A contractor is a “first-party claimant” with respect to a homeowner insurance policy, and is therefore entitled to seek relief for the improper denial of a claim.

There are many unanswered questions at the intersection of construction and insurance law, one of which the Colorado Court of Appeals recently addressed in Kyle W. Larson Enterprises, Inc., Roofing Experts, d/b/a The Roofing Experts v. Allstate Insurance Company (September, 2012): a contractor may sue an insurer as a “first-party claimant,” and may seek punitive damages when the insurer improperly denies a claim.

The contractor in this case (a roofer), contracted with the owners of four homes insured by Allstate Insurance Company to repair their roofs. The contracts provided that the repair costs would be paid from insurance proceeds and granted the roofer full authority to communicate with Allstate regarding all aspects of the insurance claims. Allstate refused to pay claim amounts for additional repairs required under the applicable building code and the roofer filed suit.  The district court dismissed the claim, finding that the roofer was not a “first-party claimant” and thus could not seek relief against Allstate.

Colorado Revised Statute § 10–3–1115 addresses the “[i]mproper denial of [insurance] claims” and states that a person engaged in the business of insurance “shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.”  The section goes on to define “first-party claimant” as, among other things, an individual asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy. This definition is important because when unreasonable delay or denial in the payment of an insurance claim occurs, a first-party claimant may sue to recover attorney fees, court costs, and two times the covered benefit. 

The Court of Appeals held that the General Assembly’s intent in passing the sections discussed above was to create a statutory duty for insurers to refrain from unreasonable delay or denial of payment of  insurance claims.  Given this intent, the Court construed the above statutes to include contractors such as the roofer.

The lesson for contractors is this: when a homeowner/insured gives a contractor the authority to communicate directly with their insurance company regarding claims based on work done by the contractor on the insured’s property, the contractor meets the statutory criteria for “first-party claimant” and may assert a claim directly against the insurance company for unreasonable delay or denial of payment of insurance claims.