Industry Standards and Reasonable Basis in First-Party Claim Denials: El Dueno v. Mid-Century Insurance

1. Introduction

The Tenth Circuit’s decision in El Dueno, LLC v. Mid-Century Insurance Company (No. 24-1110, May 30, 2025) addresses the scope of Colorado’s statutory bad-faith remedy for first-party insurance claimants under Colo. Rev. Stat. §§ 10-3-1115 & 10-3-1116. El Dueno, a commercial building owner in Greeley, Colorado, filed a hail-damage claim for roof repairs under its Mid-Century policy. After an initial adjuster paid approximately $12,000, a second engineer concluded there was no hail damage; Mid-Century denied further coverage. El Dueno sued for unreasonable delay or denial. The district court granted summary judgment for the insurer, and the Tenth Circuit affirmed.

2. Summary of the Judgment

The court held that under § 10-3-1115 an insurer’s denial or delay of benefits is unreasonable only if it lacks any reasonable basis, judged objectively against industry standards. El Dueno failed to articulate or present evidence of any applicable industry standard showing that Mid-Century’s reliance on an independent engineer’s report was unreasonable. Mere disagreement with that report, or the fact that it conflicted with an earlier adjuster’s estimate, did not create a triable issue. Accordingly, summary judgment for Mid-Century was proper.

3. Analysis

3.1 Precedents Cited

Statutory Framework: Colo. Rev. Stat. § 10-3-1115(1)(a)–(2) (defining “unreasonable delay or denial”); § 10-3-1116 (remedy for first-party claimants).
Schultz v. GEICO Cas. Co., 429 P.3d 844 (Colo. 2018) – requirement that claimant prove insurer acted unreasonably and with knowledge or reckless disregard that no reasonable basis existed for denial.
Goodson v. American Standard Ins. Co., 89 P.3d 409 (Colo. 2004) – industry standards as objective measure of reasonableness; expert testimony where standards not in common knowledge.
American Family Mut. Ins. Co. v. Allen, 102 P.3d 333 (Colo. 2004) – expert testimony may be required to establish industry practice.
State Farm Mut. Auto. Ins. Co. v. Reyher, 266 P.3d 383 (Colo. 2011) – reasonableness judged against information available at time of denial.
Dyno Nobel, Inc. v. Steadfast Ins. Co., 85 F.4th 1018 (10th Cir. 2023) – de novo review of summary judgment.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) – standard for genuine dispute of material fact.

3.2 Legal Reasoning

The court began with the undisputed facts: Mid-Century paid an initial hail-damage award based on adjuster Maggie Fields’s estimate and then denied further payment after engineer William Templeton—inspecting under partly snow-covered conditions—found no hail damage. El Dueno’s later expert disputed Templeton’s findings, but that report was not available to Mid-Century at the time of its denial.

Under § 10-3-1115, the threshold is objective reasonableness, measured “based on proof of industry standards.” The insurer need not rely on multiple experts; it need only demonstrate a reasonable basis. El Dueno bore the burden of identifying the industry standard that Mid-Century allegedly violated. The court found that, despite generalized assertions (e.g., that investigations must be “full, fair, and prompt”), El Dueno never pointed to any concrete standard forbidding reliance on a later-generated independent engineer’s report. The Tenth Circuit thus concluded that mere disagreement with an expert’s conclusion—without more—does not prove bad faith, and that conflicting reports do not automatically create a genuine issue of fact.

3.3 Impact

Proof Burden on Claimants: Insureds asserting a statutory bad-faith claim under Colo. Rev. Stat. §§ 10-3-1115–1116 must identify and prove specific industry standards that the insurer allegedly breached.
Insurer Investigations: Reliance on a single independent engineer’s report, even if contested, can constitute a reasonable basis for denial if no industry standard forbids such reliance.
Litigation Strategy: Future plaintiffs must secure admissible evidence of industry norms—often via expert testimony—to withstand summary judgment on bad-faith claims.
Judicial Economy: The decision clarifies that courts need not allow every expert dispute to proceed to trial without a foundational industry benchmark.

4. Complex Concepts Simplified

First-Party Claimant: An insured or beneficiary asserting a right to benefits under their own policy (as opposed to third-party liability coverage).
Bad-Faith Claim: A statutory remedy under Colorado law allowing an insured to recover enhanced damages if the insurer unreasonably delays or denies payment of a claim.
Industry Standards: Objective practices or norms in the insurance industry (e.g., investigation procedures, reliance on expert reports) that guide what constitutes reasonable conduct.
Summary Judgment (Fed. R. Civ. P. 56): A pre-trial procedure by which a court may dispose of claims if no genuine dispute exists as to any material fact and the moving party is entitled to judgment as a matter of law.
Genuine Dispute of Material Fact: A factual disagreement that could lead a reasonable jury to decide in favor of the non-moving party.

5. Conclusion

El Dueno v. Mid-Century Insurance reinforces that under Colorado’s unreasonable-delay-or-denial statute, an insurer’s denial is unlawful only if it lacks any reasonable basis under objective industry standards. Mere disagreement with an expert’s findings or reliance on a later-generated report—even one reached under imperfect inspection conditions—does not, by itself, demonstrate bad faith. Claimants must identify and prove specific industry norms that an insurer violated. This decision thus sharpens the focus on industry standards as the essential measure of reasonableness and strengthens procedural safeguards against meritless bad-faith claims.