Construction lawyers often evaluate insurance policies for a variety of reasons including covered risks, uncovered risks and possible avenues for recovery for their clients. One need not be covered by an insurance policy in order to successfully sue an insurance provider. Contrary to the common belief, insurance companies may vulnerable to suits filed by a wide range of individuals and entities beyond the actual policy holder.
Vendors such as construction contractors who contract with property owners (homeowners, HOAs, REITS) may qualify as “first party claimaints” allowing them to obtain recovery from the property owner’s insurance company for work the vendor provides in correcting a covered property loss claim. At least two Colorado Courts have found that vendors who have provided construction services for an insured property loss to be first party claimants under the property owners insurance policy.
Beside the potential of a claim by an insured who purchased the insurance policy, the path for potential claims has been statutorily opened up for an expansive class of plaintiffs categorized as “first party claimants” through Colorado’s “statutory bad faith” statute. The definition of a “first party claimant” is broad and includes “a person or entity that asserts a claim ‘on behalf of’ an insured.” Hence, an independent third party, such as roofing contractor, who has no contract with an insurance company, may be permitted to sue that insurance company for contractual breach “on behalf of” a homeowner or condominium association with whom the insurance company did have a contractual relationship when the roof repairs were commissioned.
This means the insurance company providing the policy may be obligated to pay for the construction vendor’s services, and additional statutory damages equal to double the denied benefit, and attorney fees. These remedies may be available under Colorado’s “statutory bad faith” statute, § 10-3-1113, 1115 and 1116, which provides relief where an insurer unreasonably delays or denies the benefits owed.
In addition to pursuing statutory bad faith claims, an insured or a contractually-uninvolved third party may utilize another well-established avenue for legal action, specifically, a straight forward breach of contract action. A breach of contract claim is viable as long as there is a valid assignment of claims from the insured to the third party. However, there is a caveat arising out of the law of assignments: the insured cannot assign the actual policy that was contractually entered into with the insurance company; what is assignable is the right to receive money due or to become due under the existing contract. Every case is unique and should be evaluated by an attorney experienced in insurance and construction claims.
For more information, contact the Milo D. Miller Law Group, P.C. at 720-306-7733.