Chapter 11 - § 11.3 • CONCLUSION

• Jurisdiction: Colorado

§ 11.3 • CONCLUSION

As this discussion shows, as long as Colorado courts adhered to the premise that a claim for bad faith arises out of an implied covenant of good faith and fair dealing in the insurance contract, claims against non-parties to the contract, such as insurance agents or independent adjusting companies, were not recognized. Adherence to this premise was the basis for the courts' decisions in Gorab and Munoz. However, in cases such as Trimble III and Scott Wetzel, the courts abandoned adherence to the doctrine that a claim for bad faith originates in the contractual relationship between the parties in order to avoid injustice. The courts departed from this rule to extend liability to companies that "stood in the shoes" of the insurer in processing claims. The courts' rationale was that unless liability attached to such entities, the parties actually responsible for mishandling claims would escape responsibility. Furthermore, with the supreme court's decision in Ballow v. PHICO, the notion that a claim for bad faith must arise out of a contractual relationship was significantly eroded.

In light of such cases as Scott Wetzel and Ballow, there is a potential that third parties who adjust claims or control the payment of claims may be liable for bad faith in some circumstances. However, the courts have...