Appellate Court Broadly Interprets “First-Party Claimant”

A decision by a Colorado appellate court, as a matter of first impression, finding that a repair vendor was a “first-party claimant” where it sued an insurer on behalf of its insured seems to expand the definition of “first-party claimant” – and could lead to an increase in the number of plaintiffs suing insurance companies.  

The complaint in this case was filed by a roofing company, Kyle W. Larson Enterprises, Inc., that had contracted with the owners of four homes 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 the owners’ insurance company regarding all aspects of the insurance claims. The roofer met with the insurer’s adjustors to discuss the four homes and to determine the amount of each claim, and began each repair after receiving approval from the insurer for the claims. The roofer made additional repairs to comply with applicable building codes and to maintain certain manufacturers’ warranties, and invoiced the insurer for them. The insurer paid the claim amounts that were agreed to during the original adjustment, but refused to pay for the additional repairs. 

The roofer filed suit as a first-party claimant against the insurer for unreasonable delay and denial of benefits under Colorado statutory law. The trial court ruled that the roofer was not a first-party claimant entitled to seek relief under the statutes and granted the insurer’s summary judgment motion. The roofer appealed.

The Decision

In Kyle W. Larson Enterprises, Inc. v. Allstate Ins. Co., No. 11CA2205 (Colo. Ct. App. Sept., 27, 2012), the appellate court reversed, concluding that the “first-party claimant” definition in Colorado law “unambiguously” included the roofer. It reasoned that the legislature’s intent was to create (i) a statutory duty for insurers to refrain from unreasonable delay or denial of payment of any claim for benefits owed, and (ii) an express private right of action by first-party claimants for violation of this duty. Consistent with that intent, the appellate court decided, “first-party claimant” included vendors such as the roofer who were authorized to assert, and who did assert, claims on behalf of insureds.

The appellate court reasoned that the insureds gave the roofer authority to communicate directly with the insurer regarding their claims based on repair work done by the roofer on the insureds’ property. Accordingly, it concluded, the roofer’s assertion of claims against the insurer for payment for such repair work was necessarily made “on behalf of” the insureds, as this arrangement relieved the insureds of any obligation to assert the claims themselves. The roofer thus met the statutory criteria for a “first-party claimant.”

The Rivkin Rule

The court rejected the argument that the definition of first-party claimant required a “contractual relationship” between the insurer and the claimant, or that a first-party claimant had to be a “consumer” or an “insured.”  At this point, the broad interpretation by the Colorado appellate court applies only in Colorado, but its impact bears watching.