Dawn Michelle Goodson

Summary

The Supreme Court of Colorado reversed the court of appeals' ruling that an insured must prove substantial property or economic loss before recovering emotional distress damages in a bad faith breach of insurance contract action. Holding that the essence of the tort is the insurer's unreasonable conduct rather than the insured's ultimate financial loss, the court concluded that emotional distress is a likely and foreseeable consequence of a bad faith denial of benefits, and that existing safeguards (statutory caps, remittitur, special verdict forms, jury credibility assessments, and the preponderance burden) adequately deter fictitious claims. It therefore overruled the court of appeals' Trimble III substantial-loss requirement and reinstated the jury's award of $75,000 in actual and $75,000 in punitive damages. Justice Coats concurred in the judgment only, objecting that the majority gratuitously overruled a long-standing, reasonable damage limitation for third-party claims and would have left insurance-industry policy choices to the legislature.