Colorado Workers' Compensation Insurers and Bad Faith Lawsuits – Your Rights

Insurers have duty to act in good faith or face the possibility of further legal challenges

Any insurance company, including a workers' comp insurer in Colorado, is required to act in good faith. Meaning, they are obligated to investigate your claim and pay you benefits entitled to you under the law if your claim is legitimate.

An insurance company – whether they're an auto, home, life or workers' comp insurer – is said to be acting in "bad faith" if they ignore, mislead or make decisions contrary to what their investigation reveals. There are various reasons why you would have grounds to pursue a bad faith lawsuit in Colorado.

Before getting into what those grounds are, we want to clearly state that you cannot pursue a bad faith lawsuit just because an insurance company makes a decision you do not agree with. If they followed all the proper procedures and carefully examined your claim but legitimately denied it, you cannot file a bad faith insurance suit against them.

What's the difference between a workers' compensation case and a bad faith lawsuit?

Workers' compensation claims and lawsuits only allow you to obtain benefits outlined in chapter 2 of this book or in the Colorado workers' compensation statutes. You cannot seek any additional economic or non-economic damages through a standard workers' compensation claim except what's clearly stated in statute.

Take the following scenario for example:

While throwing luggage in and out of cars, a cab driver hurts his back and requires medical attention. His company's occupational accident insurance company (another form of workers' compensation coverage in Colorado) tells him that he's not entitled to full workers' compensation benefits when the law states that he is. In fact, the insurance company had a workers' compensation policy in place the whole time but was refusing to pay full benefits to the cabbie.

As a result of this misleading on the part of the insurance company, the cabbie had to initially absorb all of the costs associated with his injury. He had to sell valuable possessions and borrow money just to stay afloat... and also deal with extreme levels of stress and mental anguish.

This kind of situation would qualify for a bad faith suit – a workers' compensation insurer misleading an injured worker into thinking their injuries are not covered without investigating their claims.

Colorado Bad Faith Lawsuits (cont.)

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