Can individual adjusters be held liable for unreasonable insurance delays and denials? That’s the question to which the Colorado Supreme Court recently provided a certified answer.
The District Court of Colorado asked for a certified answer because, in part, it wanted to know whether it had jurisdiction for the case before it. In Skillett v. Allstate and Collin Draine, the plaintiff sought to recover damages for what she claimed was an unreasonable denial. However, the plaintiff complicated her case by filing against both Allstate and the individual adjuster, Collin Draine.
Case overview
In its review of the facts, the Supreme Court noted that Alexis Skillett suffered injuries in a car accident. After the collision, she settled with the other driver and the other driver’s insurance company. She then filed a claim against Allstate with which she held underinsured motorist coverage.
Allstate assigned the case to adjuster Collin Draine, and Draine determined Skillet was not eligible for underinsured motorist benefits. Accordingly, Draine and Allstate denied Skillet those benefits.
Skillet then filed suit against both Allstate and Draine. Her suit against Allstate included:
- Breach of contract
- Statutory bad faith
- Common law bad faith
She also claimed that section 10-3-1116 allowed a cause of action for her to sue Draine.
Questions of jurisdiction and liability
Because Skillett and Draine were both Colorado residents, the Supreme Court noted the case would typically remain in state courts. However, Allstate moved the case to federal court anyway. It argued that section 10-3-1116 did not allow claims against individual adjusters, but only against insurers.
By this logic, Skillett could not add Draine to the claim, and the federal court would hold jurisdiction over the two remaining parties, Skillett and Allstate.
The District Court investigated this question and found that it remained unsettled. The Colorado Court of Appeals had ruled one way in one case, and the District Court of Colorado had ruled a different way in another case:
- In Riccatone v. Colorado Choice Health Plans, the Colorado Court of Appeals found cause of action only against an insurer, not against individual employees
- In Seiwald v. Allstate, the District Court allowed a claimant to file against an individual adjuster
To resolve these contrary opinions, the District Court asked the Colorado Supreme Court for clarification. The answer would address both Draine’s potential liability and the District Court’s ability to hear the case.
Exploring the statute in proper context
The Supreme Court found that the question rested on two statutes:
- Section 10-3-1115 defines and prohibits unreasonable delays and denials by insurers
- Section 10-3-1116 outlines a course of action for those who suffer from unreasonable delays or denials
Skillett’s case rested primarily on her interpretation of the first section. It reads, “A person engaged in the business of insurance shall not unreasonably delay or deny payment[.]” Skillett’s attorneys further noted that section 10-3-1102(3) says “person” includes “adjusters.”
However, it is wrong to read a word or phrase out of context. The larger context reveals that claimants can only file against their insurers. They have no cause of action against individual employees. Specifically, the court pointed to section 10-3-1115(2). That section says when a claimant might have cause for legal action:
“[A]n insurer’s delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit[.]”
The insured must show that the “insurer” delayed or denied payment. The law allows actions against insurers. It does not allow actions against individual adjusters. Courts should not interpret other words or phrases without this context.
Insurance adjusters elsewhere may still face claims
The Colorado Supreme Court’s answer settles the matter for Colorado. However, insurance companies and adjusters may face different rules in other states. As Claims Journal notes, courts in Montana, Texas and West Virginia have allowed actions against individual adjusters. In those states, insurance companies may find themselves more likely to defend bad faith claims within state courts.
In Colorado, however, insurance companies can defend themselves without dragging their employees into the mix. This makes it easier for insurers to take their cases to federal court. It also means employees can better relax and do their jobs. They need not worry about unexpected lawsuits.