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When Bad Faith Happens to Good People


Insurance companies are in business to make money. They do so by collecting premiums and, unfortunately, sometimes by denying valid claims. But in Colorado, like most other states, the law requires insurance companies to act in good faith and employ fair dealing practices with policy holders.

What Is Good Faith?

Good faith on the part of an insurance company is a duty to perform certain activities when handling a claim, including:

  • Promptly investigate claims
  • Promptly pay claims, particularly any undisputed portions
  • Communicate regularly with policy holders regarding the status of a claim
  • Provide a prompt and reasonable explanation of a claim denial or offer some type of compromise settlement

What Is Bad Faith?

If an insurance company breaches any of the duties above, an insured might have a valid claim for negligence, bad faith, breach of contract, and breach of fiduciary duty. A breach of fiduciary duty occurs when an insurance company assumes responsibility to act on your behalf (by accepting your premiums) but then fails to act in good faith for your benefit (denying your claims). In certain circumstances, Coloradoans who have been the victim of bad faith may also have a claim under the Colorado Consumer Protection Act.

In first-party bad-faith insurance cases where an insured sues his insurance company directly, he must prove two things:

  • That the conduct of the insurer was unreasonable;
  • That the insurer knew that its conduct was unreasonable or acted in reckless disregard of whether it was unreasonable.

Whether or not an insurer’s conduct is reasonable must be determined objectively, based on proof of industry standards. The testimony of expert witnesses is often required in order to establish objective evidence of industry standards.

What Can I Recover Through a Bad Faith Claim?

If it can be proven that the insurance company acted in bad faith, the plaintiff may be eligible for compensatory damages for economic and non-economic losses, and, when appropriate, punitive damages are available to punish the insurer and discourage wrongful conduct on the part of other insurers. The punitive damages available might include a penalty of up to two times the covered benefit, in addition to interest on those benefits; attorney fees; and the costs of bringing the lawsuit.

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My daughter and I first consulted with Dan Rosen after a very serious auto accident. Dan had several phone conferences with me, and Tracie was available whenever I called. We would recommend personal injury attorney Dan Rosen to anyone!
Sally from Denver, Colorado

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1400 16th Street #400, Denver, CO 80202
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