Colorado Supreme Court Protects Policyholders in 3 Opinions

The Colorado Supreme Court today issued three important decisions related to the state’s bad faith insurance laws. The cases, which are outlined below, provide significant protections for insurance policyholders and plaintiffs in the state. Both Zach Warzel and Melissa Hailey were involved in two of the cases.

In Guaranty Life Insurance v. Estate of Casper, Zach was the initial trial attorney in 2014, along with David Jones of Decker & Jones. He also assisted with the appeals.  On the appeal to the Colorado Supreme Court, Nelson Waneka handled the majority of the briefing as well as the oral argument.  Michael Casper, Zach’s client, died nine days after a jury found in his favor in an insurance breach of contract, bad faith, and violation of CRS 10-3-1115 case.  The insurance company appealed, arguing that Mr. Casper’s verdict should be drastically reduced because of his death under Colorado’s “survival act.”

The Supreme Court found that the survival act applies per claim and that the “punitive” and “personal injury” damage limitations under the survival act do not apply to claims under Colorado law, CRS 10-3-1115.  While common law bad faith is a closer call under the “personal injury” damage limitation found in the survival act, the Court found it did not apply to this case because Mr. Casper had already obtained a verdict (“recovered” under the meaning of the survival statute) by the time he passed away.

As to punitive damages awarded by the jury, the Court found that they are governed by the “penalty” limitation of the survival statute and that the survival statute limits punitive damages only when “the person against whom such punitive damages … are claimed” has died.  Because the insurance company still existed, the limitation does not apply.  Finally, the Court found that attorney fees and costs under 10-3-1115 are “actual damages,” and not penalties, and can be included when calculating an award of punitive damages under the statutory cap on punitive damages.  The Court reversed the trial court’s nunc pro tunc entry of judgment because the actual damages of attorney fees had not yet been determined at the time of the verdict.

In the second case, Rooftop Restoration v. American Family Insurance Co., Zach and Melissa Hailey wrote an amicus brief in support of the plaintiff on behalf of the Colorado Trial Lawyers Association.  Nelson Waneka also briefed this case in the Supreme Court.  There was no oral argument held in the case. The Court found that the one-year penal statute of limitations clearly does not apply to the state’s bad faith statute, CRS 10-3-1115.

Both Rooftop and Casper appear to also stand for the proposition that claims under the bad faith statute, CRS 10-3-1115, are assignable.

In the last case, American Family Life Insurance Co. v. Barriga, the Court found that a plaintiff asserting a breach of contract claim and a claim under CRS 10-3-1115 can recover the covered benefit itself, and another two-times the covered benefit under the statute, for a total of 3x.  And that even if the insurance company subsequently pays a benefit it originally delayed without a reasonable basis, it will still owe two-times the covered benefit without an offset for the amount it subsequently paid.   The language of the statute supports this interpretation, and the rule against double recoveries does not apply because breach of contract and 10-3-1115 address different conduct (are “factually separable”) and do not return an award for the same wrong.