By Katie Johnson, Shareholder, Sutton | Booker | P.C.
On May 29, 2018, in two separate rulings, the Colorado Supreme Court issued opinions interpreting and applying C.R.S. §§ 10-3-1115/1116, Colorado statutes that provide a private right of action against an insurer for unreasonable delay or denial of insurance benefits. In these opinions, the Supreme Court held that claims under the statute are not subject to a one-year statute of limitations applicable to penalties and that insureds are entitled to recover two times the covered insurance benefit in addition to the covered benefit, for a total of three times the covered benefit.
In Rooftop Restoration, Inc. v. American Family Mut. Ins. Co., 2018 CO 44 (Colo. 2018), the Court examined whether a claim under C.R.S. §§ 10-3-1115/1116 is subject to the one-year statute of limitations for penalties found in C.R.S. § 13-80-103(1)(d). The Court held that such claims are not subject to the one-year statute of limitations. The case came up on a certified question from the U.S. District Court for the District of Colorado. In order to reach this conclusion, the Court looked at the language of the accrual statute associated with Colorado’s statutory scheme for statutes of limitation. The accrual statute states that a cause of action for penalties accrues when the determination of overpayment or delinquency is no longer subject to appeal. The Court reasoned that an action for unreasonable delay/denial never leads to a determination of overpayment or delinquency. Thus, the Court reasoned, if a cause of action for unreasonable delay/denial is a penalty subject to the one-year statute of limitations, it would never accrue and the clock to bring the claim would never start ticking. The Court concluded that the “penalty” actions referred to in the statute of limitations cannot include unreasonable delay/denial actions. Accordingly, the Court held that claims under C.R.S. §§ 10-3-1115/1116 are not governed by the one-year statute of limitations in C.R.S. § 13-80-103(1)(d).
In American Family Mut. Ins. Co. v. Barriga, 2018 CO 42, No. 15SC934, the Court analyzed the operation of an award of “two times the covered benefit” available under C.R.S. § 10-3-1116. The statute provides that an insured may bring an action to recover reasonable attorney fees, court costs, and “two times the covered benefit.” The plaintiffs were bringing a claim under the statute for benefits that they claimed were unreasonably delayed but ultimately paid. The case was tried to a jury, which found that the benefits ultimately paid had been unreasonably delayed. The trial court doubled the amount unreasonably delayed pursuant to C.R.S. § 10-3-1116, but then reduced the judgment to credit the insurer in the amount of the benefits previously paid. The Supreme Court disagreed with this approach, instead holding that insured whose benefits have been unreasonably delayed, but eventually paid, may recover “two times the covered benefit” in addition to the unreasonably delayed benefit already received, for a total of three times the covered benefit. Likewise, the Court concluded that an insured may recover benefits under a breach of contract claim against an insurer in addition to “two times the covered benefit” available under C.R.S. § 10-3-1116, for a total of three times the covered benefit.