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Colorado Court of Appeals
The Colorado Court of Appeals has also come out with two cases in December. The first case increases the types of claims that can be brought against an insurer for failure to pay benefits owed and the second takes a closer look at the age-old doctrine of causation.
New Type of Bad Faith Claim and New Standard of Care
Kisselman v. American Family Mutual Ins. Co.
The Colorado Court of Appeals found:
C.R.S. § 10-3-1115(1)(a) provides that an insurer "shall not unreasonably delay or deny payment of a claim for benefits owed." C.R.S. § 10-3-1116(1) provides that a first-party claimant also may bring an action for a breach of the statutory duty set forth in CRS § 10-3-1115 to recover reasonable attorney fees, court costs, and "two times the covered benefit."
First, the Court found that two statutes create a new private right of action in addition to and different from common law bad faith claims resulting in a new claim against insurers by Plaintiffs.
Second, the statutes announce a new standard of liability different from the standard of liability for common law bad faith claims. The common law bad faith standard required the Plaintiff to prove knowledge of unreasonableness or recklessness on the part of the insurer; however, under §§ 10-3-1115 and 1116, the Plaintiff need only show that there was "no reasonable basis" for the denial. Unfortunately, the appellate court did not define or interpret what a reasonable basis for a denial was or when a reasonable basis was lacking.
Finally, the Court determined that the statutes apply prospectively to all "post-effective date conduct of insurers", regardless of when the original claim for benefits was made.
This decision will certainly result in increased litigation as it significantly lowers the standard for proving a claim against an insurer. By avoiding the ultimate issue as to what a "reasonable basis" for a denial or delay may be, it seems this issue may be determined by juries.
The Colorado "But For" Test - Causation
Reigel v. SavaSeniorCare L.L.C.
In Reigel, the district court instructed the jury that the Plaintiff could prevail if she presented evidence that the negligent conduct of one of the Defendants "substantially increased the risk of harm" to her husband who died as a result of delayed treatment for a heart attack. This was a significant deviation from the standard causation in fact analysis.
The "but for" causation test is satisfied if the negligent conduct in a "natural and continued sequence, unbroken by any efficient, intervening cause, produce[s] the result complained of (the injury), and without which the result would not have occurred." An easy way to think of it is that the harm/injury would not have occurred but for the negligence of the defendant.
The Colorado Court of Appeals found that the "substantially increased risk" instruction was a lower standard and not the standard applicable in Colorado. There has been a push towards allowing a plaintiff to demonstrate causation by showing that the negligence of the defendant simply increased the risk of harm, and this decision has hopefully reduced those arguments, however, Plaintiffs attorneys will undoubtedly continue to attempt to utilize this "increased risk" language in arguing their cases to juries.
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