New Colorado Law Regulating Insurance Companies for Unreasonable Delay and Effective Denial of August 6, 2008
The new law gives Colorado citizens the power to ensure that insurance companies pay claims in a reasonable and timely manner.
What is this new law? House Bill 08-1407. The aim of the law is to put an end to unreasonable refusals or delays by insurance companies. The law increases penalties for insurance companies for their unreasonable behavior in relation to claims.
A first-party claimant whose benefit claim is delayed or unreasonably denied may file a claim in local court to recover reasonable attorneys’ fees and court costs and double the benefits covered.
Who benefits from the new law? Colorado citizens claim insurance benefits from their insurance company. Victims in Colorado have been unable to file large lawsuits against insurance companies because attorneys’ fees can eat up a lot of settlement money. The new law gives Colorado citizens the power to ensure that insurance companies pay claims in a reasonable and timely manner by requiring insurers to pay unreasonable benefits, double damages, and attorneys’ fees.
For example, let’s say your claim has $30,000 in damages and the insurance company unreasonably delayed or denied the claim. Under the new law, you can get double the attorney’s fee of $30,000 (let’s say $10,000). So the insurance company has to pay you $70,000 (of which $10,000 will pay attorneys’ fees) for violating the new law.
No person working in the field of insurance may unreasonably delay or refuse to pay a claim for benefits due to any claim by or on behalf of the First Party.
What type of service provider can this new law punish? The law applies to health insurance companies, disability insurance companies, auto insurance companies, and almost any other type of insurance. The law does not apply to workers’ compensation insurance, life insurance, and property insurance. If you believe that your workers compensation, life and/or equity insurance has unreasonably denied your claim, you cannot use this new law, however, you may be able to use other laws to help you get benefits.
When will the new law enter into force? The new law enters into force on August 6, 2008. However, the language of the law is not clear as to how that date will be implemented in practice. It is not clear whether the law applies only to claims after August 6, 2008 or whether it applies to claims that have been in progress over the past year or two.
If you would like to view this invoice:
- Go to the Colorado General Assembly website http://www.leg.state.co.us/
- Follow the link “Bill Digest”
- Go to 2008 Bill Digests
- It is labeled “Billing Summary – 2008”; Follow the link “Insurance”