You paid your premiums every month. You followed the policy requirements. When something bad happened, you filed a claim expecting your insurance company to keep its promise.
Key Takeaways
- Insurance bad faith occurs when your own insurance company unreasonably denies, delays, or underpays a valid claim. It is a violation of the duty your insurer owes you as a policyholder.
- Common warning signs include unexplained delays, repeated requests for the same documentation, lowball offers without explanation, and threats to cancel your policy if you dispute a decision.
- Colorado law allows policyholders to recover not just the original claim amount, but also two times the covered benefit, attorney fees, and court costs in proven bad faith cases.
Instead, you got silence. Delays. Denials that do not make sense. The sinking feeling that the company you trusted is not on your side.
If this sounds familiar, your insurance company may be acting in bad faith — and under Colorado law, that is something you can fight back against.
What Is Insurance Bad Faith?
Every insurance policy in Colorado comes with an implied covenant of good faith and fair dealing. This means your insurer has a legal obligation to handle your claim fairly, promptly, and honestly. When they violate this obligation — when they prioritize their profits over your legitimate claim — that is bad faith.
Colorado recognizes two types of bad faith claims:
- First-party bad faith: Your own insurer denies, delays, or underpays your claim (e.g., your homeowner’s insurer refuses to pay for fire damage covered by your policy)
- Third-party bad faith: Your liability insurer fails to properly defend or settle a claim against you, exposing you to personal liability beyond your policy limits
The 7 Warning Signs
1. Unreasonable Delays Without Explanation
Colorado law requires insurance companies to acknowledge claims within a reasonable time, investigate promptly, and communicate decisions without unnecessary delay. If your insurer takes weeks or months to respond to communications, repeatedly asks for the same documents, or gives vague excuses about “still investigating” without providing updates, they may be engaging in bad faith delay tactics.
Colorado regulation: Under Regulation 5-1-14, insurers must acknowledge receipt of a claim within 15 working days and must affirm or deny the claim within a reasonable time after receiving proof of loss.
2. Denying Your Claim Without a Clear Explanation
When an insurance company denies a claim, they must provide a specific, written explanation citing the policy provisions they are relying on. A denial letter that simply says “claim denied” or cites vague, generalized reasons without pointing to specific policy language is a red flag for bad faith.
If you receive a denial, ask for the specific policy provision that supports the denial. If the insurer cannot or will not provide it, something is wrong.
3. Offering a Settlement Far Below the Claim’s Value
Insurance companies are allowed to negotiate. They are not allowed to make offers they know are unreasonably low, hoping you will accept out of desperation. If your adjuster offers $15,000 on a claim with $80,000 in documented damages and provides no explanation for the gap, that offer may constitute bad faith.
Key factors: Did the insurer conduct a thorough investigation? Did they obtain their own estimates? Can they explain how they arrived at their number? If the answer to any of these is no, the lowball offer may be actionable.
4. Misrepresenting Your Policy Coverage
Some insurers tell policyholders that certain damages are “not covered” when, in fact, they are. Others apply exclusions that do not apply to the specific facts of your claim, or interpret policy language in ways that no reasonable person would agree with.
If your insurer claims something is not covered, ask them to show you the exact policy language. Then have an attorney review it. Insurance policies are interpreted in favor of the policyholder when the language is ambiguous — something insurers conveniently forget to mention.
5. Failing to Conduct a Reasonable Investigation
Insurance companies have a duty to investigate claims thoroughly before making decisions. If your insurer denies a claim without interviewing witnesses, inspecting damage, reviewing documentation, or consulting experts, they may have breached their duty of good faith.
Common examples: denying a water damage claim without ever sending an adjuster to inspect the damage; rejecting a medical claim based solely on a paper review by a doctor who never examined you; denying an auto claim without reviewing the police report or speaking to the other driver.
6. Threatening or Intimidating You
Any communication from your insurer that is designed to intimidate you into dropping your claim or accepting less than you deserve may constitute bad faith. This includes threats to cancel your policy if you pursue a claim, implying that filing a claim will be held against you, or suggesting you have committed fraud without evidence.
7. Refusing to Pay a Claim That Has Already Been Approved
In some cases, an insurance company acknowledges that a claim is covered and even provides a coverage determination — then fails to actually issue the payment. Delayed payment on an approved claim is one of the clearest forms of bad faith, because the insurer has already admitted the obligation exists.
State Law
Colorado’s bad faith statute (C.R.S. 10-3-1116) allows policyholders to recover two times the covered benefit plus attorney fees and costs when an insurer unreasonably denies or delays a claim. This is one of the strongest policyholder protection statutes in the country and applies to all types of insurance: auto, homeowners, health, disability, and commercial.
What Colorado Law Allows You to Recover
Colorado takes insurance bad faith seriously. If your insurer acted in bad faith, you may be entitled to:
- The full amount of your original claim — The benefits your policy should have paid
- Consequential damages — Financial harm caused by the delay or denial (e.g., you lost your home because the insurer delayed payment on a covered loss)
- Attorney fees and costs — Under C.R.S. § 10-3-1116, if the insurer unreasonably denied or delayed payment, you can recover reasonable attorney fees
- Two times the covered benefit — C.R.S. § 10-3-1116 allows the court to award up to double the amount of the covered benefit as a penalty for unreasonable conduct
- Common law damages — In some cases, additional damages for emotional distress and economic harm beyond the policy benefit
How to Protect Yourself
- Document everything. Save every email, letter, voicemail, and text from your insurer. Note the date, time, and content of phone calls.
- Respond to requests promptly. Do not give your insurer a reason to blame delays on you.
- Put requests in writing. Follow up phone conversations with an email summarizing what was discussed. This creates a paper trail.
- Request written explanations. If your claim is denied or reduced, demand a written explanation citing specific policy provisions.
- Do not accept the first offer if it seems low. You have the right to negotiate and to dispute the insurer’s valuation.
- Contact an attorney. An attorney experienced in insurance bad faith can evaluate whether your insurer’s conduct crosses the line from tough negotiation into actionable bad faith.
Documentation Warning
Save every communication with your insurance company: emails, letters, claim forms, phone call notes (date, time, who you spoke with, what was said). If your claim goes to court, the timeline of the insurer’s actions is the core of the case. Gaps in your records make it harder to prove unreasonable delay or denial.
We Can Help.
Get a Free Consultation with Cave Law
Frequently Asked Questions
Is a denied claim automatically bad faith?
No. Insurance companies are allowed to deny claims they believe are not covered by the policy. Bad faith occurs when the denial is unreasonable — meaning the insurer did not have a legitimate basis for the denial, did not conduct a proper investigation, or misrepresented the policy language.
How long do I have to file a bad faith claim in Colorado?
The statute of limitations for insurance bad faith claims in Colorado is generally two years from the date of the insurer’s wrongful conduct (C.R.S. § 13-80-102). However, determining when the clock starts can be complex — it may be the date of denial, the date you discovered the bad faith, or another triggering event. Consult an attorney promptly.
Can I file a bad faith claim against my own insurance company?
Yes. First-party bad faith claims — against your own insurer — are the most common type. You have a contractual relationship with your insurer, and they owe you a duty of good faith and fair dealing under that contract.
Will filing a bad faith claim cause my insurance to be cancelled?
Colorado law prohibits insurers from retaliating against policyholders who exercise their legal rights. If your insurer cancels your policy or raises your rates in response to a bad faith complaint, that retaliation itself may be actionable. Document any changes to your policy that occur after you assert a bad faith claim.
Do I need an attorney for a bad faith insurance claim?
Bad faith claims are complex and require understanding of both insurance law and the specific regulations governing insurer conduct in Colorado. An experienced attorney can evaluate whether your insurer’s conduct rises to the level of bad faith, calculate your potential damages, and hold the insurance company accountable. Most bad faith attorneys offer free consultations and work on contingency — you pay nothing unless you recover.
