What Is Bad Faith Insurance in Castle Rock?

Your insurance company has one job. When it refuses to do that job, Colorado law has a name for it.

Bad Faith Insurance Is When Your Insurer Breaks Its Promise on Purpose

A bad faith insurance claim in Colorado arises when an insurance company unreasonably delays or denies payment of benefits it owes you under your policy. Under Colorado Revised Statutes § 10-3-1115, an insurer acts in bad faith when it delays or denies a covered benefit “without a reasonable basis for that action.” Colorado recognizes two separate legal paths for holding insurers accountable: statutory bad faith under C.R.S. §§ 10-3-1115 and 10-3-1116, which allows recovery of two times the covered benefit plus attorney fees, and common law bad faith, which allows recovery for emotional distress, economic harm, and punitive damages. Both exist because insurance contracts are not ordinary commercial agreements. They are promises of security purchased by people preparing for the worst day of their life.

Why Insurance Contracts Are Different from Every Other Contract

When you buy a car, you inspect it, pay for it, and drive it home. The transaction is immediate and mutual. Insurance does not work that way. You pay premiums for years, sometimes decades, in exchange for a promise that exists only on paper until the day you need it. The entire relationship is built on trust. You trust that the company will be there. The company collects your money based on that trust.

The Colorado Supreme Court recognized this fundamental difference in Farmers Group, Inc. v. Trimble, 691 P.2d 1138, 1141 (Colo. 1984). The Court explained that insureds enter into insurance contracts ” an insured seeks to obtain some measure of financial security and protection against calamity, rather than to secure commercial advantage.” As expanded upon in Goodson v. American Standard Insurance Co., 89 P.3d 409, 414 (Colo. 2004), every insurance contract in Colorado contains an implied duty of good faith and fair dealing. See also Cary v. United of Omaha Life Ins. Co., 68 P.3d 462, 466 (Colo. 2003).

In most contracts, breaking a promise results in breach of contract damages. Pay what you owe and walk away. Insurance is different. Because you are in a uniquely vulnerable position when you file a claim, and because the insurer holds all the power over whether and when you get paid, Colorado imposes duties on insurers that go beyond ordinary contract obligations. When an insurer violates those duties, it is not just a broken deal. It is a tort. And the damages reflect that.

Two Legal Paths: Statutory Bad Faith and Common Law Bad Faith

Colorado gives injured policyholders two distinct legal tools to hold insurers accountable. These are separate claims with different elements, different burdens of proof, and different damages. Most bad faith cases assert both.

Path 1: Statutory Bad Faith (C.R.S. §§ 10-3-1115 and 10-3-1116)

In 2008, the Colorado General Assembly passed HB 08-1407, formally titled “An Act Concerning Strengthening Penalties For The Unreasonable Conduct Of An Insurance Carrier.” The name alone tells you what legislators intended. The law created two new statutory sections that fundamentally shifted the balance of power between insurers and policyholders.

What it prohibits: C.R.S. § 10-3-1115(1)(a) states that “a person engaged in the business of insurance shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.”

The standard: Under § 10-3-1115(2), “an insurer’s delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.” That is the entire test. No proof of intent required. No proof that the insurer acted maliciously. Just that the delay or denial lacked a reasonable basis. As the Property Insurance Coverage Law Blog explains, this statutory standard is less onerous than that required to prove a claim under the common law. See Kisselman v. Am. Family Mut. Ins. Co., 292 P.3d 964, 975 (Colo. App. 2011); Schultz v. GEICO Cas. C**o., 429 P.3d 844, 848 (Colo. 2018).

The remedy: C.R.S. § 10-3-1116(1) allows recovery of two times the covered benefit, plus reasonable attorney fees and court costs. No separate proof of “damages” is required beyond showing the unreasonable delay or denial. The covered benefit itself is the measure. And under Nibert v. GEICO Casualty Co., 2017 COA 23, the Colorado Court of Appeals held that this two-times multiplier applies even when the insurer has already paid the benefit. That means you can recover effectively three times the original benefit: the benefit itself plus two times the benefit as a penalty.

Who can bring it: A “first-party claimant” is defined under § 10-3-1115(1)(b)(I) as any individual or legal entity asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy. This includes you making a claim on your own auto, health, homeowners, or UM/UIM policy. The Colorado Court of Appeals in Kyle W. Larson Enters. v. Allstate Ins., 2012 COA 160M, 305 P.3d 409, extended this to include vendors asserting benefits on behalf of an insured.

Who you can sue: The Colorado Supreme Court settled this in Skillett v. Allstate Fire & Casualty Insurance Co., 2022 CO 12, as analyzed by the Colorado Lawyer: statutory bad faith claims apply to insurance companies, not individual adjusters. The individual who denied your claim may have made the decision, but the company bears the legal responsibility.

Path 2: Common Law Bad Faith (The Duty of Good Faith and Fair Dealing)

Colorado’s common law bad faith framework predates the statutory scheme and provides broader remedies at a higher burden of proof.

The elements: Under Goodson v. American Standard Insurance Co., 89 P.3d 409, 414 (Colo. 2004), a first-party claimant must prove that: (1) the insurer acted unreasonably under the circumstances, and (2) the insurer either knowingly or recklessly disregarded the validity of the insured’s claim. This two-part test is harder to satisfy than the statutory standard. You must show not just that the delay or denial was unreasonable, but that the insurer knew it was unreasonable or was reckless about that fact. See also Colorado Civil Jury Instructions, Chapter 25.

The standard of measurement: Reasonableness is judged objectively based on industry standards. Am. Family Mut. Ins. Co. v. Allen, 102 P.3d 333, 343 (Colo. 2004) (en banc). As the Property Insurance Coverage Law Blog details, expert testimony regarding industry standards is often helpful but not always required. The Allen Court held that where the standard involves conduct within the common knowledge and experience of ordinary people, such as whether an investigation was adequate or whether a denial was reasonably explained, a jury can assess that conduct without expert guidance.

The damages: This is where common law bad faith opens doors the statutory claim does not. Under Goodson, the Colorado Supreme Court held that an unreasonable denial of insurance benefits can cause anxiety, fear, stress, and uncertainty, even when the benefits are eventually paid. The Court ruled that emotional distress damages are available upon proof of insurer liability, overruling the previous requirement that you prove a substantial property or economic loss first. Goodson, 89 P.3d at 417. You can also recover all economic losses caused by the bad faith conduct. And in cases of willful and wanton insurer misconduct, punitive damages under C.R.S. § 13-21-102 become available.

The Quasi-Fiduciary Relationship: Why Insurers Owe You More Than Most Companies

Colorado courts have recognized that the insurer-insured relationship creates a “quasi-fiduciary” duty. In Goodson, the Supreme Court confirmed that this relationship exists because the insurer stands in a position of trust with regard to its insured. See also Bankr**. Estate of Morris v. COPIC Ins. Co., 192 P.3d 519 (Colo. App. 2008).

Think of it this way. You gave your insurer money every month for years. In return, they promised to protect you when something went wrong. When the worst day arrived and you filed a claim, the insurer held all the control: the power to approve, the power to deny, the power to delay, the power to lowball. You were injured, overwhelmed, possibly unable to work, and dependent on the insurer to keep its word. That imbalance of power is why Colorado law does not treat this like an argument between two businesses over a late shipment. The law treats it as a relationship of trust. And when that trust is violated, the consequences are proportionally serious.

The quasi-fiduciary duty is limited to areas in which the insurer exercises a strong degree of control over the insured’s interests. Bernhard v. Farmers Ins. Exch., 915 P.2d 1285 (Colo. 1996). But in the context of claims handling, that control is nearly absolute. The insurer decides whether your claim is valid, what it is worth, and when you get paid. That is a position of extraordinary power over someone recovering from a traumatic brain injury or a spinal cord injury or the wrongful death of a family member.

The Unfair Claims Settlement Practices Act: The Rulebook Insurers Must Follow

Beyond the statutory and common law bad faith frameworks, Colorado’s Unfair Claims Settlement Practices Act, C.R.S. § 10-3-1104(1)(h), catalogs specific prohibited conduct. As the United Policyholders organization explains, these standards define what insurers legally owe you. While the Act itself does not create a private right of action (you cannot sue directly under it), the Colorado Supreme Court held in Am. Family Mut. Ins. Co. v. Allen, 102 P.3d 333 (Colo. 2004), that the Act’s standards may be used as valid, but not conclusive, evidence of industry standards in proving bad faith.

The prohibited conduct includes: misrepresenting policy provisions (§ 10-3-1104(1)(h)(I)); failing to acknowledge communications promptly (§(h)(II)); failing to adopt reasonable investigation standards (§(h)(III)); refusing claims without reasonable investigation (§(h)(IV)); failing to affirm or deny coverage in reasonable time (§(h)(V)); not attempting good faith settlement where liability is clear (§(h)(VI)); compelling policyholders to litigate by offering substantially less than amounts ultimately recovered (§(h)(VII)); and requiring duplicate document submissions (§(h)(IX)). For the full breakdown of each tactic, see Insurance Company Delay Tactics.

Colorado also specifically prohibits insurers from basing adjuster compensation on denial quotas or payment caps under C.R.S. § 10-3-1104(1)(hh). When a claims adjuster’s bonus structure rewards minimizing payouts, the entire claims process is compromised from the inside.

How Courts Measure “Unreasonableness”

Reasonableness is a jury question. But Colorado courts have identified specific categories of evidence that support a finding of bad faith. As the Property Insurance Coverage Law Blog catalogs, drawing from Schultz v. GEICO Cas. Co., 429 P.3d 844 (Colo. 2018), policyholders can prove unreasonableness through evidence of:

Total failure to investigate the claim. An insurer that denies a truck accident claim without reviewing the police report, the crash reconstruction data, or the FMCSA compliance history has not conducted any investigation at all. See 14 Couch on Insurance § 207:24 (3d ed.).

Failure to conduct a reasonable investigation based on all available information. Allen, 102 P.3d at 344. The Court affirmed a bad faith verdict where the insurer concluded its investigation without exploring conflicting statements or interviewing relevant witnesses. A partial investigation that ignores unfavorable (to the insurer) evidence can be just as unreasonable as no investigation.

Not providing a reasonable explanation for denying a claim. Allen, 102 P.3d at 344-45. Telling a policyholder “your claim is denied” without citing specific policy language, specific factual findings, or specific legal authority is not a denial. It is a refusal to explain. Under C.R.S. § 10-3-1104(1)(h)(XIV), insurers must promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim.

In-house policies that reward employees for defeating claims. See Zolman v. Pinnacol Assurance, 261 P.3d 490, 500 (Colo. App. 2011). When an adjuster’s performance review is tied to how much money they saved the company, the investigation is contaminated before it starts.

Fair debatability can be relevant but is not dispositive. Etherton v. Owners Ins. Co., 829 F.3d 1209 (10th Cir. 2016). An insurer cannot simply point to a coverage question and claim “fair debate” as a blanket defense. The Tenth Circuit held that the statutory provisions apply to disputed benefits, not just amounts due and owing.

What Bad Faith Looks Like After a Catastrophic Injury

Bad faith is not an abstraction. For example it can be when a 34-year-old construction worker with a traumatic brain injury submits neuropsychological testing, MRI results, and his treating neurologist’s assessment, and the insurer denies the claim because their desk reviewer, who never examined the patient, disagrees with the diagnosis.

It is what happens when a family files a wrongful death claim with clear liability documentation, and the insurer takes six months to assign an adjuster, then another four months to request records the family already provided, then offers a settlement that would not cover funeral expenses.

It is what happens when a motorcycle accident victim with documented road rash, fractures, and a spinal cord injury gets an offer based on software outputs rather than the actual medical records and lifetime care projections submitted by board-certified specialists.

Each of these scenarios involves conduct that a jury could find unreasonable under both the statutory and common law frameworks. And in each scenario, the bad faith claim is separate from the underlying injury claim. It addresses a different harm: not the injury the at-fault party caused, but the additional harm the insurer inflicted by refusing to honor its obligations. For the complete damages framework, see Bad Faith Damages in Colorado.

Why Trial Preparation Changes the Outcome of Bad Faith Claims

Insurance companies calculate risk. They evaluate every claim through the lens of what it will cost them if the case goes to trial versus what it costs to settle. When a policyholder is represented by a firm that settles every case at the first opportunity, the insurer’s risk calculation is simple: the settlement will cost less than the claim is worth. That calculation incentivizes delay, lowball offers, and bad faith.

At Rampart Injury Lawyers, we change the calculation. Every bad faith claim we handle is prepared from day one as though it will be presented to a jury. We preserve every communication, document every deadline the insurer misses, request internal claims handling guidelines, depose the adjusters who made the decisions, and identify the compensation structures that Colorado law prohibits under § 10-3-1104(1)(hh). When the insurer’s own documents show that the denial was driven by profit targets rather than policy language, the case speaks for itself.

We serve the I-25 corridor from Greenwood Village to Colorado Springs, with our hub office in Castle Rock. We take fewer cases so we can prepare each one with the depth that bad faith litigation demands. That is the difference between asking an insurer to reconsider and forcing them to answer for their conduct in court. Return to Colorado Insurance Bad Faith Lawyers (Pillar Page).

Frequently Asked Questions: What Is Bad Faith Insurance?

What is the legal definition of bad faith insurance in Colorado?

Bad faith occurs when an insurance company unreasonably delays or denies payment of a covered benefit without a reasonable basis for that action. Colorado defines this under C.R.S. § 10-3-1115 (statutory bad faith) and through the common law duty of good faith and fair dealing recognized in Goodson v. American Standard Insurance Co., 89 P.3d 409 (Colo. 2004). The statutory test requires only “unreasonableness.” The common law test adds a requirement that the insurer knew or recklessly disregarded the unreasonableness of its conduct.

What is the difference between statutory and common law bad faith in Colorado?

Statutory bad faith (C.R.S. §§ 10-3-1115/1116) requires only proof that the delay or denial lacked a reasonable basis. Damages are fixed at two times the covered benefit plus attorney fees. Common law bad faith requires the additional proof of knowing or reckless disregard but opens the door to emotional distress damages, full economic harm recovery, and punitive damages. Most cases assert both claims. See the deep dive in Colorado Bad Faith Insurance Statutes Explained.

Can I file a bad faith claim even if my insurer eventually paid my claim?

Yes. Under Nibert v. GEICO Casualty Co., 2017 COA 23, the two-times statutory multiplier applies even after the benefit has been paid. And under Goodson, emotional distress damages are available because the fact that an insurer finally pays in full does not erase the distress caused by the bad faith conduct. The delay itself causes harm, and Colorado law recognizes that harm separately.

What types of insurance claims can involve bad faith?

Any first-party claim can give rise to a bad faith action: auto insurance, homeowners insurance, health insurance, disability insurance, and UM/UIM claims. In the personal injury context, bad faith most frequently arises in auto insurance claims after car accidents, truck accidents, and motorcycle accidents, particularly when the injuries are catastrophic and the claim value is high.

How do I know if my insurance company is acting in bad faith?

Warning signs include: unexplained delays, repeated requests for documents you already submitted, denial without a written explanation citing specific policy language, settlement offers far below documented damages, failure to return calls or respond to correspondence, and adjuster reassignments that reset the clock. See the full guide in Signs Your Claim Is Being Denied in Bad Faith.

Do I need an attorney to file a bad faith insurance claim?

Bad faith claims are complex litigation against well-funded corporate defendants with experienced legal teams. The statutory framework provides recovery of attorney fees, which means the insurer pays your legal costs if you prevail on the statutory claim. An attorney experienced in Colorado bad faith law can identify whether the insurer’s conduct crosses the line, preserve the evidence necessary to prove it, and prepare the case for trial.

Explore More About Colorado Insurance Bad Faith

Pillar: Colorado Insurance Bad Faith Lawyers – The complete overview of bad faith law, damages, and how we fight these cases.

Spoke 2: Signs Your Claim Is Being Denied in Bad Faith – The red flags that expose an insurer crossing the line.

Spoke 3: Colorado Bad Faith Insurance Statutes Explained – A deep dive into C.R.S. §§ 10-3-1115 and 10-3-1116 with key case law.

Spoke 4: How to Sue Your Insurance Company for Bad Faith – The process, timeline, and what to expect.

Spoke 5: Insurance Company Delay Tactics – The playbook they run and how to defeat it.

Spoke 6: Bad Faith Damages in Colorado – Statutory penalties, compensatory damages, punitive damages, and how they stack.

Sources and Legal Citations

Colorado Statutes

C.R.S. § 10-3-1115 – Improper Denial of Claims: https://law.justia.com/codes/colorado/2021/title-10/article-3/part-11/section-10-3-1115/

C.R.S. § 10-3-1116 – Remedies for Unreasonable Delay or Denial: https://law.justia.com/codes/colorado/2021/title-10/article-3/part-11/section-10-3-1116/

C.R.S. § 10-3-1104(1)(h) – Unfair Claims Settlement Practices: https://law.justia.com/codes/colorado/title-10/regulation-of-insurance-companies/article-3/part-11/section-10-3-1104/

C.R.S. § 13-21-102 – Exemplary (Punitive) Damages: https://law.justia.com/codes/colorado/title-13/article-21/section-13-21-102/

Key Case Law

Goodson v. American Standard Ins. Co., 89 P.3d 409 (Colo. 2004): https://caselaw.findlaw.com/court/co-supreme-court/1058662.html

Am. Family Mut. Ins. Co. v. Allen, 102 P.3d 333 (Colo. 2004) (objective reasonableness standard)

Farmers Group, Inc. v. Trimble, 691 P.2d 1138 (Colo. 1984) (insurance contract’s unique nature)

Kisselman v. Am. Family Mut. Ins. Co., 292 P.3d 964 (Colo. App. 2011) (statutory vs. common law burdens)

Schultz v. GEICO Cas. Co., 429 P.3d 844 (Colo. 2018) (statutory standard of unreasonableness)

Nibert v. GEICO Casualty Co., 2017 COA 23 (two-times multiplier applies even after benefit paid)

Skillett v. Allstate Fire & Casualty Ins. Co., 2022 CO 12 (adjusters not individually liable)

Etherton v. Owners Ins. Co., 829 F.3d 1209 (10th Cir. 2016) (applies to disputed benefits)

Soicher v. State Farm Mut. Auto. Ins. Co., 2015 COA 46, 351 P.3d 559 (delay of full value is unreasonable delay)

Ballow v. PHICO Ins. Co., 878 P.2d 672 (Colo. 1994) (duties extend to entire relationship)

Bernhard v. Farmers Ins. Exch., 915 P.2d 1285 (Colo. 1996) (quasi-fiduciary duty scope)

Kyle W. Larson Enters. v. Allstate Ins., 2012 COA 160M, 305 P.3d 409 (vendors as first-party claimants)

Zolman v. Pinnacol Assurance, 261 P.3d 490 (Colo. App. 2011) (in-house denial incentives)

Cary v. United of Omaha Life Ins. Co., 68 P.3d 462 (Colo. 2003) (implied duty of good faith)

Practice Resources

Colorado Civil Jury Instructions, Ch. 25: https://www.courts.state.co.us/userfiles/file/Court_Probation/Supreme_Court/Committees/Civil_Jury_Instructions_Committee/Chapter%2025.pdf

United Policyholders – Insurance Consumer Rights in Colorado: https://uphelp.org/claim-guidance-publications/insurance-consumer-legal-rights-in-colorado/

Colorado Lawyer – Insurance Adjuster Liability: https://cl.cobar.org/features/insurance-adjuster-liability-in-bad-faith-claims/

Property Insurance Coverage Law Blog – Bad Faith Standard: https://www.propertyinsurancecoveragelaw.com/blog/what-is-the-bad-faith-standard-under-the-colorado-insurance-code/

Property Insurance Coverage Law Blog – Duty of Good Faith: https://www.propertyinsurancecoveragelaw.com/blog/the-duty-of-good-faith-and-fair-dealing-in-colorado/

Tyson & Mendes – First-Party Bad Faith Exposure: https://www.tysonmendes.com/overview-of-first-party-insurance-bad-faith-in-colorado/

Keating Wagner – Elements of Bad Faith: https://www.keatingwagner.com/what-elements-must-be-proven-in-a-bad-faith-insurance-case/

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