The Supreme Court of Colorado recently decided that a court of appeals erred in determining that insurance companies could refuse to pay for non-economic damages before resolving the rest of an insured’s claim because such damages are subjective and therefore are always subject to dispute. 

Marcus A. Fear, the plaintiff in the case against GEICO, was involved in a rear-end collision that he was not at fault for, the court documents allege. He held an underinsured insurance motorist (UIM) policy with GEICO at the time. 

The plaintiff settled with the tortfeasor’s insurer for the policy limit of $25,000. He then sought compensation for additional damages through his GEICO UIM policy. 

In June 2020, Fear submitted documentation of additional medical bills. GEICO extended a new settlement offer of $4,000 and requested a release in exchange for any settlement, the court documents say. Fear did not accept the offer or communicate a demand for any particular amount. GEICO, in return, did not make any partial payments to Fear and filed suit, the court documents show. 

The court documents say that GEICO had a negotiation range of $2,500-$9,000 for the claim but used a minimum range when negotiating with Fear. 

The order says a 2018 case, State Farm Mutual Automobile Insurance Co. v. Fisher, already determined that insurers are required to pay non-economic damages before resolving the rest of an insured’s claim when such damages are undisputed or not subject to reasonable dispute. 

Yet, it goes on to say that GEICO’s internal figures could not be used to conclude that the insurance company had an undisputed amount it was willing to pay for Fear’s claims. 

However, the court also did not agree with GEICO’s argument that non-economic damages tend to involve greater subjectivity. 

“Although, as GEICO argues, non-economic damages tend to involve greater subjectivity than other types of damages like medical expenses and, as a result, it may well be a rare case in which non-economic damages are not reasonably disputable, we decline to conclude, as a matter of law, that such damages (or a portion thereof) can never be undisputed or free from reasonable dispute such that Fisher would require an insurer to pay them,” the order says. “

Evan Stephenson, an attorney who has previously represented insurance associations, told Insurance News Net that the Colorado Supreme Court’s decision was common sense and confirmed the consensus of prior law that insurers are not required to advance non-economic damage amounts that are reasonably disputed. 

“And an insurer’s own internal evaluation of such damages is not an ‘undisputed’ amount that must be paid immediately,” Stephenson said. 

Insurance News Net also reported that Nelson Waneka, who submitted a brief on behalf of a bar association for the plaintiffs’ attorneys, characterized the outcome as “a victory for Colorado insureds.”

“Among other things, the court recognized that an auto insurer’s evaluation of its insured’s non-economic damages can be relevant in an insurance bad faith case,” he said.

The court order concluded,”That CRE 408 bars the admission of the kind of claim evaluation at issue here as evidence of the amount of undisputed benefits owed, but such a claim evaluation may be admissible for other purposes, including to seek to establish an insurer’s good or bad faith.”

A Denver District Court sided with Fear in 2021 finding that the company’s evaluation represented the minimum owed to him and awarded him nearly $4,000. A Court of Appeals panel reversed the decision and agreed with GEICO’s argument that non-economic damages are “inherently subjective.”

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