The Duty of Good Faith and Fair Dealing in Colorado

Originally published by Brandee Bower.

In a Colorado insurance claim for breach of the duty of good faith and fair dealing, the plaintiff may recover damages for emotional distress without proving substantial property or economic loss.
Every contract in Colorado contains an implied duty of good faith and fair dealing.1 In most contractual relationships, a breach of this duty will only result in damages for breach of contract and will not give rise to tort liability.2 Insurance contracts are different because policyholders enter into insurance contracts to protect themselves from future events, not for commercial advantage.3 They are also different because they are unilateral and not a result of bargaining.4

Due to the “special nature of the insurance contract and the relationship which exists between the insurer and the insured,” an insurer’s breach of the duty of good faith and fair dealing gives rise to a separate cause of action arising in tort.5 The basis for tort liability is the insurer’s conduct in…

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