How to File an Insurance Bad Faith Claim in Colorado: A Step-by-Step Guide

You have tried to work with your insurance company. You have submitted documentation, answered their questions, and waited patiently. But the delay continues, the denial stands, or the settlement offer does not come close to covering your actual damages.

It is time to consider a bad faith claim. Here is how the process works in Colorado, step by step.

Step 1: Determine Whether You Have a Bad Faith Case

Not every frustrating insurance experience rises to the level of bad faith. Before pursuing a claim, honestly evaluate whether your insurer’s conduct crosses the line from tough negotiation into unreasonable behavior.

Ask yourself:

• Did the insurer provide a specific, written reason for their decision?
• Does their reason align with the actual policy language?
• Did they conduct a thorough investigation before denying or underpaying?
• Have they communicated with you consistently, or have they gone silent?
• Is their valuation reasonable given the evidence, or does it ignore documentation you provided?

If the insurer’s conduct was merely aggressive negotiation within reasonable bounds, you may have a claim dispute but not necessarily bad faith. If their conduct was unreasonable — ignoring evidence, misrepresenting your policy, deliberately delaying — that is likely actionable.

Step 2: Organize Your Documentation

Your case will be built on paper. Gather and organize everything:

Policy Documents

• Your complete insurance policy (all pages, including declarations, endorsements, and exclusions)
• Any policy amendments or riders
• Premium payment records showing your policy was active

Claim File

• Your initial claim submission and all supporting documentation
• Photos, videos, estimates, and receipts you provided
• Medical records (for health, auto, or disability claims)
• Independent assessments or expert opinions you obtained

Insurer Communications

• Every letter, email, and written communication from the insurer
• Notes from phone conversations (date, time, who you spoke with, what was said)
• Voicemails (save them)
• Records of unreturned calls or unanswered emails

Timeline

Create a chronological timeline from the date of loss through today. Note every communication, every delay, every request for additional documentation, every deadline missed. This timeline tells the story of your insurer’s conduct.

Step 3: Consult With a Bad Faith Insurance Attorney

Bad faith insurance law is specialized. Before filing a complaint or a lawsuit, consult with an attorney who regularly handles these cases. Most offer free initial consultations.

During the consultation, the attorney will:

• Review your policy and claim documents
• Evaluate whether the insurer’s conduct meets the legal standard for bad faith
• Identify the potential claims and damages available to you
• Explain the process, timeline, and potential outcomes
• Discuss fee arrangements (typically contingency for bad faith cases)

Come to the consultation with your organized documentation and timeline. The more prepared you are, the more productive the meeting.

Step 4: Send a Demand Letter

Before filing suit, your attorney will typically send a detailed demand letter to the insurer. This letter:

• Identifies the specific policy provisions supporting your claim
• Details the insurer’s unreasonable conduct with specific dates and facts
• Cites the applicable Colorado statutes (C.R.S. § 10-3-1115, 10-3-1116)
• Demands payment of the covered benefit plus damages for bad faith
• Sets a deadline for response (typically 30 days)

This letter serves two purposes: it gives the insurer a final opportunity to resolve the claim fairly, and it creates evidence that you attempted to resolve the dispute before filing suit — which courts view favorably.

Step 5: File a Complaint With the Colorado Division of Insurance (Optional)

You can file a regulatory complaint with the Colorado Division of Insurance, which may investigate the insurer’s practices. While a regulatory complaint does not directly recover damages for you, it can:

• Prompt the insurer to re-evaluate your claim
• Create an official record of the complaint
• Result in regulatory action against the insurer if a pattern of bad faith is found
• Provide additional evidence for your lawsuit

Your attorney can advise whether filing a regulatory complaint is strategically helpful in your specific case.

Step 6: File a Lawsuit

If the demand letter does not produce a fair resolution, your attorney will file a lawsuit. Colorado bad faith complaints typically include multiple claims:

• Breach of contract — The insurer failed to pay benefits owed under the policy
• Statutory bad faith — Unreasonable delay or denial under C.R.S. § 10-3-1115
• Common law bad faith — Tortious breach of the implied covenant of good faith
• Additional claims — Depending on the facts: deceptive trade practices (CCPA), breach of fiduciary duty, or negligence

Step 7: Discovery and Litigation

Once the lawsuit is filed, both sides exchange information through the discovery process:

What You Can Obtain From the Insurer

• The complete claim file — Including internal notes, adjuster evaluations, and supervisor communications that reveal how your claim was actually handled
• Claims handling manuals — Internal guidelines that may show the insurer’s own standards were violated
• Similar claim data — Evidence that the insurer has a pattern of denying similar claims
• Adjuster deposition — Testimony under oath from the person who handled your claim
• Corporate representative testimony — Company-wide claims practices and policies

Discovery often reveals the most powerful evidence in bad faith cases. Internal emails showing adjusters were told to reduce payouts, supervisor notes approving denials they knew were questionable, or training materials that emphasize denial rates over fair claims handling can be devastating to the insurer’s defense.

Step 8: Resolution

Most bad faith cases resolve before trial through one of these paths:

• Settlement negotiation: Once discovery reveals the insurer’s internal conduct, many cases settle because the insurer wants to avoid a jury seeing the evidence
• Mediation: A neutral mediator helps both sides reach a resolution. Many Colorado courts require mediation before trial
• Trial: If settlement is not possible, a jury hears the evidence and decides both liability and damages. Juries in Colorado are generally sympathetic to policyholders who paid premiums and were treated unfairly