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.