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Lazar v. Riggs11/10/2003
how entitled to greater protection from discovery.
Quite the contrary, in Kay Labs. v. Dist. Ct., 653 P.2d 721 (Colo. 1982), we expressly rejected such an attempt to limit Hawkins, reiterating the conclusion that "it is as much a part of an insurance company's normal business activity to investigate potential claims by third parties against its insureds as it is to investigate potential claims by its insureds against itself." Kay Labs., 653 P.2d at 722-23. While Kay Labs. involved claims against a self-insured hospital for actions by its employee , we extended the rationale of Hawkins in that case to deny protection under Rule 26 for the hospital's investigation, as if it were an insurance company.
In Silva, we relied on the opinion of a federal magistrate for the proposition that " hen a liability insurer investigates a third-party personal injury claim, the investigation is made in anticipation of claims which, if denied, will likely lead to litigation." Silva, 47 P.3d at 1191. Unlike the federal district court, however, we did not infer from this proposition that it is the possibility of litigation that "provides the insurer the impetus" to investigate the claim, and therefore we did not similarly infer that insurance investigations of third-party claims are always conducted in anticipation of litigation. See Weitzman v. Blazing Pedals, Inc., 151 F.R.D. 125, 126 (D. Colo. 1993).
Silva involved the disclosure of insurance company reserves and settlement authority rather than the investigation of a third-party claim. Not only does our opinion in that case fail to imply any rejection of the Hawkins/Kay Labs. rationale concerning the investigation of third-party claims; our other holdings distinguishing first from third-party claims strongly support that rationale. With respect to actions by insureds for bad faith breach of insurance contracts, we have actually imposed a higher duty of care on insurance companies in denying or delaying the approval of claims by third parties against insureds than in denying claims by insureds themselves. See Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1275 (Colo. 1985); Trimble, 691 P.2d at 1142. Because of the quasi-fiduciary duty typically created by insurance contracts, both to investigate and settle claims arising from the policies and to defend actions brought against insured parties, an insurer must exercise reasonable care with respect to third-party claims but merely avoid recklessly rejecting claims by an insured party himself. Id.
An insurer therefore clearly has a contractual duty to determine whether third-party claims are within an insured's coverage and, if so, to resolve them. Both by contract and statute, see § 10-3-1104(1)(h)(III), 3 C.R.S (2003); § 10-3-1104(1)(h)(VI), 3 C.R.S. (2003), it has an obligation to investigate third-party claims in the ordinary course of its business. Whether or not denied third-party claims are actually more likely to result in litigation, even a virtual certainty of litigation after denial could not alter the insurer's obligation to assess the claim and determine coverage in the first instance. To the extent that the third-party nature of a claim indicates less about anticipation of litigation than about the insurer and insured's commonality of interests in defending against such claims, it implicates the work product doctrine less than the degree of confidentiality that should be accorded insurance relationships. No insurer/insured privilege has been recognized by this court or the General Assembly. Cf. CRE 501; § 13-90-107, 5 C.R.S. (2003).
Where an insurance contract includes a right and duty to defend (as it typically does), in addition to an obligation to investigate and se
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