Colorado § 10-3-1101 - Legislative declaration.

§ 10-3-1101. Legislative declaration.

(1) The purpose of this part 11 is to regulate trade practices in the business of insurance by defining, or providing for the determination of, all such practices in this state that constitute unfair methods of competition or unfair or deceptive acts or practices, and by prohibiting the trade practices so defined or determined. No rules or regulations may be promulgated to adversely affect free and open competition in the sale of insurance.

(2) It is in the best interests of the citizens of this state to have transparency in the insurance claims process to further the public policy of encouraging settlement and preventing unnecessary litigation. Claimants and injured parties should fully understand the total amount of insurance coverage available to them. In addition, because payment of uninsured and underinsured motorist benefits covers the difference between the amount of the limits of any legal liability coverage and the amount of the damages sustained, it is important that the citizens of this state have accurate and reliable information about the amount of legal liability coverage available for a claim. Providing information to Colorado residents concerning the amount of liability coverage will:

(a) Help Colorado residents evaluate whether their uninsured or underinsured motorist coverage will be triggered; and

(b) Allow an insurer who provides uninsured or underinsured motorist coverage or policies more time to evaluate and place reserves on claims.

Source: L. 73: R&RE, p. 857, § 1. C.R.S. 1963: § 72-14-1. L. 2019: Entire section amended, (HB 19-1283), ch. 250, p. 2426, § 1, effective January 1, 2020.

ANNOTATION

The phrase "providing for the determination of all such practices" cannot reasonably be construed as an intent by the general assembly to exempt the insurance industry from other Colorado statutes. The phrase can only mean all such practices in the regulatory context since the purpose of the act is the comprehensive regulation of insurance trade practices. Showpiece Homes Corp. v. Assurance Co. of Am., 38 P.3d 47 (Colo. 2001).

The intent of this act is to protect citizens, encourage settlements, and prevent unnecessary litigation, all by requiring insurance companies to be transparent. Fogel v. Shelter Mut. Ins. Co., 728 F. Supp. 3d 1171 (D. Colo. 2024).

While this act provides for the general governance of the insurance industry, it does not encompass redress for any losses sustained pursuant to an insurance company's negligence, default, or tort. As a result, other statutes may also apply in order for private parties to obtain relief. Showpiece Homes Corp. v. Assurance Co. of Am., 38 P.3d 47 (Colo. 2001).

A private cause of action by an insured against an insurer under the Colorado Consumer Protection Act is not preempted by this act. Showpiece Homes Corp. v. Assurance Co. of Am., 38 P.3d 47 (Colo. 2001).

For discussion of tort of "bad faith breach of insurance contract", see Farmers Grp., Inc. v. Trimble, 658 P.2d 1370 (Colo. App. 1982), aff'd, 691 P.2d 1138 (Colo. 1984).

A third-party administrator owes a duty of good faith to an insured when a special relationship exists between the third-party administrator and the insured. A special relationship is created when the administrator has primary control over benefit determinations; assumes some of the insurance risk of loss; undertakes many of the obligations and risks of an insurer; and has the power, motive, and opportunity to act unscrupulously in the investigation and servicing of the insurance claims. To establish a breach of this duty of good faith, the plaintiff must establish that the third-party administrator's conduct was unreasonable and that the administrator knew its conduct was unreasonable or acted in a reckless disregard of whether its conduct was unreasonable. Cary v. United of Omaha Life Ins. Co., 68 P.3d 462 (Colo. 2003).

Admission of attorney litigation conduct as evidence in bad faith insurance claim. There are substantial concerns about the relevancy, probative value, and prejudicial impact of evidence of attorney litigation conduct when presented as evidence of a bad faith claim. Such evidence may be admissible in some circumstances. The appropriate test must recognize the importance of those concerns in evaluating whether evidence of attorney litigation conduct is admissible as part of a bad faith claim. Parsons v. Allstate Ins. Co., 165 P.3d 809 (Colo. App. 2006).

Test to determine admissibility of attorney litigation conduct. Evidence of attorney litigation conduct is admissible as part of a bad faith insurance claim if the risks of unfair prejudice, confusion of the issues, or misleading the jury, and considerations of undue delay, waste of time, or presentation of unnecessary cumulative evidence are substantially outweighed by the probative value of the evidence. Parsons v. Allstate Ins. Co., 165 P.3d 809 (Colo. App. 2006).

Applied in Augustin v. Barnes, 41 Colo. App. 533, 592 P.2d 9 (1978), aff'd in part, rev'd in part, 626 P.2d 625 (Colo. 1981).