Originally published in Carrier Management

By Heather Salg

Colorado isn’t like other states.

At 2.7 percent, its unemployment rate is lower than the national average. It’s the seventh-fastest-growing state in the U.S., adding some 80,000 residents in 2018. And it remains one of the most popular travel destinations in the country, attracting 86 million visitors last year to ski its slopes, sample its craft beers and hike its peaks.

But for insurers the state is not so inviting.

In fact, it can be a very challenging place for insurance companies to do business, in part because laws in the state are evolving rapidly in light of a shifting political climate.

For a variety of reasons, including recent elections that saw a massive shift to the left, Colorado is not particularly industry-friendly. This goes double for the insurance industry.

The Colorado legislature has enacted statutes that radically change the bar for civil penalties against insurance companies. In other states, a policyholder suing an insurer for benefits other than those owed under a particular policy would have to prove the insurance carrier deliberately, knowingly took action adverse to the insured. In Colorado, though, insurers can be held liable for twice any benefit owed, plus attorney fees and costs, if they act “unreasonably.”

For carriers unfamiliar with this risky and potentially expensive environment, it can be a minefield. But, of course, it remains possible—and profitable—for insurance companies to do business in Colorado, provided they enter the state with eyes open and understand the unique challenges presented by the Centennial State. Specifically, pay attention to these three things:

Stick to the facts. Know that everything that a carrier writes in its claim file can end up as an exhibit at trial in Colorado, and it should be treated as such from the very start. Claims files should be clear, concise and factual. Characterizations and impressions should be kept to a minimum, if not avoided altogether. The file should be well documented, with phone calls noted even when only voice messages are left. And if the carrier reviews information and considers it material to the claim, that information should be copied to the file and the significance of the information noted.

Don’t panic. In statutory delay, denial or bad faith cases in Colorado, plaintiffs’ counsel often try to “set up” carriers by overwhelming them with a constant barrage of letters, sending the same information repeatedly and demanding that the carrier “pay what is owed.” This influx of typically cumulative data is meant to ensure that plaintiffs’ counsel’s unilaterally imposed deadlines will be missed. But carriers are not defenseless. Be mindful of the “insured’s duties” section of the policy. Most policies generally require that plaintiffs cooperate with the carrier and the carrier should exercise its right to request information as often as is necessary. Colorado regulations allow carriers to gather all the information needed to investigate a claim—to have a “complete” file—before making a determination as to what might be owed. Communication with the insured and insured’s counsel can certainly identify what information is missing and why the carrier needs that information. If plaintiff or counsel fail to cooperate with the insurer’s efforts to investigate the claim, that can be a bar to recovery.

Know that Colorado is a minefield. Colorado law regarding first-party claims for insurance benefits is rapidly developing. Cases that change the law are nuanced and fact-specific. Carriers need to know what they don’t know and when to seek assistance from counsel. Insurance defense attorneys in Colorado know that they need to be on their toes. They work together in bar associations and even smaller groups to coordinate efforts and share information about how judges rule on particular issues. Counsel know they need to move quickly and get files reviewed, analyzed and ready for litigation in a timely manner. You can’t sit on these cases, and there are people here who know how best to respond.

For insurers, Colorado is a very complicated place. Many carriers are nervous about doing business here, and that anxiety trickles down to their adjusters handling claims.

But those that come in prepared and understand just what the differences are and what the legal implications might be for them can thrive here. After all, there are more than 5.6 million potential customers in Colorado, and that number is growing every year.

Heather Salg is a Partner in Messner Reeves’ Litigation Practice Group who has tried over 50 trials and arbitrations to verdict, defending insurance carriers and their insureds.