.
Contact the insurance company’s customer service department. Most large insurance companies have customer service departments that can help resolve problems with claims handling.
File a complaint with the Colorado Division of Insurance. If the insurance company isn’t responsive to your internal complaints, you can file a formal complaint with the state regulator.
Consider hiring a lawyer. If none of these steps resolve your problems, it might be time to get legal help.

The Role of Colorado’s Division of Insurance

Colorado’s Division of Insurance is the state agency responsible for regulating insurance companies and protecting consumers. Understanding what they can and can’t do for you is important if you’re having problems with your insurance company.

What the Division Can Do

The Division of Insurance has several tools for helping consumers with insurance problems.

Investigate complaints against insurance companies and agents. If you file a complaint, they’ll contact the insurance company and ask for their side of the story.
Mediate disputes between consumers and insurance companies. Sometimes having a neutral third party involved can help resolve problems that seemed impossible.
Take enforcement action against insurance companies that break state law. This can include fines, license suspensions, or other penalties.
Provide information about insurance laws and regulations. Their website has a lot of useful information for consumers.

What the Division Can’t Do

It’s important to understand the limits of what the Division of Insurance can do for you.

They can’t force an insurance company to pay your claim. If there’s a legitimate dispute about coverage or the amount owed, the Division can’t simply order the insurance company to pay you.
They can’t provide legal advice. The Division can provide general information about insurance law, but they can’t give you specific legal advice about your situation.
They can’t represent you in court. If you end up suing your insurance company, you’ll need your own lawyer.

How to File a Complaint

If you want to file a complaint with the Division of Insurance, the process is pretty straightforward.

Gather your documentation. You’ll need to provide information about your policy, your claim, and the problems you’ve experienced with your insurance company.
File the complaint online or by mail. The Division has an online complaint form, or you can download a form and mail it in.
Be specific about the problems. Don’t just say “my insurance company is treating me unfairly.” Explain exactly what they did (or didn’t do) that you think was wrong.
Be patient. The complaint process can take several weeks or months, depending on how complicated your situation is.

When to Think About Legal Action

Not every insurance argument needs a lawsuit, but there are definitely situations where legal action might be your best option.

Signs You Might Need a Lawyer

Your claim is large. If you’re looking at tens of thousands of dollars or more, the stakes are high enough that professional representation makes sense.
The insurance company is clearly acting in bad faith. If you’re seeing multiple red flags and the insurance company won’t respond to fair requests, it might be time to escalate.
You’re not comfortable handling the situation yourself. There’s no shame in admitting that insurance disputes aren’t your area of expertise.
The insurance company has lawyers. If the insurance company has brought in their legal team, you should probably do the same.
Time is running out. Colorado has statutes of limitations for bad faith claims, so you can’t wait forever to decide whether to sue.

What to Look for in a Bad Faith Lawyer

Not all lawyers are equipped to handle insurance bad faith cases. Here’s what to look for:

Experience with bad faith cases. Insurance bad faith is a specialized area of law, and you want someone who knows the ins and outs.
A track record of success. Ask about the lawyer’s experience with cases similar to yours and what kind of results they’ve achieved.
Resources to handle complex cases. Bad faith cases often require expert witnesses and extensive information gathering, so you need a lawyer who can handle that complexity.
A fee structure that works for you. Many bad faith lawyers work on contingency, meaning you don’t pay unless you win.

At McCormick & Murphy P.C., we’ve been handling insurance bad faith cases in Colorado for nearly three decades. We understand the tactics insurance companies use, and we know how to fight back effectively. Our [suspicious link removed] at 929 W Colorado Ave puts us right in the heart of the community we serve.

The Lawsuit Process (Briefly)

If you do end up filing a lawsuit against your insurance company, here’s a quick look at what you can expect:

Discovery is where both sides gather evidence. This might include depositions (interviews under oath), requests for documents, and written questions that must be answered under oath.
Expert witnesses are often really important in bad faith cases. You might need experts to testify about insurance industry standards, the value of your claim, or the damages you suffered.
Settlement talks often continue even after a lawsuit is filed. Many bad faith cases settle before trial, sometimes for significantly more than the original claim amount.
Trial is always a possibility, though most cases settle before reaching this point. If your case does go to trial, you’ll need a lawyer who’s comfortable in the courtroom.

Stopping Bad Faith Situations Before They Start

While you can’t control how your insurance company behaves, there are things you can do to minimize the chances of ending up in a bad faith situation.

Pick Your Insurance Company Wisely

Not all insurance companies are created equal. Some have better reputations for treating their customers fairly than others.

Look into their complaint record. The Colorado Division of Insurance publishes complaint ratios for insurance companies operating in the state.
Read online reviews. While you should take online reviews with a grain of salt, patterns of complaints about claims handling can be telling.
Ask friends and family about their experiences with different insurance companies, especially their experiences filing claims.
Work with a good agent. A good insurance agent can help you choose a company with a company with a solid reputation and can sometimes even help resolve problems if they pop up.

Understand What You’re Buying

You can’t protect your rights if you don’t know what they are.

Read your policy carefully. I know insurance policies are boring and full of legal talk, but it’s important to understand what you’re buying.
Ask questions. If there’s something in your policy you don’t understand, ask your agent to explain it.
Keep your policy updated. Make sure your coverage limits are adequate and that your policy reflects any changes in your life.
Know your deductibles. Understanding how much you’ll have to pay out of pocket can help you make smart decisions about filing claims.

File Claims the Right Way

How you file and handle your claim can affect how it’s processed.

Report claims quickly. Most policies require you to report claims within a reasonable time, and delaying can give your insurance company a reason to deny your claim.
Be honest and complete. Provide all relevant information about your claim, but don’t exaggerate or embellish.
Keep good records. Document everything related to your claim from the very beginning.
Follow up regularly. Don’t just file your claim and wait. Stay in touch with your adjuster and ask for updates on the progress.

What’s New in Colorado Bad Faith Law

Colorado’s bad faith law keeps evolving, and there have been some important updates recently that could affect your rights.

Legislative Updates

The Colorado legislature sometimes makes changes to insurance law that can affect bad faith claims.

SB 21-169 (passed in 2021) has led to new regulations aimed at preventing unfair discrimination in insurance practices through the use of external consumer data and algorithms, impacting how insurers must conduct their business and handle claims. The Colorado Division of Insurance (DOI) continues to develop and implement rules under this law, with different compliance timelines for various lines of insurance (e.g., life insurance rules are in effect, while auto and health insurance regulations are still being finalized with staggered compliance dates extending into late 2025 and beyond).
The creation of the Colorado FAIR Plan (HB 23-1288, signed into law in May 2023) provides property insurance of last resort for homeowners and businesses unable to find coverage in the traditional market due to high-risk factors like wildfire exposure. The FAIR Plan began accepting applications for personal lines homeowner policies effective April 10, 2025, and expects to accept commercial property policies in Summer 2025. This plan is highly relevant to property insurance claims and can impact bad faith disputes when coverage is initially denied by standard carriers.

These changes generally favor consumers, which is great, but they also create new things that both insurance companies and claimants need to understand.

Court Decisions

Colorado courts continue to fine-tune the state’s bad faith law through their decisions in individual cases.

Recent decisions have generally been good for consumers, with courts taking a dim view of insurance company tactics designed to delay or minimize claims.
The trend seems to be toward holding insurance companies to higher standards of conduct and being more willing to find bad faith even in tricky cases.

However, courts have also emphasized the importance of following proper steps and having solid evidence to support bad faith claims.

Regulatory Changes

The Colorado Division of Insurance has also been busy updating rules that affect how insurance companies must handle claims.

New regulations have been adopted requiring more detailed explanations when claims are denied and shorter timeframes for certain types of claim investigations.
Market conduct examinations of insurance companies have become more frequent and more detailed, with regulators paying closer attention to claims handling practices.

Moving Forward: Your Next Steps

If you think your insurance company might be acting in bad faith, don’t just sit there and take it. Here’s what you should do:

Immediate Steps

Document everything. Start keeping detailed records of every interaction with your insurance company right now.
Gather your evidence. Collect all the documentation related to your claim, including your policy, correspondence with the insurance company, and any evidence supporting your claim.
Know your timeline. Colorado has statutes of limitations for bad faith claims, so don’t wait too long to take action.
Think about your options. Consider whether you want to try to resolve the situation directly with the insurance company, file a complaint with regulators, or talk to a lawyer.

Getting Professional Help

If your situation is complex or involves significant money, you should seriously consider getting professional help.

Insurance bad faith cases can be complicated, and insurance companies have experienced lawyers on their side.
The stakes are often high. A successful bad faith claim can result in significantly more compensation than just your original claim amount.
You don’t have to go it alone. At McCormick & Murphy P.C., we handle most bad faith cases on a contingent fee basis, which means you don’t pay attorney fees unless we recover money for you.

If you’re dealing with an insurance company that’s not treating you fairly, don’t hesitate to reach out. You can call us at (719) 800-9407 to discuss your situation. We’ve been fighting for Colorado consumers for nearly 30 years, and we know how to hold insurance companies accountable when they don’t live up to their obligations.

A Few Final Thoughts

Look, dealing with insurance companies can be frustrating even under the best of circumstances. When they’re not acting in good faith, it can feel overwhelming. But remember – you have rights under Colorado law, and there are people who can help you enforce those rights.

The covenant of good faith and fair dealing isn’t just legal theory – it’s a real protection that can make a real difference in your life. Don’t let insurance companies push you around when you’re entitled to fair treatment.

Whether you’re dealing with a denied claim, unreasonable delays, or lowball settlement offers, you don’t have to accept it. Colorado law is on your side, and with the right approach and the right help, you can hold your insurance company accountable for their actions.

Remember, insurance companies are counting on you not knowing your rights or not being willing to fight for them. Don’t prove them right. Stand up for yourself, document everything, and don’t be afraid to get help when you need it. You’ve paid your premiums faithfully – now it’s time for your insurance company to hold up their end of the bargain.

The bottom line is this: if you have questions about whether your insurance company is treating you fairly, or if you need help filing a complaint against your insurance company in Colorado, don’t wait. The sooner you take action, the better your chances of getting the fair treatment you deserve.