Randy Barnhart

Colorado - Bad Faith Actions Can Accrue Before You Consult an Attorney

Continuing my series of posts on limitations periods and "accrual" dates for a bad faith claim against an insurance company by a policy-holder in Colorado, in 2007 the Colorado court of appeals held as follows:

The insured argues none of his claims accrued until he consulted an attorney in October 2005, and first learned of the insurance company's alleged misconduct. We are not persuaded.

In Winkler v. Rocky Mountain Conference, 923 P.2d 152, 159 (Colo.App.1995), a division of this court discussed the kind of information a plaintiff must possess for an action to accrue: “The critical inquiry of when an action accrues is knowledge of the facts essential to the cause of action, not knowledge of the legal theory upon which the action may be brought.” The statutes of limitations at issue here, sections 13–80–107.5(1)(a) and 13–80–108(1), require that the plaintiff use due diligence to find out the relevant circumstances or events.

This requirement creates an objective standard, and “does not reward denial or self-induced ignorance.” Sulca v. Allstate Ins. Co., 77 P.3d 897, 900 (Colo.App.2003). As a general matter, ignorance of the law does not expand the statute of limitations for filing suit. . . . We have found no Colorado cases addressing the insured's argument that his claims did not accrue until he discussed them with counsel. However, decisions from other jurisdictions employing the same general principles that Winkler describes have rejected such a result.

Olson v. State Farm Mut. Auto. Ins. Co., 174 P.3d 849, 854 (Colo. Ct. App. 2007). Lesson: don't delay in consulting with an attorney. Call the office today if you believe your insurance company has acted in bad faith regarding your policy for which you have faithfully paid the premiums.

Don't let a statute of limitations defeat your bad faith claim

Recently, applying Montana law, a federal district court dismissed bad faith claims on the basis of the expiration of the limitations periods provided by state statute:

Ongoing denial of coverage . . . does not toll the statute of limitations. The claim accrues when the insurer first denies coverage. See e.g. Cyr v. Farmers Alliance Mut. Ins. Co., 2006 WL 2788972 (D. Mont. Sept. 26, 2006). As explained in Cyr:

The Court rejects any suggestion that each day that [the insurer] stands by its previous denial of coverage and fails to reverse its position, a new breach of its statutory duty of good faith occurs. Absent direct legal authority, which has not been provided to or located by the Court, the Court will not adopt such a view since it would effectively eviscerate the statute of limitation in any case where an insurer remains steadfast in a denial of coverage.
 
The same reasoning applies here. The fact that Hartford continued refusing to pay additional money to the plaintiffs after October 2007 does not extend the date of accrual for purpose of applying the statute of limitations.
 
The [policy-holders] also argue that their common law bad faith claims could not accrue until the underlying case was resolved entirely. They cite several cases to support their argument, but all of those cases are workers compensation cases. This Court has repeatedly held, outside the workers compensation context, that bad faith claims can accrue before a judgment or settlement. Burton v. St. Farm Mut. Auto. Ins. Co., 30 M.F.R. 173, 192-94 (D. Mont. August 28, 2002).
 
The [policy-holders] knew they had potential common law bad faith claims more than three years ago. They have admitted as much in their Amended Complaint: "For over four years, both The Hartford and Safeco Insurance Company refused to pay the full measure of the Plaintiffs' harms and losses." (Amended Complaint, doc. 13 at ¶ 27.) The common law bad faith claims fail, and summary judgment is granted in favor of the defendants on these claims.

See the full case here. Different states have different limitations periods and different accrual rules. An accrual rule determines when the limitations period is triggered. Call the firm now if you think you have a meritorious bad faith claim against your insurance company. Don't risk being "out of time" by delaying - we can help!

December update: In Colorado, the following case tracks the foregoing logic:

the plaintiff urges a construction of § 13–80–102 that would permit bad faith claims to be brought within two years of the last incident of unreasonable conduct by an insurer. To support this contention, the plaintiff relies on the “continuing violation” doctrine employed by the federal courts in cases involving anti-discrimination statutes such as Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq. (1988). We find these cases to be inapposite. We are not aware of any authority in which a court has extended the “continuing violation” doctrine to a bad faith claim. We decline to do so here.

Harmon v. Fred S. James & Co. of Colorado, Inc., 899 P.2d 258, 261 (Colo. Ct. App. 1994).