Mansell, Engel & Cole

Insurer whiffs three times in court re unreasonable delay case

A recent insurance-themed article relates that a policy dispute proceeded in relatively straightforward fashion for national insurer State Farm through the court system in one state.

If the case progression could be likened to a hitter’s plate appearance in a baseball game, it could aptly be deemed quick and futile.

Strike one, strike two, strike three.

You’re out.

That’s essentially the way things played out for State Farm, as it lost an insurance delay case at all three levels of Colorado’s judicial system, with the matter reportedly never being in doubt.

The facts of the case were clear and simple. An insured was hit and injured by another driver. The at-fault motorist lacked sufficient coverage under his policy to pay for the hurt driver’s medical expenses and other costs, so that insured turned to State Farm for the difference. The insurer had a duty – which it acknowledged – to pay up pursuant to the insured’s uninsured/underinsured motorist coverage.

And yet it balked, arguing that it could legally delay until every claim in the dispute was settled.

That didn’t sit well with the insured, given the medical providers breathing down his neck for payment. He sued in court, citing a state law barring an insurer’s delay.

And, as noted above, he won. And then he prevailed again in an appeals court, which fully affirmed the lower tribunal’s ruling.

Third time lucky?

Not even close, as State Farm’s final appeal to Colorado’s Supreme Court brought a bit of judicial wrath down on it. The insurer was tasked to pay all the claimant’s expenses, plus cough up roughly the same amount again via a statutory penalty clause that doubles exactions in cases of unreasonable delay or denial. Moreover, State Farm ended up being dinged for hundreds of thousands of dollars more for additional damages awarded by the jury.

“All in all,” noted the above-cited article, “a bad day at the courthouse for State Farm.”

There is obviously a lesson imparted in the above tale for any insurance company, to wit: An insured who timely pays you monthly premiums and abides by the contractual requirements of a policy has a reciprocal right to expect you will do the same.

Bottom line: Honor your commitment.

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