Colorado Governor Signs Two Important Bills Concerning Insurance

Colorado Governor Bill Ritter signed two important bills last month impacting consumers. Senate Bill 11 requires insurance companies to offer $5,000 of auto insurance medical payments for bodily injury, sickness or disease resulting from the ownership, maintenance or use of motor vehicles. Medical payment coverage or “med pay coverage” is a type of insurance provides coverage for the insured driver and his or her passengers for payment for injuries sustained, regardless of the fault of the driver. This type of coverage is also sometimes referred to “personal injury protection (PIP).” The amount of med-pay benefits is determined by the policy limits stated in the insurance policy declarations sheet for the person who purchased the coverage.

Insurance policies may be issued without medical payments coverage only if the insured rejects medical payments coverage in writing or using the same medium in which the application for the policy was taken (such as an online application over the internet). Insurance companies are required to maintain proof that the named insured rejected the medical payments coverage for at least three years after the insured declined the med pay coverage. The rejection will be deemed valid for all insureds under the policy, including resident relatives of the named insured and permitted drivers of the vehicle.

The new legislation limits the ability of an insurance company to be reimbursed out of a settlement or award for the med pay benefits it has paid. The law will become effective on January 1, 2009 and will apply to auto insurance policies issued, delivered or renewed after this date.

Governor Ritter also signed HB 1407, Concerning Strengthening Penalties for the Unreasonable Conduct of an Insurance Carrier, which is designed to protect consumers from insurance carriers who fail to honor their obligations to the policy holder, such as wrongfully delaying or denying claims. HB1407 increases the penalties the insurance commissioner may impose for a violation of any law, rule or order to up to $5,000 per act, or up to $50,000 aggregate annually, unless the carrier knew it was violating a law, rule or commissioner order, in which case the penalties increase to $50,000 per act, or $750,000 aggregate annually. The bill prohibits an insurer from unreasonably delaying or denying a claim for payment of benefits. The bill also creates a cause of action for a claimant who is unreasonably denied insurance benefits, and allows a claimant to recover two times the actual damages sustained and recovery of attorneys’ fees. The new law becomes effective for certain types of insurance disputes arising after August 5, 2008.

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