Chapter 7 - § 7.4 • BAD FAITH CLAIMS IN DECLARATORY JUDGMENT ACTIONS

• Jurisdiction: Colorado

§ 7.4 • BAD FAITH CLAIMS IN DECLARATORY JUDGMENT ACTIONS

A tool often used by insurers to speed resolution of disputes over insurance benefits is the declaratory judgment procedure. This procedure was "established primarily 'to provide a ready and speedy remedy, in cases of actual controversy, for determining issues and adjudicating the legal rights, duties, or status of the respective parties, before controversies with regard thereto lead to the repudiation of obligations, the invasion of rights, and the commission of wrongs.'" Am. Family Mut. Ins. Co. v. Bowser, 779 P.2d 1376, 1380 (Colo. App. 1989). A declaratory judgment action "provides an early relief from uncertainty as to the future obligations for one who would normally be a defendant and who otherwise would not have his questions adjudicated until his adversary takes the initiative." Id.

Despite the legitimacy of the declaratory judgment procedure, an insurer still may be subject to liability for bad faith if it abuses the process by filing an action without reasonable justification. As the court stated in Bowser:

The insurer's duty of good faith is independent of its opportunity to file declaratory judgment actions. The same

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