Signs Your Insurance Company Is Denying Your Claim in Bad Faith

Not every denied claim is bad faith. But every bad faith denial has warning signs. These are the red flags.

How to Tell If Your Insurance Company Is Acting in Bad Faith

An insurance company is denying your claim in bad faith when it delays or refuses payment without a reasonable basis for doing so. Under Colorado Revised Statutes § 10-3-1115, any delay or denial that lacks a reasonable basis is unlawful. Under the common law framework established in Goodson v. American Standard Insurance Co., 89 P.3d 409 (Colo. 2004), an insurer acts in bad faith when it unreasonably delays or denies payment while knowing or recklessly disregarding the validity of your claim. The challenge for most policyholders is recognizing when the insurer has crossed that line. Insurance companies do not announce that they are acting in bad faith. They do it through patterns of conduct that, individually, might look like bureaucratic slowness or honest disagreement. Taken together, those patterns reveal something else entirely. For the full legal definition, see What Is Bad Faith Insurance in Colorado?.

The Line Between a Legitimate Dispute and Bad Faith

Insurance companies can deny claims. That is a contractual right. A denial becomes bad faith only when the insurer lacks a reasonable basis for its decision. As the Colorado Supreme Court held in Schultz v. GEICO Casualty Co., 429 P.3d 844, 848 (Colo. 2018), the statutory test asks a single question: did the insurer delay or deny payment without a reasonable basis for that action? If yes, the insurer violated the statute. Period.

A legitimate dispute looks like this: your policy has an exclusion, the insurer investigated your claim, and the exclusion genuinely applies to the facts. The insurer explains the denial in writing, cites the specific policy language, and gives you a path to challenge the decision. You may disagree, but the insurer acted reasonably.

Bad faith looks different. The insurer delays without explanation. The investigation ignores evidence that supports your claim. The denial letter is vague or cites policy language that does not match your facts. The offer is so low it bears no relationship to the documented damages. The adjuster disappears for weeks. These are not mistakes. They are choices. And Colorado law treats them accordingly.

Red Flag: Silence, Stalling, and Unexplained Delays

Colorado’s Unfair Claims Settlement Practices Act, C.R.S. § 10-3-1104(1)(h)(II), makes it illegal for an insurer to fail to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies. The Colorado Division of Insurance Regulation 5-1-14 requires insurers to make a decision on claims and pay benefits within 60 days after receipt of a valid and complete claim, unless a reasonable dispute exists. 3 Colo. Code Regs. § 702-5-1-14 Sec. 4(A).

What the stall looks like in practice: you call and leave messages that go unreturned for days or weeks. Your adjuster is reassigned mid-claim, and the new adjuster starts from scratch. The insurer requests documentation you already submitted, then requests it again. Weeks pass between each communication. Every interaction feels like the first. As the United Policyholders organization explains, your insurer should immediately pay you what is owed without delay and should not hold back any part of your benefits while another part is uncertain or under investigation. For the full playbook, see Insurance Company Delay Tactics.

If your insurer has gone silent, that silence is evidence. Document it. Save every voicemail, email, and letter. Note the date and time of every unreturned call. That timeline becomes a central exhibit if the case reaches a courtroom.

Red Flag: No Investigation, or an Investigation That Ignores Your Evidence

C.R.S. § 10-3-1104(1)(h)(III) prohibits insurers from failing to adopt and implement reasonable standards for the prompt investigation of claims. Subsection (IV) goes further: it prohibits refusing to pay claims without conducting a reasonable investigation based upon all available information.

The Colorado Supreme Court defined what this means in practice. In Am. Family Mut. Ins. Co. v. Allen, 102 P.3d 333, 344 (Colo. 2004), the Court affirmed a bad faith verdict where the insurer concluded its investigation without exploring conflicting statements or interviewing relevant witnesses. As United Policyholders notes, citing Thompson v. State Farm Mut. Auto. Ins. Co., 457 F. Supp. 3d 998, 1004 (D. Colo. 2020): adequacy and fairness means that the insurer has a duty to diligently search for evidence which supports the insured’s claim and not merely seek evidence upholding its own interests.

What a sham investigation looks like: you submit medical records from your treating neurologist documenting a traumatic brain injury, and the insurer has a peer reviewer who never examined you write a report disagreeing. You provide a crash reconstruction report, and the insurer ignores it. You send bills from your spinal cord injury rehabilitation, and the adjuster challenges the treatment without consulting a specialist. The investigation exists on paper but was designed to reach a predetermined conclusion. See also Brodeur v. American Home Assurance Co., 169 P.3d 139, 147 n.7 (Colo. 2007) (bad faith can occur through the unreasonable refusal to investigate or gather facts).

Red Flag: A Denial Letter That Does Not Explain Why

C.R.S. § 10-3-1104(1)(h)(XIV) requires that an insurer 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. This is not optional language. It is a statutory obligation.

A legitimate denial letter identifies the specific policy provision the insurer relies on, explains how the facts of your claim relate to that provision, and tells you what, if anything, you can do to challenge the denial. A bad faith denial letter says something vague: “based on our review, your claim does not meet the requirements for coverage.” Which requirements? Based on what facts? Under which policy provision? When the insurer cannot or will not answer those questions, it is because the answers would expose the denial as unreasonable.

In the Allen case, the Court specifically identified the failure to provide a reasonable explanation for a denial as evidence supporting a bad faith verdict. If your denial letter reads like a form document that could apply to any claim, that is a problem. If it does not cite a single policy provision by page and section number, that is a bigger problem.

Red Flag: A Settlement Offer That Insults the Evidence

C.R.S. § 10-3-1104(1)(h)(VII) prohibits insurers from compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds. That language targets a specific strategy: lowballing in the hope that injured people will accept less than they are owed rather than fight.

A motorcycle accident victim with documented fractures, road rash, and a spinal cord injury receives a settlement offer of $15,000. A family that lost their primary earner in a wrongful death case involving a commercial truck gets an offer that would not cover a year of the mortgage. These offers are not starting points for negotiation. They are tests. The insurer is measuring whether you will take what they give you or whether you will fight. Under Colorado law, if the amount you ultimately recover at trial is substantially more than the offer, the gap itself is evidence of bad faith. See Soicher v. State Farm Mut. Auto. Ins. Co., 2015 COA 46, 351 P.3d 559.

Red Flag: Pressure to Settle Quickly or Avoid Hiring an Attorney

An insurer that tells you “you don’t need a lawyer for this” or “hiring an attorney will just slow things down” is not protecting your interests. It is protecting its own. An insurer that pushes for a quick settlement before you understand the full extent of your injuries is attempting to close the file before the true cost becomes clear.

This is particularly dangerous after catastrophic injuries. A traumatic brain injury may not fully manifest for months. Cognitive deficits, personality changes, and long-term employment limitations often develop over time. A quick settlement signed two months after the accident cannot account for a lifetime of diminished earning capacity. Similarly, spinal cord injuries frequently require adaptive equipment, home modifications, and ongoing rehabilitation that can cost millions over a lifetime. Early settlement offers are calibrated to avoid those numbers, not to account for them.

Under C.R.S. § 10-3-1116(1), a successful statutory bad faith claim recovers attorney fees. That means the insurer pays your legal costs when you win. An insurer advising you not to hire a lawyer is advising you to forfeit the right that Colorado law gave you specifically to level the playing field.

Red Flag: The Adjuster’s Paycheck Depends on Denying Claims

C.R.S. § 10-3-1104(1)(hh) specifically prohibits insurers from compensating adjusters based on claim denial metrics. See also Zolman v. Pinnacol Assurance, 261 P.3d 490, 500 (Colo. App. 2011) (in-house policies that reward employees for defeating claims are evidence of bad faith).

You will not see this red flag in a letter. You will see it in the behavior. An adjuster who ignores clear evidence, refuses to explain decisions, and makes offers disconnected from the documented damages may be operating under internal pressure to close files cheaply. Discovery in bad faith litigation often reveals these internal compensation structures, claims handling guidelines that prioritize cost savings over fair evaluation, and performance metrics that tie bonuses to denial rates. When those documents surface, a jury can see exactly why your claim was handled the way it was.

Red Flag: Demands for Recorded Statements Designed to Trap You

An insurer requesting a recorded statement is not, by itself, unreasonable. Insurers have the right to investigate. The red flag is how the statement is used. An adjuster who asks leading questions designed to create inconsistencies, focuses on pre-existing conditions unrelated to the accident, or frames questions to minimize your symptoms is not investigating. The adjuster is building a file to justify a denial.

Under the duty of good faith and fair dealing, the investigation must be fair and balanced. As the court recognized in Thompson v. State Farm, 457 F. Supp. 3d at 1004, the insurer must diligently search for evidence which supports the insured’s claim. A recorded statement process designed to undermine rather than understand your claim is evidence of bias in the investigation itself.

What to Do When You See These Red Flags

Document everything. Every call, every email, every letter. Note dates, times, and the name of the person you spoke with. If the insurer misses the 60-day decision deadline under Regulation 5-1-14, that date becomes legally significant.

Do not accept the first offer under pressure. You are not required to respond immediately. An insurer that creates urgency is often trying to close the file before you understand the full value of your claim.

Keep every denial letter. Compare what the insurer says to the actual policy language. If the denial cites an exclusion, read the exclusion yourself. If it does not cite any policy provision, that omission violates § 10-3-1104(1)(h)(XIV).

Consult a bad faith attorney. Under C.R.S. § 10-3-1116, the insurer pays your attorney fees if you prevail on a statutory bad faith claim. At Rampart Injury Lawyers, we evaluate bad faith claims at no cost to you. We prepare every case from day one as though it will go before a jury, because that preparation is what changes the insurer’s calculation of risk. We serve the I-25 corridor from Greenwood Village to Colorado Springs. Full process guide: How to Sue Your Insurance Company for Bad Faith.

Frequently Asked Questions: Signs of a Bad Faith Claim Denial

How long does an insurance company have to decide on my claim in Colorado?

Under Colorado Division of Insurance Regulation 5-1-14, insurers must make a decision and pay benefits within 60 days of receiving a valid and complete claim, unless a reasonable dispute exists. Failure to meet this deadline can result in penalties of 8% annual interest on the unpaid amount plus $100 per day for each additional day of delay. See 3 Colo. Code Regs. § 702-5-1-14 Sec. 4(A).

Is a denied insurance claim automatically bad faith?

No. Insurers have the right to deny claims that are not covered under the policy. A denial becomes bad faith only when it lacks a reasonable basis. Under Schultz v. GEICO, 429 P.3d at 848, the test is whether the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis. The pattern of conduct matters as much as the denial itself. Learn more in What Is Bad Faith Insurance?

What should I do if my insurance company is not responding to me?

Document every attempted communication with dates and times. Under C.R.S. § 10-3-1104(1)(h)(II), failing to acknowledge and act promptly on communications is a prohibited practice. Your record of unanswered calls and emails becomes evidence if you file a bad faith claim. You can also file a complaint with the Colorado Division of Insurance.

Can I file a bad faith claim while my injury case is still ongoing?

Yes. Bad faith claims are separate from the underlying injury claim. They address different harm: the injury case addresses what the at-fault party caused; the bad faith case addresses what the insurer did by refusing to honor its obligations. In many cases, both proceed in parallel. Process details: How to Sue Your Insurance Company for Bad Faith.

What damages can I recover if my insurance company denied my claim in bad faith?

Under Colorado’s statutory framework (C.R.S. §§ 10-3-1115/1116), you can recover two times the covered benefit plus attorney fees. Under common law bad faith, you can recover emotional distress damages, all economic losses caused by the bad faith, and punitive damages in cases of willful and wanton conduct. These remedies stack. Full breakdown: Bad Faith Damages in Colorado.

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 1: What Is Bad Faith Insurance in Colorado? – Legal definition, both frameworks, and the quasi-fiduciary duty.

Spoke 2: Colorado Bad Faith Insurance Statutes Explained – Deep dive into C.R.S. §§ 10-3-1115 and 10-3-1116 with key case law.

Spoke 3: How to Sue Your Insurance Company for Bad Faith – The process, timeline, and what to expect.

Spoke 4: Insurance Company Delay Tactics – The playbook they run and how to defeat it.

Spoke 5: Bad Faith Damages in Colorado – Statutory penalties, compensatory damages, punitive damages, and how they stack.

Sources and Legal Citations

Colorado Statutes and Regulations

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/

3 Colo. Code Regs. § 702-5-1-14 – Timely Decision/Payment Requirements: https://www.propertyinsurancecoveragelaw.com/blog/failure-to-make-timely-decisions-payments-in-colorado-will-lead-to-penalties-for-insurers-pursuant-to-title-3-colo-code-regs-%C2%A7-702-5-1-14/

Colorado Division of Insurance – Regulations Index: https://doi.colorado.gov/statutes-regulations-bulletins/colorado-insurance-regulations

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) (incomplete investigation, failure to explain denial)

Schultz v. GEICO Cas. Co., 429 P.3d 844 (Colo. 2018) (“without a reasonable basis” standard)

Brodeur v. American Home Assurance Co., 169 P.3d 139 (Colo. 2007) (bad faith through unreasonable refusal to investigate)

Thompson v. State Farm Mut. Auto. Ins. Co., 457 F. Supp. 3d 998 (D. Colo. 2020) (duty to search for supporting evidence)

Soicher v. State Farm Mut. Auto. Ins. Co., 2015 COA 46, 351 P.3d 559 (lowball offers as evidence of bad faith)

Zolman v. Pinnacol Assurance, 261 P.3d 490 (Colo. App. 2011) (adjuster compensation incentives)

Parsons ex rel. Parsons v. Allstate Ins. Co., 165 P.3d 809 (Colo. App. 2006) (UCSPA standards as post-filing evidence)

Practice Resources

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

Property Insurance Coverage Law Blog – Colorado Claims Handling: https://www.propertyinsurancecoveragelaw.com/blog/claims-handling-requirements-by-state-colorado/

Property Insurance Coverage Law Blog – Regulation 5-1-14 Analysis: https://www.propertyinsurancecoveragelaw.com/blog/failure-to-make-timely-decisions-payments-in-colorado-will-lead-to-penalties-for-insurers-pursuant-to-title-3-colo-code-regs-%C2%A7-702-5-1-14/

ALFA International – Colorado Insurance Law Compendium: https://www.alfainternational.com/compendium/insurance-law/colorado/

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

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