STATE LAW – COLORADO LIBRARY – GUIDE 09
Claims Handling, Unreasonable Delay & Insurance Bad Faith
Good faith is not proved by an insurer saying the claim is being handled fairly.
It is measured through the claim file: what was investigated, requested,
explained, valued, paid, delayed or denied — and when.
Rule at a Glance
Do not collapse every insurance dispute into “bad faith”
Colorado provides several overlapping but distinct ways to analyze an insurer’s
conduct. The claim becomes clearer when each theory is placed on its own track.
| Track | Who / relationship | Main question | Potential consequence |
|---|---|---|---|
| Breach of contract | Person entitled to policy benefits | Did the policy require payment or performance? | Contract remedies based on benefits or performance owed. |
| §§ 10-3-1115 / 1116 | Qualifying first-party claimant | Was a covered benefit delayed or denied without a reasonable basis? | Two times the covered benefit plus reasonable attorney fees and court costs. |
| Common-law bad faith | Insurer–insured relationship | Did the insurer breach the tort duty of good faith under the applicable first- or third-party standard? | Tort damages proved to have resulted, subject to Colorado law. |
| Regulatory / DOI | Colorado Division of Insurance oversight | Did claim handling comply with § 10-3-1104 and applicable regulations? | Complaint investigation, regulatory response and administrative sanctions/remedies authorized by law. |
build the chronology before applying the label. Record the insurer’s information,
requests, investigation, decision, explanation, payment and continuing conduct.
Colorado Law
Colorado’s statutory unreasonable-delay remedy is a first-party remedy
C.R.S. § 10-3-1115 prohibits unreasonable delay or denial of benefits owed
to or on behalf of a first-party claimant. Section 10-3-1116 supplies the private
statutory remedy.
Your own policy benefit
UM/UIM, MedPay, collision and other benefits owed directly to or on behalf
of an insured can fall within the first-party framework when the statute applies.
Covered benefit + no reasonable basis
Section 10-3-1115(2) defines statutory unreasonableness as delaying or
denying authorization of a covered benefit without a reasonable basis.
§ 10-3-1116
A qualifying claimant may seek reasonable attorney fees, court costs and
two times the covered benefit, subject to the statute and proof.
a person merely asserting a liability claim against someone else’s insured is
expressly excluded from the definition of “first-party claimant” in
§ 10-3-1115. The accident claimant does not acquire a direct § 10-3-1116
two-times-benefit claim simply because the liability insurer handles the claim poorly.
In Colorado insurance law, that phrase commonly describes the liability insurer’s
duty to its own insured while defending or settling the claim brought by a third
person. Guides 08 and 10 address that relationship and excess-exposure issues.
Colorado Law
Section 10-3-1104 turns fair claim handling into specific conduct
Colorado’s unfair-claims statute supplies concrete benchmarks for investigation,
communication, coverage decisions, settlement conduct and explanations.
Do not misrepresent coverage
Pertinent facts and insurance-policy provisions relating to the coverage
at issue must not be misrepresented.
Acknowledge and respond
The statute addresses failures to acknowledge and act reasonably promptly
on communications about claims.
Investigate before denying
Insurers should maintain reasonable investigation standards and should not
refuse claims without a reasonable investigation based on available information.
Affirm or deny in reasonable time
Claimants should not be left indefinitely without a meaningful coverage position.
Explain denial or compromise
The insurer should provide a prompt reasonable explanation based on policy
language, facts or applicable law for denial or a compromise offer.
Act when liability is reasonably clear
Section 10-3-1104 identifies failures to attempt prompt, fair and equitable
settlement in specified circumstances as unfair claim-settlement practices.
Section 10-3-1114 says that, except for §§ 10-3-1115 and 1116, Part 11 does
not itself create a private cause of action. Section 10-3-1104 conduct can still
matter to DOI enforcement, industry standards and the reasonableness evidence
in an otherwise valid common-law or statutory claim.
Colorado Law
Regulation 5-1-14 creates a first-party claim-handling clock — with defined conditions
Colorado Regulation 5-1-14, 3 CCR 702-5, addresses property-and-casualty
first-party claims. Its 60-day framework begins after receipt of a
valid and complete claim and recognizes a reasonable dispute.
| Regulatory concept | What the rule says | What to document |
|---|---|---|
| 60-day framework | Decision and/or payment within 60 days after a valid and complete claim unless a reasonable dispute exists and policy conditions are satisfied. | Date the carrier received each item needed to complete the claim. |
| Valid and complete claim | Includes necessary proof, reasonable investigation, policy compliance, established coverage and no remaining indicators requiring additional investigation, subject to the rule’s terms. | What was submitted, what remained missing, and when the carrier’s investigation was complete. |
| Reasonable dispute | May include missing information, conflicting evidence, unresolved coverage, policy noncompliance, investigation indicators, litigation or ongoing valuation processes. | The carrier’s specific reason for saying more investigation or information is necessary. |
| Good-faith offer | A good-faith offer within the regulatory period can satisfy the regulation. | Offer amount, basis, evidence considered and unresolved components. |
| Continuing investigation | When payment remains outstanding beyond the regulatory timing requirement because investigation continues, insurer must explain why and send 30-day status letters thereafter. | Status letters, investigation steps, claim-log activity and new evidence. |
| Claim-file documentation | Reasonable investigation should be documented in the claim file. | Communications, reports, status records, payments and investigative activity. |
Regulation 5-1-14 is an administrative penalty framework with defined
prerequisites. It does not mean every delay shorter than 60 days is necessarily
reasonable under §§ 10-3-1115/1116 or common law, and it does not mean every
delay longer than 60 days automatically proves civil bad faith.
Colorado Law
Common-law bad faith has different first-party and liability-insurance standards
First-party foundation
The insured must prove unreasonable insurer conduct and knowledge of, or
reckless disregard for, the absence of a reasonable basis.
Colorado Supreme Court
Liability-insurance relationship
Where the insurer controls defense and settlement of a third person’s claim
against its insured, reasonableness is evaluated under negligence principles.
Colorado Supreme Court · auto-liability anchor
Clarifies both contexts
Goodson reiterates first-party knowledge/reckless-disregard requirements,
third-party negligence principles, and the role of objective industry standards.
Colorado Supreme Court
Common-law reasonableness is not tested by whether the claimant simply disagrees
with the carrier. Industry standards, the claim record, the quality of investigation,
the evidence available and the insurer’s actual decision process all matter.
Colorado Law
“Fairly debatable” is evidence — not a magic phrase that ends the case
A genuine dispute can weigh heavily against a finding of unreasonableness.
Colorado nevertheless rejects the idea that fair debatability is always a complete
defense as a matter of law.
Separate statutory burden
Vaccaro explains that the statutory claim is less onerous than common-law
bad faith and that fair debatability weighs in the analysis without being
automatically outcome-determinative.
Published Colorado Court of Appeals
No automatic safe harbor
Schultz confirms that fair debatability is a factor, not a threshold that
supplies both the beginning and end of a bad-faith analysis.
Colorado Supreme Court
what made the dispute reasonable at the time? Identify the conflicting medical
evidence, coverage facts, causation issue, damages proof or legal authority that
actually existed when the insurer acted.
Colorado Law
A disputed claim can still contain an undisputed covered benefit
Colorado does not permit an insurer to convert disagreement about one part of a
UIM claim into a reason to hold every covered component.
Pay undisputed covered benefits
Fisher holds that a carrier may not unreasonably delay or deny an undisputed
covered benefit merely because other components of the UIM claim remain
reasonably disputed.
Colorado Supreme Court
Not categorically limited to medical bills
Noneconomic damages are not inherently and always disputed. In a particular
record they can be undisputed or not reasonably disputable, but the insured
still needs admissible evidence of the amount.
Colorado Supreme Court
Later payment does not erase prior delay
GEICO paid the remaining UIM policy limit before trial, yet the common-law
and statutory delay claims proceeded and the statutory two-times-benefit
award was affirmed.
Published Colorado Court of Appeals
Separate what the insurer accepts from what it disputes: medical expense,
wage loss, future loss, noneconomic damages and any other covered component.
Then identify the evidence and valuation position for each.
Evidence & Proof
Bad-faith reasonableness and contract entitlement use different evidence windows
This distinction became especially important in 2026.
| Claim | Evidence question | Colorado rule |
|---|---|---|
| Bad faith / unreasonable conduct | Was the insurer’s decision reasonable when made? | Schultz: evaluate reasonableness from the information before the insurer at the time of the decision; new evidence cannot retroactively justify the old decision. |
| Breach of contract | Is the insured actually entitled to the claimed policy benefit? | Pinto, 2026 CO 44: Schultz does not bar later relevant evidence concerning entitlement to benefits in the separate contract claim. |
Colorado’s Supreme Court expressly declined to extend Schultz to
breach-of-contract claims. The case is a useful reminder to keep the conduct
claim and the contract-benefit claim analytically separate even when they arise
from the same UM/UIM file.
Colorado Law
The Division of Insurance provides a regulatory complaint track
Colorado DOI regulates insurers and agents, answers consumer questions,
investigates complaints and uses complaint information as part of market oversight.
Make the issue document-ready
Assemble the policy, claim number, chronology, disputed benefit, carrier
correspondence, denial or reservation, proof submitted and requested resolution.
State the rule and the event
Identify the conduct precisely: missing response, investigation delay,
unexplained position, nonpayment, coverage dispute, status-letter failure
or another documented claim-handling event.
Preserve every other deadline
A DOI complaint does not toll a lawsuit, extend a policy condition, preserve
UM/UIM automatically or replace legal review of a release or limitations period.
DOI can investigate compliance and take regulatory action within its authority.
A consumer seeking contract damages, § 10-3-1116 relief or common-law damages
must separately satisfy the elements and deadlines of those claims.
Citizen Workflow
Build a claim-handling chronology that can answer the reasonableness question
Notice
Date claim opened and identify benefit requested.
Proof
Record every document, bill, record and damages submission.
Investigation
Track what the carrier requested, obtained and actually evaluated.
Decision
Record offers, payments, reservations, denials and explanations.
Follow-through
Track status letters, new evidence, reconsideration and remaining benefits.
Policy and every applicable endorsement.
Date of loss and date claim was reported.
Date each coverage or benefit was requested.
Documents provided and proof of transmission.
Every carrier request for more information and your response date.
Medical, wage, property and other damages evidence available at each decision date.
Coverage-position, reservation and denial letters.
Every settlement offer or first-party benefit evaluation.
Payments: date, amount, benefit category and stated basis.
Which components the carrier admits and which it disputes.
Every explanation for delay and every 30-day status letter, when applicable.
DOI complaint, insurer response and agency correspondence, if filed.
Contract, statutory and litigation deadlines kept on a separate calendar.
good faith is measured by investigation, timing, explanation and conduct.
The citizen’s job is not to argue from suspicion; it is to create a record that
makes the conduct reviewable.
Important Legal Rules & Cases
Colorado good-faith and bad-faith authority map
Third-party insurer-insured duty
Foundational Colorado automobile authority on reasonable liability-claim handling where the insurer controls defense and settlement.
Colorado Supreme Court
First-party bad faith
Establishes unreasonable conduct plus knowledge or reckless disregard as the common-law first-party standard.
Colorado Supreme Court
Objective reasonableness
Clarifies first- and third-party standards and the importance of objective industry practices in evaluating insurer conduct.
Colorado Supreme Court
Statutory claim is distinct
Explains the less onerous statutory reasonable-basis standard and rejects fair debatability as automatically dispositive.
Published Colorado Court of Appeals
Payment after delay
Affirms statutory two-times-benefit damages even though the insurer paid the UIM policy limit before trial.
Published Colorado Court of Appeals
Undisputed covered benefit
A carrier may not unreasonably hold an undisputed covered benefit because another component remains disputed.
Colorado Supreme Court
Fair debatability + decision-time evidence
Fair debatability is only a factor, and bad-faith reasonableness is assessed from information before the insurer when it acted.
Colorado Supreme Court
Noneconomic damages
Noneconomic damages are not categorically always reasonably disputed; proof of an undisputed amount remains essential.
Colorado Supreme Court
Bad faith vs. contract evidence
Confirms that Schultz’s decision-time evidence rule applies to bad-faith reasoning, not as a categorical limit on proof relevant to contract entitlement.
Colorado Supreme Court · 2026 current authority
Rooftop Restoration, 2018 CO 44, holds that a § 10-3-1116 claim is
not governed by the one-year statute for actions on penalties. Do not infer from
that holding that every insurance claim shares one limitations period. Accrual,
claim type and applicable limitation must be calendared specifically.
Skillett v. Allstate, 2022 CO 12, holds that the §§ 10-3-1115/1116
statutory action runs against the insurer, not an individual adjuster acting solely
as the insurer’s employee.
Related Guides & Resources
VictimsGuide resources supporting Guide 09
Colorado Law
Claim-handling evidence worksheet
| Event | Date / record | Reasonableness question |
|---|---|---|
| Claim notice | __________ | When did the insurer receive notice and open the claim? |
| Benefit requested | __________ | What policy benefit was actually sought? |
| Proof submitted | __________ | What information was available to evaluate coverage and damages? |
| Carrier request | __________ | Was more information reasonably necessary, and was the request specific? |
| Investigation step | __________ | What did the carrier actually investigate? |
| Valid/complete status | __________ | When did Regulation 5-1-14’s prerequisites arguably exist? |
| Offer / payment | __________ | What was admitted, valued and paid? |
| Delay explanation | __________ | What specific reason was given for more time? |
| 30-day status letters | __________ | If applicable, did continued-investigation notices explain the delay? |
| Denial / reservation | __________ | What policy, facts and law supported the position at that time? |
| Undisputed benefit | __________ | Was a separable covered amount withheld because another component was disputed? |
| New evidence | __________ | Was it available at the decision date or developed later? |
| DOI complaint | __________ | What regulatory issue and response were documented? |
| Deadline calendar | __________ | What contract, limitations or litigation deadline remains? |
good faith is proven by actions. Build the record before drawing the conclusion:
what was known, what was investigated, what was explained, what was paid,
what remained disputed, and whether the insurer’s conduct was reasonable when it occurred.
Frequently Asked Questions
Frequently asked questions
Does every denied insurance claim amount to bad faith?
No. Coverage can be reasonably disputed. The legal question is whether the
insurer’s investigation, reasoning and conduct satisfied the applicable contract,
statutory and common-law standards.
Can I sue the other driver’s insurance company under § 10-3-1116 because it delayed my liability claim?
Not merely because you are the third-party accident claimant. Section
10-3-1115 expressly excludes a person asserting a claim against an insured
under a liability policy from the statute’s definition of first-party claimant.
What is the difference between statutory and common-law bad faith?
The statutory §§ 10-3-1115/1116 claim asks whether a qualifying first-party
covered benefit was delayed or denied without a reasonable basis. Common-law
first-party bad faith additionally requires knowledge of, or reckless disregard
for, the unreasonableness.
If my claim is “fairly debatable,” does the insurer automatically win?
No. Vaccaro and Schultz treat fair debatability as a factor bearing on
reasonableness, not an automatic threshold that ends the analysis.
Does the insurer always get 60 days before delay can be unreasonable?
No. Regulation 5-1-14 creates an administrative framework tied to a valid and
complete first-party claim and a reasonable-dispute analysis. It should not be
treated as a universal civil safe harbor for every claim-handling decision.
Must an insurer pay the part of a UIM claim that is not disputed?
Fisher holds that an insurer may not unreasonably withhold an undisputed
covered benefit merely because another component of the UIM claim remains
reasonably disputed.
Can an insurer invent a new reason after suit is filed to justify its earlier denial?
For bad-faith reasonableness, Schultz requires the decision to be evaluated
from information before the insurer at the time it acted. Pinto clarifies that
this rule does not categorically bar later evidence relevant to the separate
contract question of whether benefits are actually owed.
If the insurer eventually pays, does that erase a prior statutory delay claim?
Not necessarily. Nibert affirmed statutory delay damages after the UIM limit
had been paid before trial. The timing and reasonableness of the earlier conduct
remain important.
Can I sue the individual claims adjuster personally under §§ 10-3-1115/1116?
Skillett holds that the statutory unreasonable-delay/denial action proceeds
against the insurer, not an individual adjuster acting solely as the insurer’s employee.
Should I file a complaint with the Colorado Division of Insurance?
It can be useful when there is a documented regulatory or claim-handling issue.
Treat it as an administrative track. Do not assume a DOI complaint preserves
civil claims, tolls limitations, extends policy deadlines or substitutes for
legal review of settlement and release decisions.
Primary Authorities