Colorado’s insurance sector lost another political battle Thursday as the House Business Affairs and Labor Committee approved a bill that dramatically raises fines and penalties the state Division of Insurance can impose on insurers that "unreasonably" deny claims.
Sponsored by Rep. Andrew Romanoff, D-Denver, House Bill 1407 was approved in a party-line vote of 6-4 — following a sometimes-testy exchange between Democratic legislators and business leaders.
The bill applies to all forms of insurance including health, life and auto. It increases maximum penalties by up to 500 percent against insurers who unfairly deny claims. It also allows people whose claims are denied to collect up to two times the actual damages sustained.
Romanoff, who is the House Speaker, said the bill gives individuals a chance to recover their losses without resorting to costly and time-consuming litigation.
The legislation also changes the standard that the insurance commissioner needs to evaluate when weighing whether or not claims were inappropriately denied.
Under current law, the insurance commissioner needs to determine that insurers engaged in "willful, wrongful and reckless" behavior when denying a claim — a standard that Romanoff said is "hard to define."
Under HB 1407, the commissioner will only need to determine that insurers acted in an "unreasonable" manner no teletrak payday loans. Romanoff said the new standard included in the bill gives the commissioner "a bigger stick to deter" unscrupulous insurers.
Supporters of the bill recounted heartbreaking stories of tragic circumstances, of denied claims and prolonged lawsuits against insurance companies that nearly resulted in bankruptcy — even after the courts ruled against the insurers.
The proponents maintained that HB 1407 would have spared them from what Romanoff described as "a Kafkaesque Hell."
But representatives of the insurance industry argued that the bill establishes a lower standard of guilt and force insurers to pay more claims — resulting in higher premiums.