Certiorari to the Colorado Court of Appeals Court of Appeals
Case No. 23CA117
Judgment
Reversed
Attorneys for Petitioner: Covington & Burling LLP Allan
B. Moore Lauren Willard Zehmer Washington, District of
Columbia.
Davis
Graham & Stubbs LLP Theresa Wardon Benz, Denver,
Colorado.
Patterson Ripplinger, P.C. Franklin D. Patterson Greenwood
Village, Colorado.
Attorneys for Respondents: Western Slope Law Nelson A.
Waneka, Glenwood Springs, Colorado.
2
Galperin and Associates Jacob Galperin Jordan Willison,
Denver, Colorado.
Attorneys for Amicus Curiae American Car Rental Association:
Spencer Fane LLP Evan Bennett Stephenson Hannah S. McCalla,
Denver, Colorado.
Attorneys for Amicus Curiae Colorado Division of Insurance:
Philip J. Weiser, Attorney General Heather Flannery, First
Assistant Attorney General Evan Spencer, Senior Assistant
Attorney General Gabriel Young, Assistant Attorney General
Denver, Colorado.
Attorneys for Amici Curiae Colorado Trial Lawyers Association
and American, Association for Justice: Levin Sitcoff PC Robyn
Levin James W. Hart, Denver, Colorado.
Attorneys for Amicus Curiae Truck Renting and Leasing
Association: Womble Bond Dickinson (US) LLP Kendra N.
Beckwith, Denver, Colorado.
JUSTICE SAMOUR delivered the Opinion of the Court, in which
CHIEF JUSTICE MARQUEZ, JUSTICE BOATRIGHT, and JUSTICE
BERKENKOTTER joined.
JUSTICE HOOD, joined by JUSTICE GABRIEL and JUSTICE BLANCO,
concurred in part and dissented in part.
3
OPINION
SAMOUR
JUSTICE.
¶1
"If you call a tail a leg, how many legs has a dog?
Five? No; calling a tail a leg don't make it a leg."
Bank One Dayton, N.A. v. Limbach, 553 N.E.2d 624,
627 n.5 (Ohio 1990) (quoting John Bartlett, The Shorter
Bartlett's Familiar Quotations 218(d) (Christopher
Morely ed., 1953)). This famous aphorism often attributed to
Abraham Lincoln helps frame today's decision. Words
cannot alter facts. One may call something whatever one
likes, but the underlying reality remains unchanged. A dog
has four legs, and relabeling its tail a "leg"
doesn't magically create a fifth one. So too here.
Plaintiffs may label the car rental company before us an
insurer based on its involvement in claims handling and its
significant financial incentives in resolving claims. But the
reality remains the same: Under Colorado law, the car rental
company does not qualify as a statutory insurer or as a
common-law de facto insurer.
¶2
The specific issue we confront today is narrow but carries
outsized importance to the car rental industry—and
potentially beyond: Can a car rental company be deemed an
insurer of customers who purchase a "Liability
Insurance Supplement" ("supplemental
insurance") through their rental agreement and thereby
become additional insureds on a policy listing the car rental
company as the insured and the car rental
company's insurer as the policy insurer? Our analysis
focuses on two dispositive questions. First, did the
legislature intend to
4
treat car rental companies offering supplemental insurance as
insurers under title 10 of the Colorado Revised Statutes,
which governs "Insurance"? Second, does our
decision in Cary v. United of Omaha Life Insurance
Co., 68 P.3d 462 (Colo. 2003), sanction the treatment of
car rental companies offering supplemental insurance as de
facto insurers (that is, insurers in practice) under the
common law? We answer no to both questions.
¶3
We hold that, although a car rental company may offer its
customers supplemental insurance through its own
insurer, that arrangement does not impose on the car
rental company a nondelegable duty, under either statute or
the common law, to act as an insurer. Rather, that duty
remains where the law has placed it: with the insurer named
on the policy providing the supplemental insurance (that is,
with the car rental company's insurer).
¶4
In so holding, we recognize that the car rental company in
this case had both some involvement in administering
plaintiffs' insurance claims and a significant financial
incentive in the outcome of those claims. But, as the old
adage reminds us, "fine feathers don't make fine
birds." And as with many things in nature, what catches
the eye doesn't always capture the truth.
Cary's judicially crafted tort is limited to
third-party administrators with both primary responsibility
for handling insurance claims and a significant financial
stake in the outcome of those claims. See 68 P.3d at
468-69. Whatever else may be said about the car rental
5
company here, its business has never been claims handling;
its trade has always been renting cars. Cary
therefore furnishes no alchemy capable of transforming it
into a de facto insurer.
¶5
Because a division of the court of appeals concluded that the
car rental company in this case was plaintiffs' statutory
insurer and could, alternatively, be plaintiffs'
common-law de facto insurer, we reverse its judgment. The
district court correctly dismissed plaintiffs' complaint
against the car rental company as a matter of law. We
therefore remand the case to the division with instructions
to return it to the district court for reinstatement of the
dismissal order.[1]
I.
Facts and Procedural History
¶6
On February 26, 2020, Roman Rakhimov, a nonparty, rented a
car from Hertz Corporation ("Hertz"). As part of
his rental agreement, Rakhimov opted to purchase, for an
additional $18.85 per day, supplemental insurance, which
included uninsured/underinsured ("UM/UIM") coverage
for all occupants of the
6
rental car. The supplemental insurance provision was embedded
within a paragraph appearing on the final page of the rental
agreement:
If You elect [supplemental insurance], [supplemental
insurance] provides protection from liability for third party
automobile claims for the difference between the liability
limits in Paragraph 10 of the Rental Agreement and the
maximum combined single limit of $1,000,000 for bodily
injury, including death and property damage. [Supplemental
insurance] also includes uninsured/underinsured motorist
coverage (while occupying the Car) for bodily injury and
property damage, if applicable, for the difference between
the statutory minimum underlying limits and $1,000,000 for
each accident.
¶7
The next day, as Rakhimov was driving the rental car
accompanied by two passengers, Stanislav Babayev and Oleg
Chikov ("plaintiffs"), another vehicle collided
with the rental car and fled the scene. Plaintiffs sustained
injuries and were transported by ambulance to an emergency
room where they received extensive treatment.
¶8
As beneficiaries of the UM/UIM coverage in the supplemental
insurance purchased by Rakhimov, plaintiffs submitted claims
for medical expenses. The automobile insurance policy
providing this coverage was issued by ACE American Insurance
Company ("Chubb"), a licensed and regulated
third-party insurer. Under the policy issued by Chubb (the
"Chubb Policy"), Chubb was the insurer, Hertz was
the named insured, and Rakhimov and plaintiffs were
additional insureds.
7
¶9
Within a few weeks of plaintiffs' claims being submitted,
Chubb's third-party claims administrator, ESIS, Inc.
("ESIS"), started an investigation. ESIS is a
wholly-owned subsidiary of Chubb and is specifically
designated under the Chubb Policy as the authorized entity
responsible for claims handling.[2]
¶10
Shortly after ESIS began reviewing plaintiffs' claims,
one of its claims adjusters sent a letter to plaintiffs'
counsel describing the relationship between Chubb, ESIS, and
Hertz. Specifically, the claims adjuster stated that (1)
neither ESIS nor Hertz was an insurance company; (2) ESIS
acted solely as a third-party claims administrator for Chubb
(the insurer); and (3) Hertz was the named insured under the
Chubb Policy. The letter enclosed a copy of the Chubb Policy
identifying Hertz as the named insured on the Declarations
page. A few weeks later, plaintiffs' counsel followed up
via email, making clear that everyone was singing from the
same hymn sheet: "CHUBB insurance is responsible for all
claims in Colorado."
8
¶11
The investigation into plaintiffs' claims spanned just
over a year. During that timeframe, ESIS regularly
communicated with plaintiffs' counsel, reviewed
plaintiffs' medical records, ordered medical
examinations, and issued some payments. Because plaintiffs
received payments that totaled less than the medical expenses
claimed, they filed suit against Hertz.[3] Plaintiffs'
complaint included claims for: (1) breach of contract; (2)
common-law bad-faith breach of an insurance contract; and (3)
unreasonable delay or denial of insurance benefits in
violation of sections 10-3-1115 and -1116, C.R.S.
(2025).[4]
¶12
During a discovery hearing, plaintiffs asserted that Hertz
was their insurer. Hertz disagreed. In the briefing that
followed, Hertz explained that plaintiffs' insurer was
Hertz's own insurer, Chubb, and that the Chubb Policy had
provided plaintiffs UM/UIM coverage as part of the
supplemental insurance purchased by Rakhimov. Plaintiffs,
however, insisted that Hertz qualified as a statutory insurer
9
or as a common-law de facto insurer because it had engaged in
the business of insurance by providing supplemental insurance
coverage as part of its rental agreement with Rakhimov.
¶13
The district court held, as a matter of law, that Hertz was
neither a statutory insurer under title 10 nor a common-law
de facto insurer under our decision in Cary. In
terms of title 10, the court agreed with Hertz that
legislative amendments had abrogated the holding in
Passamano v. Travelers Indemnity Co., 882 P.2d 1312
(Colo. 1994), a case on which plaintiffs relied. The court
explained that, through these amendments, the legislature had
clearly distinguished between car rental companies and
insurers. And because Hertz was not in the business of making
contracts of insurance, the court ruled that Hertz did not
qualify as a title 10 insurer.
¶14
Separate and apart from title 10, the court considered the
common law. Specifically, the court considered whether Hertz
qualified as a common-law de facto insurer under
Cary given (1) Hertz's involvement in the early
stages of the assessment of plaintiffs' claims and (2)
Hertz's significant financial stake in the resolution of
those claims. The court recognized that Hertz had a
significant financial interest in the resolution of
plaintiffs' claims based on a risk-allocation agreement
(also known as a "fronting agreement") it had
executed with Chubb
10
related to the UM/UIM coverage in the supplemental
insurance.[5] But the court nevertheless ruled against
plaintiffs because it concluded that whatever control Hertz
may have exerted during the initial investigation of
plaintiffs' claims did not amount to primary
responsibility for processing those claims. The court
therefore concluded that Hertz could not be deemed a de facto
insurer under Cary. Accordingly, the court dismissed
all of the claims brought against Hertz.
¶15
Plaintiffs then moved to amend their complaint to add Chubb
and ESIS as defendants and to assert a new deceptive trade
practices claim against Hertz. But the court denied the
motion and entered a final judgment against
plaintiffs.[6]
¶16
Plaintiffs appealed the dismissal order, and a division of
the court of appeals reversed. Babayev v. Hertz
Corp., 2024 COA 15, ¶ 1, 548 P.3d 1180, 1181. The
division determined both that Hertz was a statutory insurer
under title 10 and that there were disputed issues of
material fact as to whether Hertz regularly
11
performed the functions of an insurer and should thus be
deemed a common-law de facto insurer under Cary. Id.
at ¶¶ 35, 47, 548 P.3d at 1186-87.
¶17
As it relates to title 10, the division determined that
nothing in the statutory definitions of
"insurance," "insurer," and "motor
vehicle rental company" precluded a car rental company
like Hertz from being deemed an insurer. Id. at
¶¶ 14-18, 548 P.3d at 1183. Because Hertz had
offered Rakhimov and his passengers supplemental insurance
encompassing UM/UIM coverage, the division concluded that
Hertz was plaintiffs' statutory insurer. Id. at
¶ 35, 548 P.3d at 1186. In doing so, the division
disagreed with the district court's view that
Passamano had been abrogated in relevant part by our
legislature. Id. at ¶ 19, 548 P.3d at 1183-84.
Although the division acknowledged that, in the aftermath of
Passamano, our legislature had exempted car rental
insurance policies from the rules governing automobile
insurance in title 10, including the requirement to offer
UM/UIM coverage, the division discerned that the legislature
had not exempted car rental companies altogether from
qualifying as insurers. Id. at ¶ 24, 548 P.3d
at 1184.
¶18
Then, turning to our decision in Cary, the division
homed in on Hertz's significant financial incentive in
the resolution of plaintiffs' claims and Hertz's
involvement in ESIS's early handling of those claims. The
division observed that there was evidence that Hertz had
performed some of the functions of an insurer,
12
which the division took to mean that a genuine dispute of
material fact existed as to whether Hertz may be deemed a de
facto insurer under the common law. Id. at ¶
46, 548 P.3d at 1187. Accordingly, the division held that the
district court had erred by resolving the issue on a motion
filed pursuant to C.R.C.P. 56(h) ("Determination of a
Question of Law"). Id. at ¶ 47, 548 P.3d
at 1187. Hertz sought our review, and we granted its
petition.
II.
Analysis
¶19
The issue before us entails two distinct inquiries: (1)
whether Hertz qualifies as a statutory insurer; and (2)
whether Hertz qualifies as a common-law de facto insurer
under Cary. But we mustn't get over our skis. We
must first identify the applicable standard of review. Only
after doing so may we get down to brass tacks.
¶20
With the applicable standard of review as our lodestar, we
consider whether the legislature intended to permit the
treatment of car rental companies offering supplemental
insurance as statutory insurers under title 10. We conclude
that it did not. We next examine whether Cary's
extension of the common-law duty of good faith and fair
dealing beyond insurers—to a narrow class of
third-party administrators—has enough elasticity to
encompass Hertz. We conclude that it does not. In
Cary, we penned a modest holding, confined to
third-party administrators that not only possess a
significant financial stake in the resolution
13
of claims but also have primary responsibility over claims
handling on behalf of the ultimate insurer. It remains so
cabined after today.
A.
Standard of Review
¶21
First, whether Hertz qualifies as an insurer under title 10
is an issue implicating statutory interpretation, which we
review de novo. Shelter Mut. Ins. Co. v. Mid-Century Ins.
Co., 246 P.3d 651, 660 (Colo. 2011). Our initial step in
construing a statute is to ascertain and give effect to the
intent of the General Assembly. See Apodaca v. Allstate
Ins. Co., 255 P.3d 1099, 1102 (Colo. 2011). We decipher
our legislature's intent by affording a statute's
words and phrases their plain and ordinary meaning.
Robbins v. People, 107 P.3d 384, 387 (Colo. 2005).
To do so, we read such words and phrases in context and in
accordance with the rules of grammar. Doubleday v.
People, 2016 CO 3, ¶ 19, 364 P.3d 193, 196. We are
required to consider "the statutory scheme as a
whole" and "'to give consistent, harmonious,
and sensible effect to all its parts.'"
Archuleta v. Roane, 2024 CO 74, ¶ 9, 560 P.3d
399, 402 (quoting Dep't of Nat. Res. v. 5 Star
Feedlot, Inc., 2021 CO 27, ¶ 20, 486 P.3d 250,
256).
¶22
Second, we likewise review de novo the district court's
determination, pursuant to C.R.C.P. 56(h), that Hertz may be
deemed plaintiffs' common-law de facto insurer. Great
N. Props., LLLP v. Extraction Oil &Gas, Inc., 2024
CO 28, ¶ 20, 547 P.3d 1110, 1116. A court may determine
a question of law under C.R.C.P. 56(h)
14
if there is "no genuine issue of any material fact"
necessary for its resolution. Coffman v. Williamson,
2015 CO 35, ¶ 12, 348 P.3d 929, 934 (quoting C.R.C.P.
56(h)). In the context of a C.R.C.P. 56(h) motion, the
nonmoving party is entitled to "all favorable inferences
from the undisputed facts," and "all doubts as to
the existence of a triable issue of fact must be resolved
against the moving party." Id.
B.
Hertz Is Not a Statutory Insurer Under Title 10
¶23
The division set out on firm footing, starting where it
should: with the plain meaning of the statutory definitions
of "insurance" and "insurer." Section
10-1-102(12), C.R.S. (2025), defines "[i]nsurance"
as a "contract whereby one . . . undertakes to indemnify
another . . . upon determinable risk contingencies." And
section 10-1-102(13) defines an "[i]nsurer" as
"every person engaged as principal, indemnitor, surety,
or contractor in the business of making contracts of
insurance." Having erected its decision on this sturdy
foundation, however, the division stumbled on the very next
step.
¶24
Without giving the framework of title 10 much scrutiny, the
division concluded that Hertz was a statutory insurer. It
reasoned that, since "[t]he rental agreement between
Hertz and Rakhimov indemnified Rakhimov and his passengers
for damage caused by uninsured motorists," Hertz had
"engaged as a contractor, if not an indemnitor, in the
business of making an insurance contract."
Babayev, ¶ 18, 548 P.3d at 1183.
15
¶25
The division used Passamano as the scaffolding for
its determination. Id. at ¶¶ 20-24, 548
P.3d at 1184. But Passamano cannot bear the weight
the division asked it to support. The plaintiff in
Passamano, like plaintiffs here, entered into an
agreement with a car rental company. 882 P.2d at 1316. We
held that, as a result of offering Passamano "various
insurance coverages for specified prices," the car
rental company qualified as an insurer "for purposes of
section 10-4-609(1)[, C.R.S. (1994)]," a statutory
provision compelling automobile insurers to offer UM/UIM
coverage. Passamano, 882 P.2d at 1317. We therefore
declared that all car rental companies offering to sell their
customers the option of purchasing insurance were deemed to
be insurers and were required to offer UM/UIM coverage.
Id. at 1323.
¶26
Significantly, however, our General Assembly responded to
Passamano while the ink was still wet. In the very
next legislative session, it began abrogating
Passamano, leaving it moribund as relevant here; and
in a session a few years later, it all but interred that
decision—spade, soil, and all. Ch. 88, sec. 3, §
10-2-105(1)(g)(I)-(IV), 1998 Colo. Sess. Laws 233,
234[7];
see also Ch. 88, sec. 4, § 10-3-903(2)(j), 1998
Colo. Sess. Laws 233, 234; § 10-3-105(2), C.R.S. (2025).
16
¶27
Specifically, in the wake of Passamano, the
legislature made significant amendments to title 10. For
starters, it inserted paragraph (b) in section 10-4-609(1),
the provision we applied in Passamano. Ch. 51, sec.
4, § 10-4-609(1)(b), Colo. Sess. Laws 142, 143. The
added paragraph provides that "[t]his subsection (1)
shall not apply to motor vehicle rental agreements or motor
vehicle rental companies." § 10-4-609(1)(b), C.R.S.
(2025).
¶28
Relatedly, the legislature distinguished between insurers and
car rental companies. It defined the former as "every
person engaged as principal, indemnitor, surety, or
contractor in the business of making contracts of
insurance," and the latter as "an entity that is in
the business of renting, pursuant to motor vehicle rental
agreements, motor vehicles." § 10-1-102(13), (15).
In so doing, the legislature separated insurers and car
rental companies as cleanly as if it had drawn the line with
a razor.
¶29
Elsewhere the legislature expressly declared that car rental
agreements of the kind at issue in Passamano (the
same kind at issue here) are not automobile insurance
policies. Section 10-4-601(10), C.R.S. (2025), defines
"[p]olicy" as "an automobile insurance policy
providing coverage for all or any of the following
coverages: . . . bodily injury liability, property damage
liability . . . and uninsured motorist
coverage." (Emphases added.) But, spurred by
Passamano, the legislature added paragraph (a) to
that subsection, explicitly exempting any agreement in
17
which the vehicle insured is "rented to others pursuant
to the terms of a motor vehicle rental agreement."
§ 10-4-601(10)(a).
¶30
Similarly, the legislature carved out an exception to the
definition of "transacting insurance business" by
proclaiming that "[t]he sale of authorized insurance by
agents of a motor vehicle rental company" does not
qualify as "transacting insurance business." §
10-3-903(1), (2)(j), C.R.S. (2025).
¶31
Lastly, the legislature addressed the statutory definition of
an "[i]nsurance producer." § 10-2-103(6),
C.R.S. (2025). A person qualifies as an insurance producer
when the person "solicits, negotiates, effects,
procures, delivers, renews, continues, or binds"
policies of insurance. § 10-2-103(6)(a)(I). But
here, too, the legislature made a change by including a
specific exception for "[o]fficers or employees of a
motor vehicle rental company" who offer insurance
coverage. § 10-2-105(2)(g).
¶32
Thus, prompted by our holding in Passamano, the
legislature enacted multiple provisions to establish that (1)
car rental companies are not insurers, (2) a car rental
agreement offering insurance is not an automobile insurance
policy, (3) the sale of insurance in a car rental agreement
does not qualify as transacting insurance business, and (4)
agents of car rental companies offering insurance through car
rental agreements are not insurance producers. These changes,
in addition to consigning the germane portions of
Passamano to their final resting
18
place, reflect a clear intent by the legislature to
differentiate car rental companies from insurers and rental
agreements from insurance policies.
¶33
The supplemental insurance sold here, therefore, was not an
automobile insurance policy under title 10. See
§ 10-4-608(1)(c), C.R.S. (2025) (exempting any policy
"arising out of a motor vehicle rental agreement"
from all of title 10, article 4, part 6). And if the
agreement for supplemental insurance did not constitute an
automobile insurance policy, how can Hertz be deemed a
contractor or indemnitor "in the business of making
contracts of insurance" under section 10-1-102(13), as
the division concluded? It can't.
¶34
In arriving on the other side of the analytical divide, the
division downplayed our legislature's swift response to
Passamano and tried to explain each relevant
statutory amendment away. Babayev, ¶¶ 24,
25-33, 548 P.3d at 1184-85. But the division improperly
parsed those amendments and analyzed each in isolation
without regard to title 10's overall design. See id.
at ¶¶ 28, 30, 33, 548 P.3d at 1185. This was a
misstep. Courts must take a panoramic view of a statutory
scheme and give consistent, harmonious, and sensible effect
to all its parts. Archuleta, ¶ 9, 560 P.3d at
402. Giving the integrated statutory framework a holistic
reading, as we must, it becomes evident that a car rental
company that offers its customers supplemental insurance does
not fit within the definition of a title 10 insurer.
See § 10-1-102(13).
19
¶35
Interestingly, the division acknowledged that "this
delineation of what is and is not 'transacting insurance
business' does not apply to rental car insurance,
presumably because motor vehicle rental companies are not
insurance companies that must procure a certificate of
authority to do business." Babayev, ¶ 33,
548 P.3d at 1185. But, surprisingly, the division
nevertheless determined that Hertz was a statutory insurer.
The statutory scheme offers no hint that the legislature
meant to steer in opposite directions at once. And to the
extent the division attempted to label Hertz an
"indemnitor" for agreeing to secure supplemental
insurance for its clients, it pushed past the title 10
shoreline into waters the legislature never meant to
navigate.
¶36
In sum, by leaning on a case whose supporting beam has been
shaved down in the very place this dispute turns, the
division arrived at the wrong destination. Using a wide-lens
perspective of title 10, as amended post-Passamano,
we conclude that Hertz does not qualify as a statutory
insurer. Rather than being in the business of making
insurance contracts, Hertz is "in the business of
renting . . . motor vehicles." § 10-1-102(15);
see also Passamano, 882 P.2d at 1329 (Vollack, J.,
dissenting) (noting that the car rental company involved was
"engaged in the business of renting motor vehicles, and
not in the business of insurance sales").
20
¶37
Having held that Hertz is not a statutory insurer, the
remaining question is whether it nonetheless bears the
hallmarks of one under the common law as interpreted by
Cary—in short, whether it should wear the
mantle of a de facto insurer. We turn to that issue now.
C.
Hertz Does Not Qualify as a De Facto Insurer Under the Common
Law
1.
Applicable Common-Law Principles
¶38
Although Colorado law reads into every contract a duty of
good faith and fair dealing, a breach of this duty is not
generally actionable in tort. Cary, 68 P.3d at 466.
Insurance contracts, however, are cut from a different cloth.
Id. Given the "special nature of the insurance
contract" relative to other kinds of contracts, and
given further "the 'special nature' of the
relationship that exists between an insured and his
insurer," a breach of the duty of good faith and fair
dealing in an insurance contract "gives rise to a
separate cause of action sounding in tort." Id.
at 466-67 (quoting Travelers Ins. Co. v. Savio, 706
P.2d 1258, 1272 (Colo. 1985)); see also Goodson v. Am.
Standard Ins. Co. of Wis., 89 P.3d 409, 414 (Colo. 2004)
(examining the distinct motivations and disparate positions
of insurers and insureds).
¶39
To succeed on a tort cause of action for a bad-faith breach
of an insurance contract, a plaintiff must prove that the
defendant owed a duty of good faith and fair dealing in
investigating and processing the plaintiff's claim.
Id. at 465. An
21
insurer breaches its duty of good faith and fair dealing when
it conducts an unreasonable investigation, unreasonably
refuses to pay benefits, or offers an unreasonable
explanation for denying a claim—while knowingly or
recklessly disregarding the unreasonableness of its conduct
in each instance. See Riccatone v. Colo. Choice Health
Plans, 2013 COA 133, ¶ 41, 315 P.3d 203, 210.
¶40
Because an insurer's duty of good faith and fair dealing
is nondelegable, an insurer "cannot escape"
liability simply by outsourcing claims handling or other
tasks. Cary, 68 P.3d at 466. Thus, when the duty of
good faith and fair dealing is breached, it is generally the
insurer—rather than an "agent[] involved in claims
processing"—that is on the hook for any tort
liability. Riccatone, ¶ 14, 315 P.3d at 206
(quoting Cary, 68 P.3d at 466).
¶41
Relatedly, the general rule is that, because the insurer has
a special relationship with the insured by virtue of the
insurance contract, the insurer owes a duty of good faith and
fair dealing to the insured. Cary, 68 P.3d at 466.
Typically, then, the insured may bring a claim for breach of
the duty of good faith and fair dealing only against the
insurer.
¶42
Of course, a general rule, by its very nature, leaves room at
the margins for exceptions. Enter Cary. We held
there that when "a third-party administrator [(1)]
performs many of the tasks of an insurance company and [(2)]
bears some of the financial risk of loss for the claim,"
there is "a special relationship" between
22
the administrator and the insured "sufficient for
imposition of a duty of good faith and tort liability for its
breach—even when there is no contractual privity
between the defendant and the [insured]." Id.
at 466, 469. This holding forms the battleground on which the
parties' common-law disagreement is fought.
2.
Cary's Judicially Crafted Tort Duty Is Narrowly
Confined and Does Not Extend to Hertz Here
¶43
Plaintiffs contend that Hertz meets Cary's
criteria and should therefore be liable under the common law
for breach of the duty of good faith and fair dealing. In
other words, according to plaintiffs, even if Hertz
doesn't qualify as a statutory insurer under title 10, it
should nevertheless be treated as a de facto insurer under
the common law. Hertz counters that plaintiffs'
comparison of this case to Cary is an
apples-to-oranges one because, unlike the third-party
administrator in Cary, Hertz was neither
expressly retained by the insurer to act on its
behalf in administering claims nor regularly operating in the
business of insurance. Consequently, Hertz urges us to
decline plaintiffs' invitation to extend our holding in
Cary to the circumstances of this case. To get to
the bottom of the question, we must unpack Cary.
¶44
In Cary, the City of Arvada offered its employees
access to a self-funded health insurance program overseen by
the Arvada Medical and Disability Program Trust Fund (the
"Trust"). Id. at 464. Because the Trust
had limited resources and little claims-handling experience,
it retained third-party
23
administrators, United of Omaha Life Insurance Company and
Mutual of Omaha of Colorado (collectively,
"United"), to execute "virtually all of the
functions normally performed by an insurance company in
processing claims and determining whether to deliver
insurance benefits." Id. at 464, 468, 464 n.3.
Specifically, United assumed responsibility for the following
aspects of the claims-handling process:
• providing claims-handling facilities, personnel,
procedures, files, and systems;
• verifying claimant eligibility;
• receiving all claim forms and related materials from
plan members;
• processing submitted claims and issuing
explanation-of-benefits letters to claimants upon taking
action on a claim;
• preparing claim payments;
• offering actuarial and underwriting services to
recommend benefit modifications;
• printing and covering the cost of all plan claim forms
and benefit checks;
• developing and printing plan-benefit booklets and
identification cards;
• evaluating the health histories of late applicants and
determining whether they should receive plan coverage; and
• periodically auditing the claims-processing system to
assess the quality of claim administration, including
establishing an appellate procedure for coverage denials.
Id. at 464.
24
¶45
Beyond exercising "primary control" over the
administration of claims and the determination of benefits,
United was also a party to a reinsurance agreement under
which it insured claim payments between $75,000 and
$1,000,000, creating "a significant financial incentive
to delay payment of benefits or coerce [the insured] into a
diminished settlement." Id. at 463-64, 468.
¶46
Given that United had both primary responsibility
for claims handling and a significant financial stake in the
resolution of claims, we concluded that it effectively stood
in the shoes of an insurer. Id. at 469. We added
that United shared a "special relationship" with
the insureds that warranted treatment as a de facto insurer
under the common law. Id. at 468. In essence, we
applied the familiar "duck test": United walked,
swam, and quacked like an insurer, so we deemed it one.
¶47
Thus, Cary ushered in a judicially crafted tort
limited to third-party administrators with both primary
responsibility over the claims-handling process and a
significant financial incentive in the resolution of claims.
See id. at 468-69. For twenty-three years,
Cary has stood where we first placed it; we have not
revisited it—let alone pushed its boundaries.
¶48
A division of the court of appeals did apply Cary,
though, a decade into that case's life. See
Riccatone, ¶ 12, 315 P.3d at 206. Much like
Cary, Riccatone addressed the conduct of
third-party administrators performing claims-adjustment
duties for
25
a self-funded health plan. Id. at ¶¶ 2,
12-22, 315 P.3d at 205-07. The division ultimately concluded
that, in the absence of the reinsurance agreement present in
Cary or any comparable "financial
incentive" tied to the ultimate risk of loss, the
third-party administrators could not be held liable for
breach of the duty of good faith and fair dealing under the
common law. Id. at ¶¶ 18, 22, 315 P.3d at
207. Accordingly, the division determined that the
third-party administrators were not liable to the insured.
Id. at ¶ 22, 315 P.3d at 207.
¶49
Although Riccatone crossed the finish line in the
right place, its stride along the way deserves attention. The
Riccatone division distilled Cary's
holding into a two-part inquiry: Whether a "third
part[y]" (1) had performed the functions of an insurer
and (2) possessed a significant financial incentive to limit
an insured's claims. Id. at ¶ 17, 315 P.3d
at 207. We refine Riccatone's reading of the
Cary test now by emphasizing that the "third
parties" to whom common-law bad-faith liability may
extend are limited to administrators whose primary
business is claims handling and who have a significant
financial stake in the resolution of claims. Cary,
68 P.3d at 468-69. That's what Cary teaches.
Id. To the extent the division in this case relied
on Riccatone to extend Cary's scope to
any third party satisfying the two-part criteria
just described, it erred.
¶50
Cary sought to make certain that administrators
whose primary business is claims handling (i.e.,
administrators retained primarily to perform
insurer-like
26
functions) and who share the insurer's financial
incentives in the resolution of claims are held to the
standards applicable to insurers. In Cary, treating
the third-party administrator as a de facto insurer was
appropriate because United was primarily responsible for
claims handling, regularly operated within the
claims-management industry, and had a significant financial
stake in the resolution of claims. Id.
¶51
Unlike United, Hertz is not a third-party administrator; that
role belongs solely to ESIS. Nor does Hertz carry primary
responsibility for claims handling; that duty rests squarely
with ESIS.
¶52
Moreover, the relationship between Hertz and plaintiffs bears
minimal resemblance to the "special relationship"
between United and the insureds in Cary. See
id. at 468. In this case, an actual
insurer—Chubb—stands at the center of the
insurer-insured relationship and is expressly designated as
the entity responsible for making payments on plaintiffs'
claims. The Chubb Policy spells out the parties' roles in
black-and-white: Chubb is the insurer; Hertz is the named
insured; and purchasers of supplemental insurance are
additional insureds. Further, the record confirms that Hertz
paid premiums to Chubb; that plaintiffs were told early on in
this litigation that Chubb was the entity ultimately
responsible for coverage decisions and payments; and that
ESIS—a Chubb subsidiary expressly retained to process
claims—investigated, adjusted, and paid claims on
Chubb's behalf. In
27
both form and function, Chubb acted as the insurer, ESIS
acted as the third-party administrator, Hertz acted as the
insured, and plaintiffs acted as additional insureds.
¶53
Thus, while United determined eligibility, processed and paid
claims, issued benefit decisions, and handled appeals, Hertz
did none of this. It did not underwrite the risk, adjust
claims, or issue payments. Those primary insurer
functions were performed by ESIS, which investigated the
claims, collected and reviewed records, coordinated
examinations, communicated with plaintiffs' counsel, and
paid benefits under the Chubb Policy. These circumstances
reflect Hertz's business reality: Hertz rents cars; it
doesn't insure them.
¶54
True, Hertz participated in the early investigation and
adjustment of plaintiffs' claims and offered input on
potential settlement. But those actions pale in comparison to
United's and come up woefully short of what Cary
requires for de facto insurer status.
¶55
We caution that Cary's cornerstone is not an
open invitation for courts to impose bad-faith tort liability
on every entity that happens to touch an insurance claim. No,
Cary offered a targeted solution to a narrow
problem—one that arises only when control, expertise,
and financial incentives converge in a third-party
administrator whose primary business is claims
handling and who effectively substitutes
28
for the insurer. And Cary's limited
reach over the past two-plus decades confirms this
reading.[8]
¶56
We are not persuaded otherwise by plaintiffs' argument
that Hertz's offer of supplemental insurance during a
car-rental transaction transformed it into a de facto
insurer. At most, Hertz agreed through the supplemental
insurance sold in its rental agreement to secure
coverage for purchasers, a commonplace commercial
arrangement. See, e.g., Md. Cas. Co. v. Buckeye
Gas Prods. Co., 797 P.2d 11, 12 (Colo. 1990) (examining
a supplier-distributor agreement requiring the supplier to
name the distributor as an additional insured); Weitz Co.
v. Mid-Century Ins. Co., 181 P.3d 309, 310 (Colo.App.
2007) (interpreting an additional-insured endorsement based
on a subcontractor's promise to insure the general
contractor). While such
29
agreements routinely confer additional-insured status to
others (such as Hertz's customers) under a named
insured's policy (such as Hertz's Chubb Policy), they
do not alter the fundamental roles of the insurer, the named
insured, and the additional insureds.
¶57
Treating a mere agreement by a named insured to secure
supplemental insurance coverage for additional insureds as
though it were the actual issuance of an insurance policy
would collapse the distinction between the insurer and the
named insured. More importantly, doing so would have a
chilling effect that could extend beyond the car rental
industry. If a car rental company offering incidental access
to insurance coverage is an "insurer" potentially
subject to liability—notwithstanding the General
Assembly's painstaking efforts to make clear that such a
company is not an "insurer"—the same would
seemingly be true of any Colorado business that offers access
to third-party insurance incidental to the services or
products it sells.
¶58
Imposing de facto insurer status on Hertz is also
particularly unwarranted here given the legislature's
deliberate decision to prevent car rental companies from
being treated as insurers under title 10. Our jurisprudence
makes clear that it is "not this court's place to
substitute the judiciary's policy judgments for those of
the General Assembly." Bermel v. BlueRadios,
Inc., 2019 CO 31, ¶ 37, 440 P.3d 1150, 1158.
Indeed, we do not act by judicial fiat. Our mission instead
is to honor
30
the legislature's considered judgment. Because the
legislature has expressly carved out an exception from title
10 for car rental companies that merely facilitate insurance,
we must uphold that choice rather than invent liability
through the common law. See, e.g., Martinez v.
Lewis, 969 P.2d 213, 219 (Colo. 1998)
(declining to impose a duty of care onto a physician
performing an independent medical evaluation when doing so
would countermand the General Assembly's decision
"to limit an IME practitioner's liability for his or
her findings"). To take plaintiffs up on their request
to stretch Cary in a way that treats as insurers any
rental companies offering supplemental insurance would be to
improperly sneak through the "back door" what the
legislature has barred at the "front door." See
Laird v. Nelms, 406 U.S. 797, 802 (1972).[9]
¶59
Before we draw the curtain on this opinion, one final point
is worth making. Rejecting plaintiffs' request to deem
Hertz a de facto insurer does not leave them without
alternate recourse. Unlike the situation in Cary,
where the "unavailability or inadequacy" of
recovery was a reality that seemingly motivated this court to
recognize de facto insurer status, Cary, 68 P.3d at
472 (Coats, J., dissenting), plaintiffs here have avenues for
relief against Chubb and ESIS under both
31
statutory and common-law theories. Indeed, plaintiffs are
currently pursuing statutory and common-law claims against
Chubb and ESIS in federal court. Additionally, plaintiffs
have another path open to them with respect to Hertz, as
evidenced by the claim they have brought in federal court
pursuant to the Colorado Consumer Protection Act, alleging
that Hertz engaged in deceptive trade practices with respect
to the marketing and sale of supplemental insurance benefits.
III.
Conclusion
¶60
For these reasons, we conclude that, under Colorado law,
Hertz is neither plaintiffs' statutory insurer nor
plaintiffs' common-law de facto insurer. Accordingly, we
reverse the division's judgment The district court
correctly dismissed plaintiffs' claims against Hertz as a
matter of law We therefore remand the case to the division
with instructions to return it to the district court for
reinstatement of the dismissal order.
JUSTICE HOOD, joined by JUSTICE GABRIEL and JUSTICE BLANCO,
concurred in part and dissented in part.
32
JUSTICE HOOD, joined by JUSTICE GABRIEL and JUSTICE BLANCO,
concurring in part and dissenting in part.
¶61
I agree with the majority that the General Assembly
didn't intend for rental car companies like Hertz to be
treated as statutory insurers. Maj. op. ¶ 36.
¶62
But when, as here, a rental car company (1) generates revenue
from a third-party insurance policy it offers to its
customers, (2) assists in adjusting claims under that policy,
and (3) assumes complete financial risk for those claims, the
rental car company potentially becomes a de facto insurer
under the common law. This is because the rental car
company's control over benefits and its incentive to
minimize claims exposure create a special relationship and
thus a duty of good faith and fair dealing with the
policyholder. Cary v. United of Omaha Life Ins. Co.,
68 P.3d 462, 468 (Colo. 2003). Under Cary, a de
facto insurer can't escape liability for breaching that
duty by pointing to the formalities of contractual privity
that typically define a bad-faith claim.
¶63
Because statutory and common-law insurance claims are
distinct under Colorado law, Vaccaro v. Am. Fam. Ins.
Grp., 2012 COA 9M, ¶¶ 20-21, 275 P.3d 750,
756, and because I believe that resolution of the remaining
factual disputes may reveal that the plaintiffs'
common-law claims fall within the breadth of Cary, I
respectfully dissent from Part II.C of the majority opinion.
33
¶64
At its core, Cary tells us when a plaintiff should
be allowed to bring an insurance bad-faith claim despite
lacking privity of contract with the defendant. Privity of
contract is the direct legal relationship created between two
parties to a valid contract. Privity, Black's
Law Dictionary (12th ed. 2024). It's a required element
of most bad-faith claims because the "special
relationship" between the policyholder and the insurer
creates a nondelegable duty of good faith and fair dealing
that is implied in an insurance contract. Cary, 68
P.3d at 466. But the assumption that the special relationship
only exists between parties in privity of contract is
predicated on the notion that insurance involves a simple,
two-party relationship between the insurer and its
policyholder. Under more complex insurance arrangements,
those assumptions break down. Cary demonstrated that
in multi-party insurance structures, the entity asked to
evaluate the policyholder's claim in good faith retains a
special relationship with the policyholder, even without
privity of contract.
¶65
The fronting policy between Hertz and Chubb is an example of
a complex insurance arrangement that strains the assumptions
underpinning the privity requirement. Under a fronting
policy, a noninsurer enterprise and a licensed insurer agree
to policy limits that match the deductible. 1 Robert H.
Jerry, II, New Appleman on Insurance Law Library
Edition, § 1.09[4], LEXIS (database updated 2025).
In practice, this means that while an insurer like Chubb may
compensate
34
the policyholder up to the limits of its policy, Hertz is
obligated to reimburse Chubb through its deductible, which
will cover the entire amount paid by Chubb. Babayev v.
Hertz Corp., 2024 COA 15, ¶ 6 n.2, 548 P.3d 1180,
1182 n.2; see also Esteban Carranza-Kopper,
Fronting Arrangements: Industry Practices and Regulatory
Concerns, 17 Conn. Ins. L.J. 227, 229 (2010). As a
result, on the facts before us, Hertz functionally retained
liability for all claims and transferred no risk to Chubb.
¶66
Fronting effectively allows large corporations, which are not
licensed insurers, to operate their own self-funded insurance
programs when state insurance regulation would make it
impractical to officially do so. See Reliance Ins. Co. v.
Shriver, Inc., 224 F.3d 641, 643 (7th Cir. 2000). Put
another way, "[i]n a fronting policy, the insured
essentially rents an insurance company's licensing and
filing capabilities, but the insurance company does not
actually pay any claims." Dorsey v. Fed. Ins.
Co., 798 N.E.2d 47, 51 (Ohio Ct. App. 2003). That's
why courts have granted "a direct right of action"
to "the person[] to whom [the fronting policy is
payable]" against the enterprise-policyholder to enforce
payment, even when that would otherwise flout privity
requirements. O'Hare v. Pursell, 329 S.W.2d 614,
620 (Mo. 1959).
¶67
While our precedent hasn't addressed fronting policies
directly, the privityrequirement exception established in
Cary demonstrates that Colorado law is compatible
with a cause of action based on fronting. 68 P.3d at 468.
Cary provided
35
a two-prong standard for dispensing with privity, justified
by a pragmatic understanding of the multi-party relationships
that arise in complex insurance arrangements. Id.
Cary held that a common-law insurance bad-faith
plaintiff is exempt from proving privity if the would-be
defendant had (1) "primary control over benefit
determinations" and (2) "significant financial
incentive to delay payment of benefits or [to] coerce [the
policyholder] into a diminished settlement."
Id. at 467-68 (first citing Travelers Ins. Co.
v. Savio, 706 P.2d 1258, 1272 (Colo. 1985); and then
citing Scott Wetzel Servs., Inc. v. Johnson, 821
P.2d 804, 808 (Colo. 1991), to trace the conditions under
which Colorado has created exceptions to privity
requirements). When both requirements are met, a court may
consider the control and financial incentives demonstrated by
all parties to the insurance arrangement without putting
dispositive weight on explicit contractual obligations or
formal titles.
¶68
In contrast, the majority narrowly reads Cary as
creating a formalistic rule that regulates the conduct of
third-party claims administrators when they provide
operational support to self-funded insurance programs. Maj.
op. ¶¶ 47-50. Under that reading, the analysis is
simple—Hertz isn't a third-party claims
administrator, so it can't be a de facto insurer under
Cary.
¶69
But I find no language in Cary to indicate that our
holding was "limited to third-party
administrators." Id. at ¶ 47. Rather, the
sentence from Cary that the
36
majority leans on is the only instance when we
narrowly referred to third-party claims administrators, and
we did so to apply the rule to the defendant in that case.
Cary, 68 P.3d at 468-69 (concluding the analysis of
the subsection "Special Relationship in This
Case" by stating: "When a third-party
administrator performs many of the tasks of an insurance
company and bears some of the financial risk of loss for the
claim, the administrator has a duty of good faith and fair
dealing to the insured in the investigation and servicing of
the insurance claim." (emphasis added)).
¶70
Taking that sentence in isolation, as the majority does,
ignores other points in the opinion when we used more general
terms to describe the legal rule that would shape what types
of entities could be subject to Cary liability.
See, e.g., id. at 466 ("When the
actions of a defendant are similar enough to those
typically performed by an insurance company in claim
administration and disposition, we have found the existence
of a special relationship . . . even when there is no
contractual privity between the defendant and the
plaintiff." (emphasis added)). In limiting Cary
to its facts, the majority ignores the broader principles
upon which Cary is built. See id.
¶71
And perhaps more importantly, I fear that appending a third
requirement to Cary, as the majority does today,
Maj. op. ¶ 49, creates a formalistic limit to which
entities can be held responsible for unfair insurance
practices under Cary.
37
Adding a label-driven third requirement to Cary
provides a way for sophisticated actors in the insurance
industry to administer aggressive claims-adjustment practices
through an entity not titled "third-party claims
administrator," and then use the absence of that
all-important title as evidence that Cary
doesn't apply. Rather than simply making Cary a
"walks-like-a-duck, quacks-like-a-duck" standard,
the majority requires a plaintiff to identify a singular
species of duck to access Cary's rule.
Id. at ¶ 46.
¶72
For the sake of argument, let's assume that Cary
identifies a category of entities, rather than a specific
example, and apply that assumption to these facts. If
Cary does create a general standard, instead of a
factually constrained rule, could the fronting policy between
Hertz and Chubb establish the necessary control and financial
incentives for Hertz to be a de facto insurer? I believe so.
¶73
It's undisputed that the policy formed a fronting
relationship between Hertz and Chubb and that Hertz retained
final financial liability for all of plaintiffs' claims
up to one million dollars through the deductible it pays
Chubb. Facing impending financial liability for
plaintiffs' claim, Hertz appears to have tried to
minimize that cost.
¶74
For example:
• A member of Hertz's legal team requested that
plaintiffs provide Hertz with their medical records, which
would allow "Hertz to complete its evaluation of these
claims."
38
• An employee of ESIS revealed in a deposition that
Hertz "maintain[ed] high involvement" throughout
the claims-adjustment process and "h[e]ld the ultimate
authority" in determining the value of claims because
"[i]t is their money[;] . . . it's their case, in
the end."
• And the Risk Management Services Agreement between
Hertz and ESIS identified Hertz as "responsible for
certain obligations," including final settlement
authority for larger claims.
This
demonstrates "primary control over benefit
determinations" and "significant financial
incentive to delay payment of benefits or . . . diminish[]
settlement." Cary, 68 P.3d at
468.[1]
¶75
It's entirely possible that additional discovery might
reveal an alternate explanation for Hertz's actions that
demonstrates why it's outside of the reach of
Cary. But the opportunity to allow that factual
development to continue is why the division held that the
trial court erred by resolving plaintiffs' common-law
claims under C.R.C.P. 56(h). Babayev, ¶ 47, 548
P.3d at 1178. I agree.
¶76
Accordingly, I would affirm the division's opinion in
relevant part and remand this case to the trial court to
allow the parties to litigate the application of
Cary, consistent with the broader view of that case
I express here. So, I respectfully
39
dissent in part with respect to the majority's
application of Cary to the plaintiffs'
common-law claims.
---------
Notes:
[1] We granted certiorari to review the
following issue:
Whether, after the legislative abrogation of
Passamano v. Travelers Indemnity Co., 882 P.2d 1312
(Colo. 1994), a "motor vehicle rental company" may
be considered a statutory or de facto "insurer,"
where its rental agreement incidentally offers customers the
option of purchasing insurance coverage provided by a
licensed, third-party insurer under the rental company's
own pre-existing policy with that insurer.
[2] Hertz maintained a Risk Management
Services Agreement with ESIS. Consistent with the Chubb
Policy, that agreement stated that ESIS was authorized to
provide claims-handling services for Hertz, including:
opening and maintaining claim files; establishing claim
reserves; investigating claims; retaining defense counsel;
and settling claims on Hertz's behalf, subject to
discretionary settlement limits of $25,000 per person and
$50,000 per accident. The Risk Management Services Agreement
further obligated Hertz to secure and maintain "any
consent from [Chubb] that is necessary for ESIS to perform
Claim Adjustment Services for Claims under [the Chubb
Policy]," thereby reinforcing the tripartite
relationship among Chubb, ESIS, and Hertz.
[3] The original complaint also included
claims against George Parker, a licensed attorney
representing Hertz, and Samantha Howard, a claims adjuster
acting on behalf of ESIS. Parker and Howard moved to dismiss
under C.R.C.P. 12(b)(5) for failure to state a claim upon
which relief could be granted. The district court granted
their motion, finding that neither individual (1) was a party
to the rental agreement or a statutory insurer or (2) owed
plaintiffs a common-law duty of good faith and fair dealing.
The dismissal of those claims is not before us.
[4] Plaintiffs' bad-faith claims were
premised on the theory that, by selling supplemental
insurance coverage, Hertz qualified as both a statutory
insurer and a common-law de facto insurer. However,
plaintiffs expressly acknowledged in their complaint that
ESIS was the third-party administrator responsible for
processing claims, including those seeking UM/UIM
benefits.
[5] Under this arrangement, Chubb
initially paid UM/UIM claims on Hertz's behalf up to the
$1,000,000 policy limit, after which Hertz was required to
reimburse Chubb (through a "deductible") the exact
amount paid. Practically speaking, this structure placed the
ultimate financial responsibility for UM/UIM claims on
Hertz.
[6] One month later, plaintiffs filed
claims in federal court similar to those it sought to add
through its motion to amend. See Complaint,
Babayev v. Hertz Corp., No. 1:23-cv-00311-GPG-MEH
(D. Colo. Feb. 2, 2023). The federal case is on hold pending
the resolution of this case. Plaintiffs' Status Report,
Babayev v. Hertz Corp., No.1:23-cv-00311-GPG-MEH (D.
Colo. May 24, 2023).
[7] In 2001, the legislature amended this
statute, adding a new subsection (1) and relocating this
portion of the statute to subsection (2). Ch. 306, sec. 5,
§ 10-2-105(2)(g)(I)-(IV), 2001 Colo. Sess. Laws 1190,
1992-94.
[8] It is worth noting that Cary
placed Colorado in rare company among the states. See De
Dios v. Indem. Ins. Co. of N. Am., 927 N.W.2d 611, 622
(Iowa 2019) (indicating there are "relatively few
jurisdictions that allow claims against third-party
administrators"). The vast majority of jurisdictions to
consider the issue have declined to extend bad-faith
liability to other entities—including, in some
instances, third-party administrators—lacking privity
with the insured. Id. at 623; see also William
Powell Co. v. Nat'l Indem. Co., 141 F.Supp.3d 773,
782-83 (S.D. Ohio 2015) (concluding that, absent privity,
Ohio law does not permit bad faith claims against third-party
administrators); McLaren v. AIG Domestic Claims,
Inc., 853 F.Supp.2d 499, 511 (E.D. Pa. 2012) (same under
Pennsylvania law); Charleston Dry Cleaners & Laundry,
Inc. v. Zurich Am. Ins. Co., 586 S.E.2d 586, 588 (S.C.
2003) (holding that "no bad faith claim can be brought
against an independent adjuster or independent adjusting
company" due to the lack of privity). Stretching
bad-faith liability past Cary's contours, as
plaintiffs urge, would place Colorado in even sharper tension
with the overwhelming majority of states and propel it into
territory that few—if any—jurisdictions have
chosen to chart.
[9] Plaintiffs ask us not to consider
Hertz's assertion that it did not owe them a duty of care
under traditional tort principles because it did not
raise the argument in the proceedings below. Inasmuch as
Hertz prevails on other grounds, we do not need to reach that
question or plaintiffs' waiver contention.
[1] To be clear, I'm not suggesting
that every entity carrying a fronting policy must be
treated as a de facto insurer in all circumstances. Rather, I
would conclude that Hertz's level of involvement and
course of conduct during the claims administration process
satisfied Cary's test for de facto
insurers.
---------