Colo. Bad-Faith Law Said To Give Insureds Double Penalties

Law360, New York (November 25, 2013, 8:46 PM EST) -- A Colorado law punishing insurers for unreasonably delaying or denying coverage allows for penalties of twice the unpaid benefit on top of the benefit itself, a federal judge ruled Monday, widening the exposure of a carrier accused of shirking a developer's construction defect defense.

Addressing a question that has split Colorado federal courts, U.S. District Judge R. Brooke Jackson held that insureds are entitled under the state's bad-faith law to recover whatever benefit was wrongly withheld plus double that amount as a separate award, plus attorneys' fees.

The judge rejected Mountain States Mutual Casualty Co.'s contention that the statutory penalty of...

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