In El Dueno, LLC v. Mid-Century Insurance Company (2025 WL 1540329) (10th Cir. 2025)), the Tenth Circuit Court of Appeals affirmed summary judgement on behalf of the insurer on the basis that the insurer did not act in bad faith when it denied the insured’s claim based on an engineering report that contradicted an adjuster’s initial findings.
Factual Overview
This insurance coverage dispute arose from alleged roof damage caused by a hailstorm. The subject insurance policy covered direct physical loss caused by hail. After receiving the claim, the insurer assigned a claim adjuster to investigate the roof . The adjuster concluded that the roof was, in fact, damaged by hail. Based on the adjuster’s repair estimate, the insurer paid the claim.
Subsequently, the insured hired a contractor who provided an estimate that vastly exceeded the estimate initially prepared by the insurer’s adjuster. In response, the insurer then reassigned the claim to a large-loss adjuster. The large-loss adjuster reinspected the property and hired an engineer to assist. The engineer concluded that the roof damage was not caused by hail but was preexisting or due to other causes. Based on the engineer’s report, the insurer denied coverage for the roof repairs, but did not seek to recoup the previously disbursed payments.
As a result, the insured commenced suit, alleging, in part, that the insurer unreasonably delayed or denied coverage.
Court’s Legal Analysis
When the insurer determined that its policy did not cover the insured’s roof repairs, it had before it the original adjuster’s report concluding hail damage, and the engineer’s report concluding that hail did not damage the roof. The insured argued that the conflicting information demonstrated that the insurer acted unreasonably in denying coverage. Under Colorado law, insurers are prohibited from unreasonably delaying or denying payment of claims for benefits owed to first-party claimants. An insurer’s actions are deemed unreasonable if they lack a reasonable basis.
In rejecting the insured’s argument and finding for the insurer, the Court stated that “an insurance company does not act unreasonably in determining the scope and value of a claim by relying on a report generated by an independent engineer, even if that report conflicts with an insurance adjuster’s initial assessment.” Without evidence of an industry standard suggesting otherwise, the Court concluded that the insured’s arguments reflected a mere disagreement, which was insufficient to establish a bad faith claim.
Conclusion
El Dueno underscores the principle that, at least in certain jurisdictions, an insurer’s reliance on a qualified, independent expert’s report—despite additional conflicting assessments—does not automatically constitute bad faith. A disagreement over the cause or extent of damage, without evidence of additional unreasonable conduct or delay, is insufficient. For policyholders and insurers alike, this decision highlights the importance of substantiating claims with credible and expert-backed evaluations.
