Insurance companies put a premium on the language of their policies, and to avoid timely payment of benefits thay often invoke clauses like the following: “The right to benefit and the amount payable will be decided by agreement between the insured person and Allstate. If the insured person and we do not agree, then the disagreement will be resolved in a court of competent jurisdiction.”
Resort to such contract language to delay payment of benefits owed runs afoul of the Colorado Supreme Court’s jurisprudence in State Farm Mut. Auto. Ins. Co. v. Kastner, 77 P.3d 1256, 1259-60 (Colo. 2003). There, the court held that the general rule, that an insurance policy is to be interpreted according to settled principles of contract law, is subject to an important “proviso,” namely, “the contract must comply with applicable statutory requirements. Should the contract fail to conform to any statute, it is unenforceable to that extent.”
Under that proviso, nothing in the contract’s language can defeat the mandates and purposes of the Colorado Unfair Claim Settlement Practices Act, C.R.S. §10-3-1104 (1)(h)(II), (IV), (V), (VII) and (XIV), requiring communication with insureds about pending claims, prohibiting any refusal to pay claims without reasonable investigation, prohibiting forcing policy-holders to file suit by making inadequate offers, and mandating that insurers provide policy-holders with prompt and reasonable explanations for why benefits are not being paid.
Nothing in insurance contract language should permit an insurance company to unreasonably delay payment of benefits owed. We know where insurance contract terms will go if such terms were allowed to override statutory rights and duties and the general prohibition of abusive but insurer-favored practices.
Whatever the language of the insurance contract appears to allow, it cannot be interpreted to sanction an insurer's unreasonable delay in the payment of benefits. The insurance contract, when construed to deliver financial security and peace of mind, cannot bar payments for benefits as those benefits accrue. Where is the financial security and peace of mind if a “complete” claim is prerequisite to any payment of benefits, especially when treatment for injuries sustained may never be completed as a matter of medical fact?