­Colorado Supreme Court Clarifies Scope of Liability for Insurance Adjusters

The Colorado Supreme Court recently clarified that individual employees of insurance companies cannot be held liable for violations of C.R.S. § 10-3-1115, unreasonable delay or denial of payment for a claim for insurance benefits. In Skillet v. Allstate Fire & Cas. Ins. Co., 2022 CO 12, the Court confirmed that Section 1115 (and the corresponding damages provided for in Section 10-3-1116) apply to insurance companies and not to individual employees or adjusters who handle claims for their insurance company employers.

Enacted in 2008, Section 10-3-1115 provides 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.” Enacted at the same time, C.R.S. § 10-3-1116 created a cause of action for these violations, and further provided that claimants who prove a violation of Section 1115 may recover reasonable attorney fees, court costs, and an additional two times the covered benefit. The potential for recovering treble damages, plus attorney’s fees and costs, has led to an explosion of unreasonable delay or denial claims filed in Colorado state courts over the past decade. Many insurers seek to remove these cases to federal court asserting diversity jurisdiction as the basis for the federal court’s jurisdiction over the state-law claims.

Recently, some first-party claimant insureds have filed lawsuits naming, not only their first-party insurer, but also individual adjusters who were involved in handling their claims. These claimants asserted that both the insurer and the individual adjuster violated Section 1115 and were liable for damages under Section 1116. Because many of the out-of-state insurers employ adjusters in Colorado, such claims, if viable, would defeat diversity jurisdiction and prevent insurers from removing these cases to federal court.

Insurers and the defendant-claims adjusters routinely moved to dismiss these claims against the individual employees. Most courts confronted with this issue found that individual adjusters and employees could not be held liable. See, e.g., Williams v. Neal et al., 2021CV30995 (Denver Dist Ct. July 7, 2021); Regaldo v. American Family Mut. Ins. Co. et al., 2021CV30183 (Denver Dist. Ct. April 24, 2021); Frerichs v. State Farm Mut. Ins. Co. et al., (Adams Cty. Dist. Ct. March 19, 2021); Contreras v. State Farm Mut. Auto. Ins. et al., 2020CV32397 (Arapahoe Cty. Dist Ct. March 15, 2021); Smith v. State Farm Fire and Cas. Co., 2021CV30016 (Weld Cty. Dist Ct. March 25, 2021). An earlier case from the Colorado Court of Appeals determined that a third-party administration and plan advisor could not be held liable under these provisions supported these state district court opinions. See Riccatone v. Colorado Choice Health Plans, 315 P.3d 203, 2013 COA 133 (Colo. App. 2013). However, in late 2020 one U.S. District Court concluded that it was possible that the Colorado Appellate Courts might allow such a claim. See Siewald v. Allstate Prop. & Cas. Ins. Co., Civil Action No. 20-cv-00464-PAB, 2020 U.S. Dist. LEXIS 220999 (D. Colo. Nov. 24, 2020). Confronted with a split in authority, the U.S. District Court in Skillet certified the issue to the Colorado Supreme Court, which accepted the case.

The plaintiff in Skillet argued that because Section 1115 provides that “[a] person engaged in the business of insurance” and C.R.S. § 10-3-1102(3) defines “person” to include “adjusters,” the plain language of the statute allowed claims against individual adjusters. The Colorado Supreme Court rejected this argument noting that the definitions in Section 10-3-1102 apply “unless the context otherwise requires.” In reviewing Sections 10-3-1115 and 1116, the Court concluded that unreasonable delay and denial claims may only be brought against insurers and not individual claims adjusters. Among other reasons, the Colorado Supreme Court noted that it would be “odd” that a first-party claimant could recover “two times the covered benefit” from an individual adjuster who is not a party to the insurance policy contract.

The Colorado Supreme Court’s resolution of these issues should preclude attempts to impose liability on individual adjusters handling claims. This will prevent any chilling effect on adjusters who may otherwise fear suit by claimants who disagree with an insurer’s valuation of a claim. This Skillet decision will also likely result in many, if not most first party insurance cases being removed to federal court if diversity jurisdiction exists.

Attorneys at Wells, Anderson & Race, LLC frequently advise and represent insurers in Colorado state and federal courts. We have a proven track record of success in defending extra-contractual claims, including common law bad-faith and statutory claims under C.R.S. § 10-3-1116. Please contact Adam O’Brien or William Healy for additional information.


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