The Colorado Supreme Court in Schultz v. GEICO Casualty Co., 429 P.3d 844 (Colo. 2018) recently held that later-developed evidence was irrelevant to a UIM claim because the denial had taken place prior to the development of that evidence. In this case, the insured, Charissa Schultz, needed multiple knee replacement surgeries after a motor vehicle accident caused by an underinsured motorist. After settling with the tortfeasor’s insurer, GEICO paid its UIM policy limits two years after the tortfeasor payment. Schultz then sued GEICO, alleging unreasonable payment delay. During the processing of the UIM claim, GEICO requested an IME, which was objected to by Schultz. Schultz claimed that the request was made too late. However, the trial court ordered the IME to proceed.
The Supreme Court reversed the trial court’s ruling. The Supreme Court’s analysis bifurcated the common law bad faith from the statutory claim. Under Colorado law, the insurance company’s good or bad faith was determined based upon information that the insurer had at the time of the unreasonable conduct. According to the Court, GEICO had failed to explain how Schultz’s medical condition at the time she sued GEICO for bad faith had any bearing on her condition years earlier when GEICO made its payment decision. Therefore, the Supreme Court found that the trial court abused its discretion in ordering the IME.