Are Individual Insurance Adjusters Liable for Unreasonable Delay or Denial of Claims under Colorado Law?

Written by: Melissa A. Ogburn, Esq.

On March 14, 2022, the Colorado Supreme Court issued its ruling in Skillett v. Allstate Fire and Casualty Insurance Co., infra, definitively deciding whether insurance adjusters themselves can be held liable for unreasonably delaying or denying benefits under a policy of insurance pursuant to C.R.S. §§ 10-3-1115 and -1116.  Colorado has historically recognized bad faith claims against insurance providers under the common law.  However, in 2008, the Colorado General Assembly enacted HB 08-1407 to include several amendments to the Colorado statutes concerning conduct of insurance companies.  Included in the amendments were two new sections, C.R.S. §§ 10-3-1115 and -1116.  In general, those provisions prohibited “a person engaged in the business of insurance” to “unreasonably delay or deny payment of a claim for benefits” to a “first-party claimant.”[1]  C.R.S. § 10-23-1116 states that violations of C.R.S. § 10-3-1115 carry a penalty of “reasonable attorney fees and court costs and two times the covered benefit.”  Piecing these phrases together, claimants have argued that not only can the insurance company be held liable for damages arising from the improper handling of a claim, but insurance adjusters themselves are equally liable.

Riccatone v. Colorado Choice Health Plans, 315 P.3d 203 (Colo. App. 2013), was the first Colorado appellate decision addressing the issue of whether the individual insurance adjuster handling the claim can be held liable for damages under C.R.S. §§ 10-3-1115 and -1116.  There, the Court of Appeals affirmed that the plan administrators were not proper parties to such claims.  The Court’s ruling hinged on whether any of the Defendants qualified as, “a person engaged in the business of insurance,” as required by C.R.S. § 10-3-1115.  Ultimately, the Court concluded that the statute was ambiguous because it could be reasonably interpretated in such a way as to bring third-party administrators within the ambit of C.R.S. §§ 10-3-1115 and -1116 as well as to exclude third-party administrators from the statute’s reach.  In a good recitation of legislative testimony on the Bill, the Court gave great deference to the testimony of then-Speaker Romanoff who explained the intent behind the new legislation.  The testimony makes clear that while the “purpose of the statutes was to create a private right of action and to reduce the showing required under the common law standard…, there is no indication that its purpose was either to expand or restrict the realm of possible defendants.”[2]  Summary judgment in favor of the defendants was affirmed.

Then, in Seiwald v. Allstate Property and Casualty Insurance Company, 2020 WL 6946563, the United States District Court for the District of Colorado seemingly reversed course.  Relying on the definition of person found in C.R.S. § 10-3-1102(3), the Court held that claims pursuant to C.R.S. §§ 10-3-1115 and -1116 could be asserted against individual adjusters.[3]  Although the Court noted that the Riccatone court ultimately found the statute ambiguous and ruled that plan administrators could not be held liable for statutory claims, the U.S. District Court ruled that such interpretation and application was not necessarily controlling in determining whether it had diversity jurisdiction.[4]

The question of whether plan administrators, adjusters, and other individuals could be held liable under C.R.S. §§ 10-3-1115 and -1116 was ripe for decision by the Colorado Supreme Court.  In the case of Skillett v. Allstate Fire and Casualty Insurance Co., 2022 CO 12. No. 21SA187, the Colorado Supreme Court got its chance.  In that case, the Colorado Supreme Court clarified, “An action for unreasonably delayed or denied insurance benefits under Colorado law may be brought against an insurer, not against an individual adjuster acting solely as an employee of the insurer.”[5]  Based on the reasoning set forth by the Colorado Supreme Court, we would expect a similar result for administrators, agents, brokers, and other individuals.  The provisions of C.R.S. §§ 10-3-1115 and -1116 apply strictly to insurance companies issuing insurance policies.

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[1] A review of the construction of the language “unreasonably delay or deny payment of a claim for benefits” and “first-party claimant” have also been points of contention amongst Colorado litigators and courts, but such interpretation and discussion is beyond the scope of this article.

[2] Riccatone, 315 P.3d. at 210.  The Court also noted the potential chilling effect on the insurance industry if administrators and others were assigned liability under the statute.

[3] Seiwald v. Allstate Property and Casualty Insurance Company, 2020 WL 6946563 at 3.

[4] Id.

[5] Skillett v. Allstate Fire and Casualty Insurance Co., 2022 CO 12. No. 21SA187 at 4, 12.