I have written before about the insightful opinion by a District Judge in the case of Wahlert v. American Standard Ins. Co. of Wis., No. 14-cv-02744-RBJ, 2016 WL 1222944 (D. Colo. March 29, 2016). In that case, the District Judge dismissed a Colorado common law claim of insurer bad faith, and dismissed in part but retained in part a statutory claim for double damages plus policy benefits, attorney's fees, and costs.
That was the result. The District Judge produced more than an outcome, however. She reported the reasons that common law and statutory claims are frequently alleged together in insurance bad faith cases, reasons seldom mentioned in the case law it seems:
The common law claim requires proof not only that insurer's conduct was unreasonable but also that the insurer knew or recklessly disregarded the fact that its conduct was unreasonable. [Citation omitted.] The statutory claim requires proof that a benefit to which the insured was entitled under the policy was unreasonably delayed or denied. If that is established, the plaintiff is entitled to receive a penalty payment of two times the benefit (in addition to the benefit itself) plus reasonable attorney's fees and costs. C.R.S. § 10-3-1116(1).
Because of the lesser liability burden and the onerous penalty provision, the statutory claim is “ ‘arguably ...more financially threatening’ ” to the insurer. [Citations omitted.] Nevertheless plaintiffs frequently assert both claims. Perhaps the motivator for including the common claim is that punitive damages can be recovered if the plaintiff establishes that the insurer's actions were accompanied by circumstances of fraud, malice, or willful and wanton conduct.
Wahlert v. American Standard Ins. Co. of Wis., No. 14-cv-02744-RBJ, 2016 WL 1222944, at *3-*4 (D. Colo. March 29, 2016).
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