Jim Flynn

Jim Flynn.

Most people would agree that having good insurance is more important than having a good lawyer. Sometimes, however, your own insurance company becomes your adversary — and then you’re going to need a good lawyer.

A case recently decided by the Colorado Supreme Court provides an example. In this case, Dale Fisher’s car was hit in 2010 by another vehicle and he suffered injuries. The at-fault driver of the other vehicle, as often happens, had the minimum $25,000 of liability insurance required in Colorado. Fisher’s medical expenses exceeded $61,000; and Fisher claimed other damages, including substantial lost income.

Fortunately for Fisher, he had uninsured/underinsured motorist coverage as part of his auto policy. This coverage comes to your rescue when you suffer damages due to the negligent acts of someone whose liability insurance is less than the amount of your damages. (This is coverage you should have, with the highest limits possible).

Because Fisher’s damages exceeded the at-fault driver’s insurance, Fisher filed an uninsured/underinsured motorist claim with his own insurance company, State Farm, and that’s when his insurer became his adversary.

State Farm agreed it had to pay Fisher’s medical expenses, but it disputed the amount of Fisher’s claim for other damages. State Farm refused to pay the medical expenses in the belief that Colorado law allowed it to make no payment to anyone for anything until all claims were resolved. This put Fisher in a bind since his medical providers wanted to be paid right away and weren’t interested in waiting around while State Farm and Fisher fought about his other claims.

As a result, Fisher sued State Farm under a Colorado statute that says an insurance company “shall not unreasonably delay or deny payment of a claim” owing to its own insured. The case was tried to a jury, which not surprisingly sided with Fisher. (Juries don’t much like insurance companies.)

State Farm appealed to the Colorado Court of Appeals, which affirmed the lower court decision and rejected State Farm’s argument that it had no obligation to pay claims piece-meal. State Farm then appealed to the Supreme Court, which affirmed the Court of Appeals’ decision and ruled State Farm could not delay payment of Fisher’s medical expenses because Fisher’s other claims were still unresolved.

As a further incentive for insurance companies not to unreasonably delay or deny payment of a claim to their own policyholder, another Colorado statute says that such a delay or denial will result in a penalty — doubling the amount of the claim. In Fisher’s case, the penalty cost State Farm another $61,000 plus Fisher’s legal expenses, including attorneys fees.

The jury also sided with Fisher on the other damages, causing State Farm to have to pay Fisher (in addition to the $61,000 penalty) the full amount of his underinsured/uninsured coverage — $400,000. All in all, a bad day at the courthouse for State Farm and not a happy ending for Fisher, either, since his claim for damages plus his medical expenses exceeded $1 million.

Jim Flynn is with the Colorado Springs firm of Flynn & Wright LLC. Contact him at moneylaw@jtflynn.com. “Best of Jim Flynn’s Money & the Law” is now available at amazon.com — paperback or e-book.

Jim Flynn is with the Colorado Springs firm of Flynn & Wright LLC. Contact him at moneylaw@jtflynn.com. "Best of Jim Flynn's Money & the Law" is now available at amazon.com — paperback or e-book.

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