Dunn v. American Family Insurance
251 P.3d 1232
Colo. Ct. App.2010Background
- Plaintiffs reported a homeowners insurance claim for sewer and water backup that flooded their basement, including around the HVAC system.
- ICA was recommended by defendant to remediate; plaintiffs hired ICA after defendant provided its contact information.
- Remediation by ICA failed; subsequent contractors Western Restoration and Quest Environmental were engaged; mold was detected and plaintiffs vacated the home.
- Mold remediation and flooding resulted in substantial personal property loss and medical concerns for plaintiffs; they received about $340,000 in insurance proceeds.
- Plaintiffs alleged defendant breached the duty of good faith in supervision of the remediation, failure to warn about mold and freezing risks, and failure to communicate about coverage.
- Court granted summary judgment on some bad faith theories but found a genuine dispute regarding defendant’s duty to communicate promptly and effectively.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer has a duty to supervise independent contractors. | Dunns assert insurer must oversee ICA’s work. | Insurer owes no duty to supervise contractors. | No duty to supervise independent contractors. |
| Whether insurer had a duty to warn about mold and freezing risks. | Defendant should warn and protect from mold and freezing. | Policy allocated duties to insureds; no extra duty to warn beyond policy terms. | No general duty to ensure heating or warn of mold absent policy terms. |
| Whether insurer had a duty to communicate promptly regarding claims. | Defendant failed to promptly communicate and investigate. | No breach of duty beyond core adjustment obligations. | Insurer had a good faith duty to communicate; remand ordered for trial on breach. |
| Whether expert testimony was necessary to establish duty. | Expert testimony needed to define industry standards. | Duty is a matter of law; expert testimony unnecessary for duty determination. | Expert testimony not required for duty; remand guidance allowed. |
Key Cases Cited
- Lazar v. Riggs, 79 P.3d 105 (Colo. 2003) (insurer’s duty covers payment/determination of amounts under policy)
- Goodson v. American Standard Ins. Co., 89 P.3d 409 (Colo. 2004) (duty extends beyond mere payment to other insurance services)
- Pham v. State Farm Mut. Auto. Ins. Co., 70 P.3d 567 (Colo. App. 2003) (bad faith encompasses the entire course of conduct in handling a claim)
- Flickinger v. Ninth Dist. Prod. Credit Ass’n, 824 P.2d 19 (Colo. App. 1991) (broad duty of good faith in dealing with insureds)
- Carrizales v. State Farm Lloyds, 518 F.3d 343 (5th Cir. 2008) (insurer not always liable for contractor performance under preferred vendor programs)