A Colorado law that allows claimants to collect double coverage if a claim is unreasonably denied or delayed does not allow plaintiffs to hold claims adjusters personally liable, the state Supreme Court decided Monday.

In a unanimous decision, the high court said the plain statutory language makes it clear that insurers—not their employees—are responsible for delayed and denied claims.

“Because the insurer—not any individual employee—authorizes payment, this language indicates that an action for unreasonable delay or denial of insurance benefits is triggered by a decision of the insurer, not the adjuster,” the opinion says.

The question of a claims adjuster’s personal liability was brought to the Colorado Supreme Court by the U.S. District Court in Denver, which is considering a lawsuit filed by injured motorist Alexis Skillett that seeks penalties for an alleged unreasonable denial of underinsured motorist benefits. Allstate Fire and Casualty Insurance Co. removed the case to federal court and filed an unopposed motion to certify legal questions to the Colorado Supreme Court.

Skillett was hurt in a July 2020 crash in Aurora, Colo., while riding as a passenger in her mother’s car. Another vehicle, while attempting to change lanes, struck the right front corner of the car.

Skillett settled with the at-fault driver’s insurer for $23,907.15 but asked Allstate—which insured her car—for an additional $10,000 in underinsured motorist benefits.

Allstate adjuster Collin Draine offered to pay $1,750, saying that the settlement had adequately compensated Skillett for her damages. Skillett filed a suit in state court alleging that the denial was unreasonable. She requested double the $25,000 per-person limit on her insurance policy, attorney fees and costs as allowed by Colorado Revised Statute Section 10-3-1116.

That statute was adopted in 2008 as a means of discouraging insurers from unreasonably delaying or denying claims. The statute prohibits “a person engaged in the business of insurance” to unreasonably delay or deny payment of a first-party claim.

Whether claims adjusters can be held personally liable for unreasonable claim delays or denials has been a contentious issue across the country. In 2019, the supreme courts for Iowa and Washington state ruled that their state laws do not recognize bad-faith claims against third-party claims administrators.

However, the high courts in Montana, Texas and West Virginia ruled prior to those decisions that an individual could bring third-party claims against insurance company employees for bad faith, according to an article written by Florida State University law professor Chad G. Marzen.

Skillet argued that the Colorado statute’s reference to “a person” allows lawsuits against individual adjusters in addition to insurers. Her lawsuit names Draine as a defendant along with Allstate.

Allstate countered that Skillett named Draine as a defendant only as a means of keeping Skillett’s lawsuit in state court, where jurists are generally thought to be more sympathetic to insurance claimants. Draine is a Colorado resident and federal courts generally do not have jurisdiction in disputes between residents of the same state.

According to the Supreme Court’s opinion, the Colorado Court of Appeals ruled in 2013 that individual employees cannot be held liable for bad faith. But in 2020, the federal district court in Denver created a conflict by finding that the statute could plausibly be interpreted to create a cause of action against an individual adjuster.

The Colorado Supreme Court said that even though an adjuster can be considered to be “a person engaged in the business of insurance,” the use of that word in the context of the entire statute shows that the legislature intended for lawsuits to be filed against individuals, not individual employees. The law establishes penalties in instances when an “insurer” delays or denies payment of a benefit. Moreover, a preceding code section refers to instances when the insurer “delayed or denied authorizing payment” of a covered benefit, the opinion says.

“Insurers and insureds—not adjusters—are the parties to an insurance policy,” the court said. “They are the ones who undertake obligations under such policies, and it is the insurer—not the adjuster—who may be obligated to pay insurance benefits.”

The American Property Casualty Insurance Association applauded the ruling.

“This is a welcome and common-sense result that accords with a similar decision from the Washington Supreme Court in Keodalah v. Allstate in 2019,” stated Kenneth Stoller, APCIA assistant vice president and amicus counsel. “APCIA filed amicus briefs in both cases explaining why personal liability for bad faith would distort the role of the adjuster, significantly impair proper claims handling, and is not necessary to advance the legitimate interests of insureds.”