June 27, 2019

Colorado Court of Appeals: Breach of Insurance Contract Claims Properly Denied When Brought Against Third-Party Administrators and Not Insurance Company

The Colorado Court of Appeals issued its opinion in Riccatone v. Colorado Choice Health Plans on Thursday, September 12, 2013.

Bad-Faith Breach of Insurance Contract—Insurer—Motion to Amend.

Plaintiffs Kirsten K. Riccatone, Brian Riccatone, and Ashlee D. Duran appealed from the summary judgments entered by the district court in favor of defendants Colorado Choice Health Plans, doing business as San Luis Valley Health Maintenance Organization (Choice); Gallagher Benefit Services, Inc. (GBS); and CNIC Health Solutions, Inc. (CNIC). The judgment was affirmed.

Plaintiffs were plan participants under the San Luis Valley Combined Educators Health Plan (Plan). The Plan was an employer self-funded healthcare plan. Choice and CNIC were, respectively, the current and former third-party administrators for the Plan. GBS was a broker and advisor for the Plan. Plaintiffs brought claims based on the denial of benefits to Duran based on a provision in the Plan excluding from coverage injuries resulting from the illegal use of alcohol.

Plaintiffs contended that the district court erred in granting summary judgment to defendants on plaintiffs’ common law bad-faith breach of insurance contract and unreasonable denial of insurance benefits claims. The district court properly granted summary judgment in favor of CNIC, Choice, and GBS on plaintiffs’ common law bad-faith breach of insurance contract claims, because these defendants were not the insurer; did not have a financial incentive to deny plaintiff’s claims or coerce a reduced settlement; and, therefore, did not owe a duty of good faith and fair dealing to plaintiffs. Additionally, the district court properly granted summary judgment in favor of GBS and Choice on plaintiffs’ claim for unreasonable denial of insurance benefits under CRS § 10-3-1116(1), because neither GBS nor Choice was a proper defendant under the statute. They were not engaged in the business of insurance, which includes only those individuals or entities against whom a common law claim of bad-faith breach of insurance contract would exist.

Plaintiffs also contended that the district court abused its discretion in denying their motion to amend the complaint to assert new claims against defendants for aiding or abetting a tortious act. The district court did not abuse its discretion in denying plaintiffs’ motion to amend based on plaintiffs’ undue delay and their repeated failure to cure deficiencies in their pleadings through prior amendments.

Summary and full case available here.