Insurance companies often take the position that they have not breached the insurance contract because no court has finally resolved the amount of damages that a policy-holder is legally entitled to recover from a uninsured or underinsured (UIM) driver. Because the total amount remains undetermined, say insurance companies, the plicy has not been breached by any refusal to pay even benefits which are not disputed.
Often the insurance company, if you file suit to protect your right, will take the position that because the insurance contract does not expressly require it to pay UIM benefits as they accrue, it need only make a one-time payment and only after a court says what the total amount of benefits owed happens to be. In support of this erroneous position, insurance comapnies invoke the so-called “suspension rule, ” which allows some conduct by insurance comapnies over dispouted matters once suit is filed. That rule does not apply to cases of unreasonable delay of benefits owed if there is evidence, like medical bills, that certain benefits have been proven.
In Baker v. Allied Prop. & Cas. Ins. Co., 2013 WL 1397297 *17 (D. Colo. Apr. 5, 2013)(Jackson, J), for example, the court correctly tied the “fairly debatable” doctrine to the insurers’ invocation of the suspension rule. The court held that Colorado courts have “declined to read into ‘fairly debatable’; the meaning that ‘an insurer can avoid liability for unjustified denials of benefits simply by framing each denial as a valuation dispute. Baker took pains to demarcate the boundaries of the suspension rule: “that the duty to negotiate, settle, or pay has been suspended . . . does not dispose of Mr. Baker’s common law bad faith claims nor his statutory unreasonable delay claims” because “Mr. Baker has challenged the insurers’ conduct prior to his filing of this action,” 2013 WL 1397297 * 15.
The Baker court also noted that the amended UIM statute means that “‘the insurer’s obligation to pay benefits is now triggered by exhaustion of the tortfeasor’s ‘limits of . . . legal liability coverage,’” 2013 WL 1397297 * 16, and held: “Allowing every ‘evaluation dispute’ to escape bad faith or unreasonable delay claims would allow insurers the free reign to ‘refuse to pay any claim where money is at issue.’” 2013 WL 1397297 * 17. In short, “Whether Allstate’s conduct amounts to bad faith remains a fact dispute to be resolved by the jury.” 2013 WL 1397297 * 18.