Tcl - the Limitations of the Colorado Consumer Protection Act in Insurance Bad Faith Litigation - November 2005 - Tort and Insurance Law Reporter
| Jurisdiction | Colorado,United States |
| Citation | Vol. 34 No. 11 Pg. 75 |
| Pages | 75 |
| Publication year | 2005 |
2005, November, Pg. 75. TCL - The Limitations of the Colorado Consumer Protection Act in Insurance Bad Faith Litigation - November 2005 - Tort and Insurance Law Reporter
November 2005
Vol. 34, No. 11 [Page 75]
Tort and Insurance Law Reporter
The Limitations of the Colorado Consumer Protection Act in Insurance Bad Faith Litigation
by Ryan Kirchoff
(c) 2005 Ryan Kirchoff
This column provides information concerning current tort law issues and insurance issues addressed by practitioners representing either plaintiffs or defendants in tort cases. In addition, it addresses issues of insurance coverage, regulation, and bad faith.
Column Editor:
William P. Godsman of the Law Office of William Godsman, Denver - (303) 455-6900, wgodsman@qwest.net
This month's article was written by Ryan Kirchoff, Denver, an associate with McElroy, Deutsch, Mulvaney & Carpenter LLP - (303) 293-8800, rkirchoff@mdmlawco.com. The contents of this article do not necessarily express the opinions of McElroy, Deutsch, Mulvaney & Carpenter LLP.
Although Colorado Consumer Protection Act claims have become seemingly commonplace components of insurance bad faith lawsuits, the law underlying those claims continues to evolve. This article includes a brief history and outline of the CCPA and discusses its current application in insurance bad faith lawsuits in light of the Showpiece Homes and Coors decisions.
The Colorado Consumer Protection Act ("CCPA")1 provides prompt, economical, and readily available remedies against consumer fraud.2 Originally codified in 1969,3 the CCPA is intended to effectively punish and deter market abuses at the local level by providing a private cause of action for consumers injured as the result of deceptive trade practices.4
The Federal Trade Commission5 ("FTC") encouraged the enactment of state statutes such as the CCPA because of the difficulty it had in attempting to monitor and remedy deceptive trade practices at local levels pursuant to the FTC Act.6 Scarce budgetary resources and the practical difficulty of monitoring local matters made it nearly impossible for the FTC to effectively protect consumers.7 Additionally, the FTC Act did not provide a private right of action available to plaintiffs seeking to file claims for injuries resulting from deceptive practices.8
In addition to the CCPA, Colorado insurance consumers are protected by the Unfair Claims Deceptive Practices Act ("UCDPA"),9 which sets forth general standards for handling insurance claims. The UCDPA regulates trade practices in the insurance industry by defining and providing for the determination of deceptive acts or practices. It does not provide a private cause of action.
This article discusses CCPA claims in insurance bad faith lawsuits,10 focusing on factors courts consider when determining whether a challenged practice is actionable under the CCPA. It also discusses the issue of whether a violation of the UCDPA is a per se violation of the CCPA or whether CCPA claims are limited to the specific practices enumerated therein. Factors are listed that courts consider when determining whether a deceptive practice, once established, has the requisite public impact as required to be actionable under the CCPA. Finally, this article covers damages under the CCPA and the question of pleading with particularity.
Elements of a CCPA Claim
Five elements are required to establish a violation of the CCPA: (1) the defendant engaged in an unfair or deceptive trade practice; (2) the challenged practice occurred in the course of the defendant's business, vocation, or occupation; (3) the challenged practice significantly impacts the public as actual or potential consumers of the defendant's goods, services, or property; (4) the plaintiff suffered injury in fact to a legally protected interest;11 and (5) the challenged practice caused the plaintiff's injury.12 The first and third elements are often of dispositive importance and are discussed in the following sections.
The Requirement of a Deceptive Practice
The CCPA requires that a claimant establish that the defendant engaged in a deceptive trade practice. CRS § 6-1-105 presents a seemingly exhaustive list of acts that are considered deceptive practices. However, subsection (3) appears to allow claims based on other acts not enumerated therein. A closer reading reveals that CRS § 6-1-105(3) preserves causes of action available at common law and in other statutes, and provides for damages in cases where a person is found to have committed any deceptive trade practice "listed in this article." The Colorado Court of Appeals has found that only a deceptive practice enumerated in CRS § 6-1-105 can satisfy the first element of a CCPA claim.13
Scope of Deceptive Practices Under Showpiece Homes
In Showpiece Homes Corp. v. Assurance Co. of America,14 the Federal District Court for the District of Colorado ("Colorado District Court") certified four questions regarding the CCPA to the Colorado Supreme Court. Showpiece Homes involved allegations that an insurer failed to properly investigate and promptly settle claims made against the insured. The first certified question asked whether the provisions of the UCDPA preempted a private cause of action under the CCPA, if an insurer violated the UCDPA.15
In its analysis of the first certified question, the Court held that the UCDPA does not preempt a private cause of action under the CCPA. In so holding, the Court distinguished the purposes of the two statutes.16 The CCPA is a remedial statute designed to deter and punish deceptive trade practices in the public marketplace.17 The UCDPA, on the other hand, is a regulatory statute that sets forth general standards for handling insurance claims.18 Private rights of action can be maintained under the CCPA and cannot be maintained under the UDCPA.19
The Court held that insurance industry practices may be within the purview of the CCPA. CRS § 6-1-105 does not list all industries to which it applies or all types of transactions it covers.20 The Court suggested that the statutory list is not exhaustive - deceptive or unfair practices in the insurance business, for...
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