In May 1995, Dawn Goodson’s car was rear-ended by a car insured by American Standard. Fourteen months later, in July 1996, Goodson and her children spent $8,000 on a chiropractor. Goodson submitted an insurance claim three months later.
You might imagine a wee bit of skepticism on the part of the insurance company. Goodson hadn’t gone through American Standard’s PPO, which meant that the bills were higher than they would have been; moreover, American Standard was skeptical that a chiropractor’s 1996 treatment for three individuals was medically necessary as a result of the 1995 accident, and asked for an independent medical evaluation. Nevertheless, American Standard, after initially offering to pay part of the bill, eventually paid the full medical bills in April 1998.
Not good enough: Goodson sued three months later, seeking damages for “emotional distress.” A jury awarded $75,000, and doubled it with $75,000 of punitive damages. The Colorado Supreme Court affirmed Monday, holding that the eighteen-month delay in full payment was grounds for recovery of non-economic damages. You can guess what the eventual consequence will be for Colorado insurance rates now that an insurer is potentially subject to penalties of over 2000% for questioning a claim, but the Colorado Trial Lawyers Association paints it as a victory for the consumers who will now have to pay for the meritless claims insurers will pay out of fear of lawsuit. (Howard Pankratz, “Court says tardy insurers liable for emotional damages without proof of loss”, Denver Post, May 4; Karen Abbott, “Insurer is ordered to pay family $300,000”, Rocky Mountain News, May 4; Goodson v. American Standard Insurance Company of Wisconsin opinion).