Can You Sue Your Insurance Company for Denying a Legitimate Claim in Colorado?

When a Claim Denial Crosses the Line

Insurance is supposed to be your safety net—a promise that when disaster strikes, your provider will step in to help you recover. But what happens when that promise is broken? If your insurance company wrongfully denies a claim that should have been covered under your policy, you may be wondering if you have legal recourse. The answer is yes—you can sue your insurance company in Colorado for acting in bad faith.

Under Colorado law, insurers have a legal obligation to treat their policyholders fairly and to handle claims with honesty, transparency, and reasonable speed. When they fail to do so—especially when they delay or deny payment without a valid reason—it may rise to the level of bad faith. If that happens, you have the right to take legal action.

What Is Insurance Bad Faith?

“Bad faith” refers to an insurance company’s intentional or reckless failure to uphold its obligations under your policy. In Colorado, insurers are bound by both statutory and common law duties to act in good faith when evaluating and processing your claim.

Examples of bad faith conduct can include:

• Denying a valid claim without proper investigation
• Deliberately underpaying or delaying payments
• Misrepresenting policy language or coverage limits
• Failing to communicate or provide explanations for decisions
• Requiring excessive documentation with no justification

A simple denial is not automatically bad faith. However, when the denial is unjustified, done without proper cause, or carried out in a deceptive or evasive manner, it may meet the legal threshold for a bad faith claim.

Colorado’s Laws Protecting Policyholders

Colorado has some of the strongest laws in the country when it comes to holding insurers accountable. Two primary legal avenues may apply:

• Common Law Bad Faith: This allows a policyholder to sue an insurer for violating the implied covenant of good faith and fair dealing. You must show that the company unreasonably denied or delayed your claim and acted with knowledge or reckless disregard for that fact.
• Statutory Bad Faith (CRS § 10-3-1115 and § 10-3-1116): These laws make it illegal for insurers to unreasonably delay or deny payment of benefits. If successful, you may be entitled to recover two times the covered benefit, plus attorney’s fees and court costs.

These statutes put real power in the hands of policyholders. Colorado doesn’t just require insurers to honor their contracts—it gives you legal tools to hold them accountable when they don’t.

What You’ll Need to Prove

To win a bad faith insurance lawsuit in Colorado, you must demonstrate that your insurance company acted unreasonably. This doesn’t mean they simply made a mistake—it means they failed to act as a reasonable insurer would have under the circumstances.

Key elements of a strong bad faith case often include:

• Clear evidence that the claim was covered under your policy
• Documentation showing the insurer’s delay or denial was unjustified
• Correspondence between you and the insurance company
• Expert testimony or policy analysis, if applicable

The more organized and thorough your records are, the stronger your position will be in court. An experienced attorney can help identify the strongest aspects of your case and build the legal strategy to support it.

What Compensation Can You Recover?

If your insurance company is found to have acted in bad faith, the financial recovery can go beyond the original amount of the denied claim. Under Colorado law, you may be able to recover:

• The full value of the original insurance claim
• Two times the covered benefit (under statutory bad faith laws)
• Attorney’s fees and litigation costs
• Emotional distress or consequential damages, in some cases

These additional penalties are meant to deter insurance companies from unfair practices and ensure policyholders aren’t left bearing the burden of unlawful claim denials.

Call Evans Case Today for Help Recovering Your Losses

If your claim has been denied and you believe your insurance company acted in bad faith, it's important to speak with a legal professional as soon as possible. A delay in taking action may impact your ability to recover compensation or preserve critical evidence.

At Evans Case, we have extensive experience handling bad faith insurance disputes for clients throughout Colorado. Whether your case involves health insurance, homeowners insurance, auto policies, or another form of coverage, we can review your claim and help you determine whether legal action is appropriate.

If you’re dealing with an unfair denial or delay, reach out to us today. You don’t have to accept an insurance company’s refusal as the final word. We’re here to help you understand your rights and pursue the compensation you’re entitled to under Colorado law.