The U.S. Court of Appeals for the Tenth Circuit has affirmed a district court's summary judgment ruling against a policyholder who sued his insurance claims administrators for bad faith conduct under Colorado law.
In *Rajabi v. Sedgwick Claims Management Services, Inc.* (10th Cir. 2026), a three-judge panel consisting of Circuit Judges Matheson, Ebel, and Eid unanimously upheld the lower court's decision favoring the defendants. The case involved Cyrus Rajabi's lawsuit against Sedgwick Claims Management Services, Inc. and Tristar Group, which operates under the names Tristar Managed Care and Tristar Risk Management.
Rajabi sued the claims administrators for breach of the duty of good faith and fair dealing under Colorado law. This legal doctrine requires insurance companies and their agents to handle claims fairly and honestly, without unreasonably delaying or denying legitimate benefits. Such claims are common in insurance litigation and can result in significant damages beyond the original policy benefits when successful.
The U.S. District Court for the District of Colorado originally entered summary judgment against Rajabi, concluding he lacked sufficient evidence to prove his bad faith claim. Summary judgment is a procedural mechanism that allows courts to resolve cases without trial when there are no genuine disputes about material facts and one party is entitled to judgment as a matter of law.
On appeal, Rajabi raised two main arguments challenging the district court's decision. First, he argued the court erred in granting summary judgment in favor of the claims administrators. This suggests Rajabi believed there were factual disputes that should have been resolved by a jury rather than decided by the judge. Second, he contended the court abused its discretion in denying him a stay of the litigation, though the specific circumstances surrounding this request are not detailed in the available court documents.
The Tenth Circuit panel determined that oral argument would not materially assist in deciding the appeal, indicating the legal issues were sufficiently clear from the written briefs and record. This decision to forego oral argument is not uncommon in appeals courts when the legal questions are straightforward or the outcome appears clear based on existing precedent and the factual record.
The appeals court's order notes that while the decision is not binding precedent except under specific legal doctrines such as law of the case, res judicata, and collateral estoppel, it may be cited for its persuasive value in future cases. This reflects the standard treatment of unpublished federal appellate decisions under Federal Rule of Appellate Procedure 32.1.
Colorado law recognizes claims for breach of the covenant of good faith and fair dealing in insurance contexts, often referred to as bad faith claims. These cases typically arise when policyholders believe their insurance companies or claims administrators have unreasonably denied, delayed, or underpaid legitimate claims. To succeed on such claims, plaintiffs must generally demonstrate that the insurer's conduct was unreasonable and that it lacked a good faith basis for its actions.
The case originated in 2021 when Rajabi filed his lawsuit in federal district court in Colorado. The matter proceeded through discovery and motion practice before the district court granted summary judgment in favor of the defendants in 2024, leading to Rajabi's appeal to the Tenth Circuit.
Sedgwick Claims Management Services is a major third-party administrator that handles workers' compensation and other insurance claims for various companies. Tristar Group operates similar services under multiple business names. These companies serve as intermediaries between insurance carriers and claimants, managing the claims process on behalf of insurers.
The affirmance of summary judgment suggests the Tenth Circuit found the district court correctly determined that Rajabi's evidence was insufficient to create a genuine issue of material fact regarding whether the claims administrators breached their duty of good faith and fair dealing. This could indicate problems with either the factual foundation for the bad faith allegations or the legal sufficiency of the evidence presented.
The decision represents another instance where federal courts have required strong factual support for bad faith insurance claims. Courts generally require clear evidence of unreasonable conduct by insurance companies or their agents, and mere disagreement over claim handling decisions typically does not establish bad faith.
For policyholders considering bad faith claims, the case underscores the importance of developing comprehensive evidence demonstrating not just that a claim was denied or delayed, but that the insurer's conduct was objectively unreasonable under the circumstances. The decision also highlights the procedural hurdles that can arise in complex insurance litigation.
The case number for the appeal was 24-1326, corresponding to the original district court case number 1:21-CV-00422-GPG-JPO in the District of Colorado. The Tenth Circuit's jurisdiction covers appeals from federal district courts in Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming.