Court ruling finds adjusters can't be held personally liable for denied claims
The unanimous decision answered a certified question of law from the U.S. District Court for the District of Colorado.
The Supreme Court of Colorado has ruled that a Colorado law allowing claimants to collect double coverage if an insurance claim is unreasonably denied or delayed does not allow plaintiffs to hold claims adjusters personally liable, which is good news for adjusters operating based on the direction of an insurer. The case is Skillett v. Allstate Fire & Cas. Ins. Co., 2022 CO 12.
The unanimous decision answered a certified question of law from the U.S. District Court for the District of Colorado. The Colorado high court rejected a policyholder’s attempt to hold an insurance director personally liable under sections 10-3-1115 to 10-3-1116 C.R.S. (2021) for unreasonable delay or denial of a claim.
According to the opinion, “[b]ecause the insurer – not any individual employee – authorizes payment, this language indicates that an action for unreasonable delay or denial of insurance benefits is triggered by a decision of the insurer, not the adjuster.”
The question of whether a claim’s adjuster can be held personally liable was brought to the Colorado Supreme Court by the U.S. District Court in Denver. The initial lawsuit was filed by injured motorist Alexis Skillett. In the suit, she sought penalties for an alleged unreasonable denial of underinsured motorist benefits. Allstate Fire & Casualty Insurance Co. removed the case to federal court and filed an unopposed motion to certify the legal questions to the Colorado Supreme Court.
Skillett was injured in July 2020 in a crash in Aurora, Colorado while riding as a passenger in her mother’s car when another vehicle struck the right front corner of the car while attempting to change lanes. Skillett settled with the insurer for the at-fault driver for almost $24,000, but asked Allstate, her motor vehicle insurer, to pay an additional $10,000 in underinsured motorist benefits.
Allstate assigned Collin Draine to handle Skillett’s claim. Draine offered to pay $1,750, saying that the settlement had adequately compensated Skillett for the damages she suffered in the accident. Skillett filed suit in state court alleging that the denial was unreasonable, with a request of double the $25,000 per person limit on her insurance policy, attorney fees, and costs as allowed by Colorado Revised Statute Section 10-3-1116.
According to the opinion, An Act Concerning Strengthening Penalties for the Unreasonable Conduct of an Insurance Carrier was enacted by the General Assembly in 2008. The law prohibits “a person engaged in the business of insurance” from unreasonably delaying or denying payment for a claim for insurance benefits, and established a cause of action for an insured whose claim for benefits had been unreasonably delayed or denied.
Skillett argued that Colorado’s statutory reference to “a person” allows lawsuits against individual adjusters in addition to the insurers. She named Draine and Allstate both as defendants in the action.
Allstate argued that Draine was only named as a party to the suit as an attempt to keep the lawsuit in state court, where jurors are generally thought to be more sympathetic to insurance claimants.
As mentioned in the opinion, the Colorado Court of Appeals ruled in 2013 that individual employees cannot be liable for bad faith, but in 2020, the federal district court in Denver found that the statute could plausibly be interpreted to create a cause of action against an individual adjuster, which created conflict between the courts.
According to the Colorado Supreme Court, even though an adjuster can be considered to be a “person engaged in the business of insurance,” the use of that word in the context of the statute shows that the legislature as written intended for suits to be filed against individuals, not individual employees. The law establishes penalties for when an “insurer” delays or denies payment of a benefit. A preceding code section refers to instances when the insurer “delayed or denied authorizing payment” of a covered benefit.
The court noted that “insurers and insureds – not adjusters – are the parties to an insurance policy. . . They are the ones who undertake obligations under such policies, and it is the insurer – not the adjuster – who may be obligated to pay insurance benefits.
Editor’s Note: 2019 brought a decision by the Iowa Supreme Court that state laws do not recognize bad-faith claims against third-party claims. Alternately, the supreme courts in Montana, Texas, and West Virginia had previously ruled that an insured could bring third-party claims against insurance company employees for bad faith. The ability of insurance company personnel to be held liable for their actions as employees makes an already sometimes difficult job even harder. An employee may be following directions from the company and as such his actions may not be made at his discretion. Holding the adjuster personally liable puts an extreme burden on the company employees.
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