2026 CO 26 | Omnilex

Full text

The Supreme Court of the State of Colorado
2 East 14th Avenue • Denver, Colorado 80203
2026 CO 26
Supreme Court Case No. 24SC183
Certiorari to the Colorado Court of Appeals
Court of Appeals Case No. 23CA117
Petitioner:
Hertz Corporation,
v.
Respondents:
Stanislav Babayev and Oleg Chikov.
Judgment Reversed
en banc
April 27, 2026
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:

2
Western Slope Law
Nelson A. Waneka
Glenwood Springs, Colorado
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 MÁRQUEZ, JUSTICE BOATRIGHT, and JUSTICE
BERKENKOTTER joined.
JUSTICE HOOD, joined by JUSTICE GABRIEL and JUSTICE BLANCO,
concurred in part and dissented in part.

3
JUSTICE SAMOUR delivered the Opinion of the Court.
¶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
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.

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.”
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.

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
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.

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
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).

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, 2347; 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).
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.

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
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.

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
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.

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.

1
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.

2
¶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

3
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 privity-
requirement 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

4
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

5
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.

6
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.”

7
• 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
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.

8
dissent in part with respect to the majority’s application of Cary to the plaintiffs’
common-law claims.

OCR transcription for search; preserved printed pages are authoritative

Opinions of the Colorado Supreme Court are available to the
public and can be accessed through the Judicial Branch's
homepage at http://www.courts.state.co.us. Opinions are also
posted on the Colorado Bar Association's homepage at
http://www.cobar.org.

ADVANCE SHEET HEADNOTE
April 27, 2026

2026 CO 26

No. 24SC183, Hertz Corp. v. Babayev-Statutory Insurer-Common Law De
Facto Insurer-Motor Vehicle Rental Companies-Insurer's Nondelegable
Duty of Good Faith and Fair Dealing -Bad-Faith Insurance Claims-§ 10-1-
102(13), (15), C.R.S. (2025) - Passamano v. Travelers Indemnity Co., 882 P.2d 1312
(Colo. 1994) - Cary v. United of Omaha Life Insurance Co., 68 P.3d 462 (Colo.
2003) - Riccatone v. Colo. Choice Health Plans, 2013 COA 133, 315 P.3d 203.

The supreme court holds 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, the car rental company's insurer).

The legislature did not intend to permit the treatment of car rental
companies offering supplemental insurance as statutory insurers under title 10 of
the Colorado Revised Statutes. Further, while Cary v. United of Omaha Life
Insurance Co., 68 P.3d 462 (Colo. 2003), extended the common-law duty of good
faith and fair dealing beyond insurers-to a narrow class of third-party

administrators - that holding lacks enough elasticity to encompass the car rental
company in this case. In Cary, this court penned a modest holding, confined to
third-party administrators that not only possess a significant financial stake in the
resolution of claims but also have primary responsibility over claims handling on
behalf of the ultimate insurer. That holding remains so cabined after today.
Because the car rental company here is not a third-party administrator, and
because claims handling for its insurer has never been its primary responsibility,
it does not qualify as a facto insurer under Cary's circumscribed holding.

# The Supreme Court of the State of Colorado 2 East 14th Avenue . Denver, Colorado 80203

2026 CO 26

Supreme Court Case No. 24SC183
Certiorari to the Colorado Court of Appeals
Court of Appeals Case No. 23CA117

Petitioner:
Hertz Corporation,

Respondents:

Stanislav Babayev and Oleg Chikov.

Judgment Reversed
en banc
April 27, 2026

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

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 MÁRQUEZ, JUSTICE BOATRIGHT, and JUSTICE
BERKENKOTTER joined.
JUSTICE HOOD, joined by JUSTICE GABRIEL and JUSTICE BLANCO,
concurred in part and dissented in part.

JUSTICE SAMOUR delivered the Opinion of the Court.

[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.

12 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

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.

13 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).

14 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

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.

15 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

16 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

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.

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.

17 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.

18 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.

19
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

110 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."

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.

111 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

112 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

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.

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.

113 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.

114 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

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.

115 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

116 Plaintiffs appealed the dismissal order, and a division of the court of appeals
reversed. Babayev v. Hertz Corp., 2024 COA 15, 11, 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

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).

performed the functions of an insurer and should thus be deemed a common-law
de facto insurer under Cary. Id. at 11 35, 47, 548 P.3d at 1186-87.

117 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
TT 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 1 24,
548 P.3d at 1184.

118 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,

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
T 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

119 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.

120 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

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

121 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, 1 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,
1 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, 1 20,
547 P.3d 1110, 1116. A court may determine a question of law under C.R.C.P. 56(h)

if there is "no genuine issue of any material fact" necessary for its resolution.
Coffman v. Williamson, 2015 CO 35, 1 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.

124 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, 1 18, 548 P.3d at 1183.

125 The division used Passamano as the scaffolding for its determination. Id. at
TT 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.
126 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, 2347; 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).

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.

127 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).

128 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.

129 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

which the vehicle insured is "rented to others pursuant to the terms of a motor
vehicle rental agreement." § 10-4-601(10)(a).

130 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).

131 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).

132 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

place, reflect a clear intent by the legislature to differentiate car rental companies
from insurers and rental agreements from insurance policies.

133 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.

134 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, 11 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 11 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, 19, 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).

135 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, 1 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.

136 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").

137 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

138 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).

139 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

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, 1 41, 315 P.3d 203, 210.

140 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).

141 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.

142 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

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

143 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.

144 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

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.

[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.

146 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.

147 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.

148 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

a self-funded health plan. Id. at TT 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 TT 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.

149 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.

150 Cary sought to make certain that administrators whose primary business is
claims handling (i.e., administrators retained primarily to perform insurer-like

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.

151 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.

152 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

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.

153 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.

154 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.

155 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

for the insurer. And Cary's limited reach over the past two-plus decades confirms
this reading.8

156 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

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.

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.

157 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.

158 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, 1 37, 440 P.3d
1150, 1158. Indeed, we do not act by judicial fiat. Our mission instead is to honor

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

159 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

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.

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

160
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.

JUSTICE HOOD, joined by JUSTICE GABRIEL and JUSTICE BLANCO,
concurring in part and dissenting in part.

161 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. 1 36.

162 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.

163 Because statutory and common-law insurance claims are distinct under
Colorado law, Vaccaro v. Am. Fam. Ins. Grp., 2012 COA 9M, 11 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.

164 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.

165 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

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, 16 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.

166 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).

167 While our precedent hasn't addressed fronting policies directly, the privity-
requirement 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

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.

168 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. 11 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.

169 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

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)).

170 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.

171 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.

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 1 46.

172 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.

173 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.

174 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."

· 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

175 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, 1 47, 548 P.3d at 1178. I agree.

176 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

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.

dissent in part with respect to the majority's application of Cary to the plaintiffs'
common-law claims.

2026 CO 26, 24SC183 Hertz Corporation v. Babayev, Stanislav

Full text

OCR transcription for search; preserved printed pages are authoritative

Continue your research in ChatGPT or Claude