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What Is The Time for Responding to a Defense Tender?

Insurers must acknowledge and act reasonably promptly upon notice of claim, Colo. Rev. Stat. § 10-3-1104(h)(II), but there are no regulations, statutes or case law defining “reasonably promptly.”

Insurers must make a decision on claims within 60 days after a valid and complete claim has been made.  3 Colo. Code Regs. § 702-5-1-14.

Does Reserving Rights Create a Conflict of Interest? 

It does not appear that Colorado courts have addressed this issue.

Does a Reservation of Rights Create Additional Duties?

An insurer retains the absolute right to control the defense of actions brought against the insured.” Farmers Group, Inc. v. Trimble, 691 P.2d 1138, 1141 (Colo. 1984).

Where the insurer has a duty to defend and pay on one claim only, counsel cannot file a motion to dismiss or for summary judgment on the only covered claim, effectively leaving the insured without coverage on the remaining claim(s). Farmers Group, Inc. v. Trimble, 691 P.2d 1138, 1141 (Colo. 1984).

What Must Be Done If A Conflict of Interest Exists?

No cases found.

Who Is Responsible for Fees of Independent Counsel?

No cases found.

What Are Independent Counsel’s Obligations?

No cases found.

What Settlement Duties Exist?

No cases found.

What Actions May Result in a Claim for Bad Faith?

An insurer that refuses to make or delaying payments owed directly to its insured under a first-party policy such as life, health, disability, property, fire, or no-fault auto insurance may be found as acting in bad faith.  Farmers Group, Inc. v. Williams, 805 P.2d 419, 421 (Colo. 1991).

An insured must prove that the conduct of the insurer was unreasonable, and that the insurer knew that its conduct was unreasonable or acted in reckless disregard of whether it was unreasonable. Cary v. United of Omaha Life Ins. Co., 68 P.3d 462, 469 (Colo. 2003).

Third party bad faith claims are also recognized; in that context, bad faith can arise from an insurer’s actions that expose the insured to being personally liable for the monetary obligations underlying the insured’s claims. Goodson v. Am. Std. Ins. Co., 89 P.3d 409, 414 (Colo. 2004).

Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?

Yes, under Colo. Rev. Stat §§ 10-3-115 and 1116 and the Colorado Consumer Protection Act – Colo. Rev. Stat § Colo. Rev. Stat §§ 6-1-101.

Are Punitive Damages Recoverable in Insurer-Insured Dispute?

Yes, the potential for double damages under Colo. Rev. Stat §§ 10-3-115 and 1116; and treble damages under and the Colorado Consumer Protection Act.

Under a tort theory, punitive damages are available to punish the insurer and deter wrongful conduct by other insurers. Ballow v. PHICO Ins. Co., 878 P.2d 672, 677 (Colo. 1994). However, punitive damages require a higher burden of proof and require insureds to establish the requisite attendant circumstances beyond a reasonable doubtGoodson v. Am. Std. Ins. Co., 89 P.3d 409, 416 (Colo. 2004).

Alternative Coverage Options

A Colorado court has the discretion to address an anticipatory declaratory action or postpone a determination until the completion of the underlying litigation.  Cotter Corp. v. American Empire Surplus Lines. Inc. Co. 90 P.3d 814, 828 (Colo. 2004).

Relevant Statutes

Declaratory Judgment – Colo. Rev. Stat. § 13-51-105.

“Courts of record within their respective jurisdictions have the power to declare rights, status, and other legal relations whether or not further relief is or could be claimed.  No action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is prayed for. The declaration may be either affirmative or negative in form and effect. The declaration has the force and effect of a final judgment or decree.” 

Colorado Unfair or Deceptive Rights or Practices statute, Colo. Rev. Stat §§ 10-3-1115 and 1116.

Colorado Consumer Protection Act – Colo. Rev. Stat § Colo. Rev. Stat §§ 6-1-101.

Unfair Methods of Competition and Unfair or Deceptive Acts or Practices  – Colo. Rev. Stat § 10-3-1104 et seq.

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