Colorado Approves Auto Insurance Med Pay Bill, ‘Bad Faith’ Bill

Colorado Gov. Bill Ritter has signed Senate Bill 11, which creates rules concerning funding for the provision of uncompensated trauma care to persons injured in motor vehicle accidents, and House Bill 1407, allowing the insurance commissioner to increase the penalties that the commissioner could impose when insurance carriers act unreasonably.

According to the SB11 bill text, 10-4-635, Colorado Revised Statutes, was amended so that insurance companies are required to offer $5,000 of auto insurance medical payments to consumers for bodily injury, sickness or disease resulting from the ownership, maintenance or use of motor vehicles.

SB11 text states insurance policies may be issued without medical payments coverage only if the named insured rejects medical payments coverage in writing, or in the same medium in which the application for the policy was taken. In that case, the insurer shall maintain proof that the named insured rejected the medical payments coverage for at least three years after the date of the rejection. The proof of rejection shall be presumed valid for all insureds under the policy, including resident relatives of the named insured and permissive users of the vehicle.

The law will take effect on Jan. 1, 2009, and will apply to auto insurance policies issued, delivered, or renewed on or after this date.

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The Governor also signed HB 1407, Concerning Strengthening Penalties for the Unreasonable Conduct of an Insurance Carrier, which is designed to protect consumers by strengthen penalities when insurance carriers act unreasonably.

HB 1407 bill text states the bill increases the penalties that the insurance commissioner could impose for the violation of any law, rule, or order of the commissioner up to $5,000 per act, or $50,000 aggregate annually, unless the carrier knew it was violating any law, rule or commissioner order, in which case the penalties would be $50,000 per act, or $750,000 aggregate annually. The bill would prohibit an insurer from unreasonably delaying or denying a claim for payment of benefits by a claimant. Also, the bill would create a cause of action for a claimant who is unreasonably denied insurance benefits, and would allow a claimant to recover two times the actual damages sustained.

The Property Casualty Insurers Association of America opposed the bill, saying, “it will hurt the very people it is intended to protect by encouraging more lawsuits and raising insurance rates for consumers and businesses.”

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