With the aftermath of Sandy still
being felt up and down the Eastern seaboard, the question of many victims turns
to how they can rebuild their lives and homes.
One of the first things many people do is call on their insurance
carriers to help rebuild whatever damaged property they have. In a recent case here in Colorado, those
rebuilding efforts got reaffirmed by a Court of Appeals case, Kyle W. Larson
Enterprises, Inc., Roofing Experts, d/b/a The Roofing Experts v. Allstate
Insurance Company, --- P.3d
----, 2012 WL 4459112 (Colo. App. September 27, 2012).
The facts of the case are pretty
straightforward and could describe many repair vendors in numerous situations. Roofing Experts contracted with four
homeowners insured by Allstate to repair their damaged roofs. The contracts provided that repair costs
would be paid from insurance proceeds.
The contracts also allowed Roofing Experts full authority to communicate
with Allstate regarding all aspects of the insurance claims. Before work began, Roofing Experts met with
adjusters from Allstate to discuss the four homes and the amount of each claim. After receiving approval for the claims,
Roofing Experts began the repairs.
During construction, Roofing Experts discovered additional repairs were
necessary to maintain certain manufacturer’s warranties and to conform to
applicable building codes. Roofing
Experts made the additional repairs and invoiced Allstate for them. Allstate agreed to pay the originally claimed
amounts, but refused to pay for the additional repairs. Roofing Experts brought a first-party bad
faith action under C.R.S. § 10-3-1115 and 1116 as a first-party claimant.
At the trial court level, Allstate
moved for summary judgment, arguing that Roofing Experts was not a first-party
claimant entitled to bring a bad faith action. The trial court agreed and granted
the motion. Roofing Experts moved for
reconsideration, which request was denied.
Roofing Experts then appealed those rulings to the Court of Appeals,
which reversed the trial court’s rulings.
Allstate moved for summary
judgment, claiming under those same statutes that Roofing Experts did not
qualify as a first-party claimant. The
trial court agreed and granted Allstate’s motion for summary judgment.
In making its decision, the Court
of Appeals reviewed the statutes at issue.
Specifically, the Court of Appeals reviewed C.R.S. § 10-3-1115(1), which
states:
(1)(a) A person
engaged in the business of insurance shall not unreasonably delay or deny
payment of a claim for benefits owed to or on behalf of any first-party
claimant.
(b) For the purposes
of this section and section 10-3-1116:
(I) “First-party
claimant” means an individual, corporation, association, partnership, or other
legal entity asserting an entitlement to
benefits owed directly to or on behalf
of an insured under an insurance policy. “First-party claimant”
includes a public entity that has paid a claim for benefits due to an insurer’s
unreasonable delay or denial of the claim.
(II) “First-party
claimant” does not include:
(A) A
nonparticipating provider performing services; or
(B) A person
asserting a claim against an insured under a liability policy.
The Court of Appeals focused on
the fact that the legislature, in drafting the statute, included parties who
might make claims on behalf of insureds as demonstrated in the language in
section (1)(a) and (1)(a)(I). In
explaining the decision, the Court of Appeals first stated that the intent of
passing C.R.S. § 10-3-1115 and 1116 was to create a statutory duty for insurers
to refrain from unreasonable delay or denial of payment of any claim for
benefits owed. The Court of Appeals also
found that the legislature made it clear that persons or entities other than
the insured are included as potential “first-party claimants.” Additionally, the Court found that the statute
enumerated what the definition of first-party claimant does not include. The Court of Appeals found it persuasive that
repair vendors like Roofing Experts were not listed in that section.
The Court of Appeals rejected
Allstate’s argument that the statue was ambiguous and did not include Roofing
Experts or other repair vendors. In
response, the Court of Appeals stated that Allstate’s interpretation of the
statutes was strained and unreasonable.
The only reasonable reading of the statute’s language, according to the Court
of Appeals, is a reading of the plain meaning of the words used. In this case, the only reasonable
interpretation of the “on behalf of” language is that the definition of a
first-party claimant includes those who assert, “on behalf of an insured,” “an
entitlement to benefits owed . . . under an insurance policy.”
The Court of Appeals reversed the
trial court’s ruling of summary judgment dismissing Roofing Experts’ action
under C.R.S. § 10-3-1115 and 1116. For
now, repair vendors can continue working knowing they will have the full support
of the law on their side, should they need it in pursuing an insurance claim
made for a homeowner.
For additional information regarding Colorado
construction litigation, please contact David M. McLain at (303) 987-9813 or by
e-mail at mclain@hhmrlaw.com
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