Chapter 10 - § 10.2 • NO PRIVATE RIGHT OF ACTION EXISTS FOR VIOLATION OF THE UNFAIR CLAIMS SETTLEMENT PRACTICES ACT

• Jurisdiction: Colorado

§ 10.2 • NO PRIVATE RIGHT OF ACTION EXISTS FOR VIOLATION OF THE UNFAIR CLAIMS SETTLEMENT PRACTICES ACT

The Unfair Claims Settlement Practices Act (UCSPA), C.R.S. § 10-3-1104(1)(h), prohibits insurers from engaging in 17 specific types of unfair claim handling practices. In Trimble I, one of the issues addressed by the court of appeals was whether the trial court had erroneously dismissed Trimble's fifth counterclaim, which was based on the contention that Farmers had breached one or more of the statutory duties enumerated in the UCSPA. Trimble I, 658 P.2d at 1377. The question the court had to consider was whether the legislature had created a private civil remedy for violation of the Act. The court held that because the legislature had not added a private civil remedy to its catalog of sanctions for violation of the statute, the statutory remedies excluded all others. Thus, the court ruled that "this statute may not serve as the sole basis for a civil action instituted by private citizens allegedly aggrieved by the conduct of their insurers." Id. at 1378. The court in Schnacker v. State Farm Mutual Automobile Insurance Co., 843 P.2d 102, 104 (Colo. App. 1992), reiterated that no private right of action exists for violation of the Act.

After the court of appeals issued its ruling in Trimble I, the legislature confirmed that it did not intend to create a private right of action for violation of the Act. See C.R.S. § 10-3-1114. However, in 1987 the legislature adopted C.R.S. § 10-3-1113, which does permit courts to consider violations of the Act in determining whether an insurer has breached its duty of good faith and fair dealing:

(1) In any civil action for damages founded upon contract, or tort, or both against an insurance company, the trier of fact may be instructed that the insurer owes its insured the duty of

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