Chapter 5 - 5.5 • REMEDIES
| Jurisdiction | Colorado |
§ 5.5.1—Common Law Claims
Actual Damages
Colorado law permits the insured who prevails on a common law bad faith breach of insurance claim to recover "the total dollar amount of plaintiff's damages . . . caused by the [insurer's] bad faith breach of insurance contract . . . ."130 These may include past and future economic losses, past and future non-economic losses, and any physical disfigurement or impairment.131 An insured may recover non-economic damages under a common law bad faith claim without proof of any accompanying substantial financial or property loss.132
The Colorado Supreme Court has held that the general rule against double recovery for a single harm does not prohibit an insured from recovering both damages for breach of contract and a statutory award for unreasonable delay or denial of benefits.133
Attorney Fees as Damages
Actual damages may include attorney fees, but "only when those fees are a wrongfully denied benefit of the insurance contract itself, e.g., fees incurred as a result of a liability insurer's refusal to provide a defense."134
§ 5.5.2—First-Party Statutory Claims
Notably, the court may not give a common law damages instruction in relation to a statutory first-party claim under C.R.S. §§ 10-3-1115 and -1116.135
Benefit Amount
An insured who recovers on a claim of first-party statutory bad faith under the UCDPA may recover from the insurer "the total dollar amount of the benefits for which payment was delayed or denied without reasonable basis."136 The insured bears the burden of proving by a preponderance of the evidence the extent of benefits the insurer improperly delayed or denied.137 Again, the Colorado Supreme Court has held that the general rule against double recovery for single harm does not prohibit an insured from recovering both damages for breach of contract and a statutory award for unreasonable delay or denial of benefits.138
Double Damages and Attorney Fees
In statutory bad faith actions, the insured may obtain damages in the amount of two times the covered benefit plus reasonable attorney fees and court costs.139 A successful statutory claim provides for damages calculated as two times the covered benefit — which are in addition to recovery of the covered benefit itself via a breach of contract claim — because C.R.S. § 10-3-1115 "provides a cause of action distinct from a breach of contract action."140 Thus, where an insured settled her covered benefit claim for $75,000 prior to trial and prevailed on her statutory bad faith claim at trial, the trial court properly awarded the insured an additional $150,000 — two times the covered benefit amount.141 The jury is not informed that if it finds for the plaintiff and awards damages for an unreasonably delayed or denied covered benefit, the court will subsequently add two times the covered benefit amount to the plaintiff's judgment.142
In May 2018, the Colorado Supreme Court issued two opinions on the same day with important implications for double damages and attorney fees under C.R.S. §§ 10-3-1115 and -1116. In the first case, American Family Mutual Insurance Co. v. Barriga, the court held that these statutes do not require Colorado trial courts to reduce an award of two times the covered benefits the insurer unreasonably delayed or denied by the amount of unreasonably delayed benefits the insurer eventually paid outside of a lawsuit.143 Indeed, such a reduction would constitute error.144 In the second case, Guarantee Trust Life Insurance Co. v. Estate of Casper, the court held that attorney fees and costs recoverable on a claim for unreasonable delay or denial of insurance benefits under C.R.S. §§ 10-3-1115 and -1116 constitute actual damages that a trial court may consider in calculating punitive damages.145 The statutes' provision for an award of attorney fees comprises an exception to the so-called American Rule that ordinarily requires each party to pay its own attorney fees.146 Finally, Estate of Casper holds that an award of the prevailing insured's attorney fees is mandatory, not discretionary.147 Attorney fees awarded under the statute can cover costs of appeal and the fees incurred in bringing a request for fees, commonly known as "fees-on-fees."148
A statutory damages award may be reduced by payments received from other insurers, in accordance with a policy's "other insurance" clause.149
§ 5.5.3—Exemplary Damages
Exemplary damages are available on a common law bad faith breach of insurance contract claim, because it is a tort claim rather than a pure contract claim.150
Several older cases interpreting Colorado law had concluded that an insured could not recover in the same action both double the delayed or denied covered benefit under C.R.S. § 10-3-1116 and exemplary damages, because the former were "penal" in nature and allowing both forms of damages would therefore provide the insured with an improper double recovery.151 However, in 2018 the Colorado Supreme Court probably overruled those cases in Rooftop Restoration, Inc. v. American Family Mutual Insurance Company.152 There, the court concluded that a claim under § 10-3-1116 is not a claim for punitive damages or a penalty.153 Further, in another case issued on the same day as Rooftop Restoration, Inc., the supreme court upheld a substantial jury verdict that included both exemplary damages and — under § 10-3-1116 — double the wrongfully withheld policy benefits.154
In Colorado, punitive damage awards are governed by statute.155 The statute provides that in a civil action "in which damages are assessed by a jury for a wrong done to the person or to personal or real property" and the injury is accompanied by circumstances of fraud, malice, or willful and wanton conduct, the jury may award reasonable exemplary damages.156 Exemplary damages may be awarded only when the party asserting the claim proves, beyond a reasonable doubt, "the commission of a wrong under the circumstances set forth" in the punitive damages statute.157 Generally, the amount of exemplary damages cannot exceed the amount of the actual damages...
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