Stuart D. Morse & Associates, L.L.C. Stuart D. Morse & Associates, L.L.C.
Colorado Insurance Defense And Business Litigation Attorneys
Call Us Toll Free 866-825-5850

Policy language: It can make -- or break -- a case for an insurer

Notwithstanding a national insurer's firm view that the merits are on its side in a dispute with a policyholder, litigation involving the firm's alleged bad-faith behavior in underpaying a claim will continue to go forward.

And, in fact, a recent federal court ruling ensures that the matter will now be classified as a class action lawsuit, enabling other plaintiffs with so-called "common questions" -- including, potentially, policyholders in Colorado -- to join litigation against the insurance company as certified class members.

That insurer -- Hartford Casualty Insurance Co. -- recently filed a motion to dismiss a claim by an insured party against it, with the plaintiff contending that the company unlawfully undervalued his claim by purposefully understating the cost value of damaged structural components. The plaintiff -- an owner of a commercial building heavily damaged in a fire -- asserted that Hartford wrongly depreciated certain components without evaluating whether they "were normally subject to repair and replacement during the useful life of [the] structure."

And that intentionally applied depreciated value on property that should never have been depreciated at all, contended the plaintiff, resulted in a claim payment that fell short of what Hartford should actually have paid out under the policy.

Hartford countered that such analysis was flatly erroneous and that the plaintiff could not demonstrate an "injury in fact" owing to payment that actually exceeded what was lawfully owed under the policy.

In reaching a ruling on the matter, the court determined that the policy language left open the question of whether Hartford was correct in its interpretation regarding component depreciation. Because of the continued existence of disputed material facts in the matter, the court ruled, the case must move forward.

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