Zalma on Insurance
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Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
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March 28, 2022
An Adjuster is not a Party to a Contract of Insurance

Colorado Supreme Court Makes It Clear: Adjuster May not be Sued for Tort of Bad Faith

Read the full article at https://www.linkedin.com/pulse/adjuster-party-contract-insurance-barry-zalma-esq-cfe and at https://zalma.com/blog plus more than 4150 posts.

Posted on March 28, 2022 by Barry Zalma

The Supreme Court of Colorado was asked to answer a certified question of law from the United States District Court for the District of Colorado regarding the potential liability of insurance adjusters under sections 10-3-1115 to -1116, C.R.S. (2021) of Colorado’s statutes. Specifically, the certified question asks:

Whether an employee of an insurance company who adjusts an insured’s claim in the course of employment may for that reason be liable personally for statutory bad faith under Colorado Revised Statutes Sections 10-3-1115 and -1116 (“Statutes”).

In Alexis Skillett v. Allstate Fire and Casualty Insurance Company, d/b/a Allstate Insurance Company and Collin Draine, 2022 CO 12, No. 21SA187, Supreme Court of Colorado, En Banc (March 14, 2022) the Colorado Supreme Court, decided that an action for unreasonably delayed or denied insurance benefits under Colorado law may be brought against an insurer, not against an individual adjuster acting solely as an employee of the insurer.
FACTS

On July 3, 2020, Alexis Skillett was involved in a car accident. At the time of the accident, Allstate Fire and Casualty Insurance Company (“Allstate”) insured Skillett under a policy that included underinsured motorist coverage. Skillett settled with the at-fault driver and his insurer and also filed a claim with Allstate for underinsured motorist benefits.

Allstate assigned one of its employees, Collin Draine, to handle Skillett’s claim. Draine was not a party to the insurance contract between Skillett and Allstate, and he handled Skillett’s claim solely in his capacity as an Allstate claims adjuster. He concluded that Skillett was not entitled to underinsured motorist benefits. Accordingly, Allstate denied Skillett those benefits.

Skillett filed suit in Denver District Court, naming both Allstate and Draine as defendants. Her claims against Allstate included breach of contract, statutory bad faith, and common law bad faith.

Draine and Skillett are both Colorado residents, which ordinarily requires that the case remain in state court because federal courts lack jurisdiction over most exclusively state law claims. Allstate removed the case to federal court, arguing that Draine had been fraudulently joined to thwart diversity jurisdiction and that the federal court did in fact have jurisdiction.

The federal district court determined that Allstate raised an important, unsettled question of Colorado law, and it certified that question to this court.
ANALYSIS
An Action for Unreasonable Delay or Denial of Insurance Benefits Proceeds Against an Insurer

In 2008, the General Assembly enacted “An Act Concerning Strengthening Penalties for the Unreasonable Conduct of an Insurance Carrier.” Ch. 422, sec. 5, §§ 10-3-1115 to -1116, 2008 Colo. Sess. Laws 2171, 2172-74. The law created, inter alia, two new provisions: (1) section 10-3-1115, which prohibits the unreasonable delay or denial of payment for a claim for insurance benefits, and (2) section 10-3-1116(1), which establishes a cause of action for an insured whose claim for insurance benefits has been unreasonably delayed or denied.

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.

Skillett argues that these provisions allow first-party claimants to bring suit not only against their insurers, but also against individual insurance adjusters. Although the court of appeals had previously rejected this argument a federal court recently accepted it leaving uncertainty for both state and federal courts as to the proper interpretation of the Statutes.

In resolving that uncertainty, Skillett is correct that section 10-3-1102(3) includes “adjusters” among “persons.” But that section does not make its definitions absolute. Most importantly for the purposes of an action brought pursuant to this section and section 10-3-1116, “an insurer’s delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.” (Emphases added.)

Reading these provisions to allow for adjuster liability leaves unnecessary statutory gaps. 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.

Insurers and insureds-not adjusters-are the parties to an insurance policy. 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. And section 10-3-1116(1) allows first-party claimants whose claims for benefits are unreasonably delayed or denied to recover “reasonable attorney fees and court costs and two times the covered benefit.” (Emphasis added.) It would seem odd to allow an insured to recover two times the covered benefit from an adjuster, who is not a party to the insurance policy that establishes the covered benefit and has not otherwise undertaken any obligation to pay the covered benefit.

The only language in the Statutes that supports Skillett’s argument is the use of the word “person” in section 10-3-1115(1)(a) and the attendant inclusion of “adjusters” as “persons” in section 10-3-1102(3). Given the statutory command that the definitions included in section 10-3-1102 only apply “unless the context otherwise requires,” the Supreme Court concluded that individual adjusters are not personally subject to suit under the Statutes.

The Supreme Court concluded that an action for unreasonably delayed or denied insurance benefits proceeds against an insurer, not an individual adjuster. The plain language of sections 10-3-1115 and 10-3-1116 required the result and the certified question was answered in the negative.
ZALMA OPINION

In the 1970’s lawyers in California, unhappy with the result of insurance bad faith cases in the federal courts, decided to sue adjusters and attorneys representing insurers as individual defendants to destroy jurisdiction in federal courts for lack of diversity. I was personally sued dozens of time where the plaintiffs alleged that when I sold them an insurance policy I promised them coverage. I am not now, nor have I ever been, an insurer or insurer’s sales person. I would file motions for summary judgment and win every time but would have to pay my lawyers and deductible and lost my insurance coverage.

In Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (Cal. 1973) the California Supreme Court made it clear, as the Colorado Supreme Court has now concluded, that the adjuster and lawyer defendants were not subject to the implied duty arising from the contractual relationship, since they were not parties to the contract of insurance. The suits continued and caused hardship for adjusters, claims managers and insurance lawyers for years until it finally stopped. The same attempt was made in the state of Washington until it was stopped by the Washington Supreme Court.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at

http://www.zalma.com

and [email protected].

Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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Posted on September 25, 2025 by Barry Zalma

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Judicial Proceeding Privilege Limits Litigation

In David Camp, and Laura Beth Waller v. Professional Employee Services, d/b/a Insurance Branch, and Brendan Cassity, CIVIL No. 24-3568 (RJL), United States District Court, District of Columbia (September 22, 2025) a defamation lawsuit filed by David Camp and Laura Beth Waller against Insurance Branch and Brendon Cassity alleging libel based on statements made in a letter accusing them of mishandling funds and demanding refunds and investigations.

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September 24, 2025
Untrue Application for Insurance Voids Policy

Misrepresentation or Concealment of a Material Fact Supports Rescission

Post 5195

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Plaintiff's Application:

Plaintiff applied for an insurance policy with the defendant, indicating that the primary use of her SUV would be for "Pleasure/Personal" purposes.

Misrepresentation:

Plaintiff misrepresented that she would not use the SUV for food delivery, but records show she was compensated for delivering food.

Accident:

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Barry Zalma: Insurance Claims Expert Witness
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The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit

© 2025 Barry Zalma, Esq., CFE

When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.

On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...

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