Terence Ridley has had a busy practice lately in bad-faith insurance defense.
In 2018, two related opinions from the 10th Circuit Court of Appeals came down in his favor in Auto-Owners v. Summit Park. They upheld a lower federal court ruling vacating a more- than-$10 million insurance appraisal award against his client. Ridley said elements of the case made national news even before it got to the 10th Circuit, including the size of the claim, the lower court’s award of sanctions against the insurance holder’s law firm and dismissal of the bad-faith case with prejudice.
Ridley, a litigator at Wheeler Trigg O’Donnell, said a lot of litigation has arisen out of Colorado’s insurance bad-faith statute enacted in 2008 because it exposes insurance companies to liability for three times an amount of benefits at issue — plus attorney fees — if a plaintiff shows an unreasonable delay or denial in a payment of claims.
“That means there’s really no such thing as a small case anymore,” he said. Ridley said the statutory definition of bad faith has mostly replaced the common-law understanding of bad faith, which has typically involved some level of intent of bad conduct.
“The focus [in statutory bad faith] is on whether the conduct was unreasonable, so when you think about it, all it really takes is one forceful personality on a jury who thinks that the conduct was unreasonable,” he said. “And an amount is agreed upon, and then the judge will run the math.”
Ridley added attorney fees can balloon along with the damages tripling because cases can take years to play out.
The number of public adjusters in Colorado has also grown rapidly since the bad-faith statute went into effect a little more than a decade ago. When negotiating insurance claims, adjusters represent the legal interests of claimants, and Ridley said be- cause they work on a contingency fee basis, that can lead to inflated insurance claims.
“At least in my mind, that leads to litigation sometimes because the pub- lic adjusters sometimes take an interest in the proceeds of the litigation.”