There are currently a large number of condominium and homeowners associations pursuing property damage claims in Colorado. With the number of wind and hail storms over the past couple of years, many of these claims are coming with higher dollar values than most policyholders have submitted in the past. One question I continually receive is what obligations an insurance company has in adjusting and paying a claim.
Like most states, Colorado law places an obligation of good faith and fair dealing on an insurance company and requires that the company, among other things, promptly and fairly investigate the claim, negotiate and settle the claim in with due regards for the best interest of the policyholder, and pay the claim as promptly as possible. Generally speaking the duty of good faith continues for the life of the parties’ relationship, including during an arbitration, appraisal, or lawsuit.
In regards to timing, property and casualty insurers in Colorado generally must pay claims within 60 days after receipt of a “valid and complete claim” unless there is a reasonable dispute between the parties.1 This means that after all relevant information has been provided proving the claim, and any litigation and/or appraisal is completed if applicable, an insurer must pay the full amounts owed under the policy.
Where Colorado differs from many states, however, is that an insurance company’s duty to negotiate, settle, or pay a claim can be suspended when there is a genuine dispute over the amounts owed under the policy and the parties have become adversarial. Colorado courts have generally found that the adversarial relationship exists when litigation is filed and when appraisal or arbitration is demanded. These requirements arguably would not be reinstated until appraisal, arbitration, or litigation is concluded.
Timeframes are important, especially in larger insurance claims where work needs to be completed as soon as possible. Aside from the legal deadlines, insurance policies also contain there own deadlines that must be complied with as well. Associations, as well as other policyholders, should document their claims thoroughly and as early as possible. Providing the supporting documentation immediately after a loss can get the claim paid quicker and allow the reconstruction process to begin in a timely fashion.
1 3 Colo. Code Regs. 702-5-1-14 Sec. 4(A)(1).