When courts order Coloradans to pay restitution to victims for the financial losses they suffer in crimes, those orders can include payments to the victims’ insurers that are hurt indirectly by the crimes. Legislative Democrats want that to change.
On Tuesday, the House Judiciary Committee approved a bill that would prohibit insurers from receiving restitution payments in criminal proceedings, directing insurers instead to seek financial compensation through civil courts. But one of the bill’s sponsors continues to work on an amendment that would clarify that insurers can still get restitution through criminal sentencing if they are the direct victims of crimes such as fraud or embezzlement.
The amendment, explained cosponsoring Rep. Cecelia Espenoza, D-Denver, was the reason that no insurers showed up to the late-afternoon hearing to testify against the bill. She had an amendment prepared to clarify that directly impacted insurers are considered crime victims just as humans are under the state law, but she held it back because she wanted to fine-tune the language and ensure it doesn’t create loopholes, she said.
Why backers are pushing for the change in restitution
Assuming Espenoza introduces the amendment during upcoming floor debate as she said she would, House Bill 1017 could receive some bipartisan backing, as Republican Rep. Matt Soper of Delta indicated his likely support once he examines the language. And were the bill to continue advancing and be signed into law, Colorado would join just a handful of states — but an ideologically diverse handful that includes Massachusetts and Louisiana — in barring criminal restitution payments to the insurers or crime victims.
“It is an important policy … to try to avoid that harm that’s being imparted on the community by allowing insurers to be in the restitution waterfall,” Espenoza told the committee before it sent HB 1017 to the House on a 7-4, Democrat-led party-line vote.
Colorado’s criminal restitution process allows sentences to require that convicted criminals who injured their victims not just physically but financially be required to compensate those victims as a condition of completing their sentences. Courts can garnish paycheck wages to ensure that happens, and the restitution payments, added to a litany of fees that the state charges victims for everything from public-defender costs to probationary services, can quickly become a financial burden.
How common such restitution requirements are
About 600 sentences a year require that convicted criminals also reimburse insurers, typically those offering property or workers’ compensation policies, that may have to pay for a new home or a new automobile because of arson or drunk-driving damage. Advocates for HB 1017 say that adds an unnecessary hardship to people who already struggle to find fulltime work to repay their debts and can lead to people returning to jail if they can’t make these extra payments to insurers.
Charles Testa, a criminal defense attorney at Berg Hill Greenleaf Ruscitti, relayed the story of one man convicted of arson who was ordered to pay $2,400 a month in criminal restitution to an insurance company and simply couldn’t do it. Because this was a technical violation of his parole, he went back to jail because of the unpaid bills, Testa said.
Kyle Givings, deputy director for the Colorado Criminal Justice Reform Coalition, told the committee that he was ordered to pay $78,000 to an insurance company in criminal restitution — a total that originally accrued 12% interest but that now accrues at 8%. While he has continued to pay in monthly increments, the accumulated interest means that he now owes $88,000 to the insurer, more than he was originally sentenced to pay.
Givings and others argued that while restitution to direct victims of crimes is an understandable part of a sentence, repaying an insurer so that it can maintain profitability should not be.
“Debtors’ prisons”
“Hypothetically, Colorado has gotten rid of debtors’ prisons, but that’s not what’s really happened,” said former state Rep. Bri Buentello, now the director of government affairs for the advocacy organization Stand for Children Colorado. “When Colorado is reporting a 38.4% recidivism rate because of technical violations like that, that’s part of what I mean when I say the system is not working.”
HB 1017 specifies that restitution can be required for victims who suffer losses because of crimes, and she said she felt that the language in the bill allows insurers who are direct victims — say, like workers’ comp insurers that pay benefits to individuals found later to be faking their injuries — to collect criminal restitution. But after several insurers expressed concern that the language needs to be more explicit, she wrote an amendment that aimed to do just that.
Some committee members questioned Tuesday, however, if the wording of the amendment could allow insurers to claim to be direct victims if they are collecting on behalf of the victims. And, as such, Espenoza declined to offer the amendment and said she would rewrite it to answer such concerns by the time the bill comes up for its second reading in the House.
The bill’s other cosponsor, Democratic Rep. Yara Zokaie of Fort Collins, said she didn’t believe insurers should get to collect restitution at all, arguing that they are sophisticated institutions that are supposed to incorporate risks like fraud into financial models. The Louisiana law, for example, doesn’t allow criminal restitution even for companies that are direct victims of crime. But she said she’d work with Espenoza all the same to tighten the language of the proposed amendment.
Civil restitution requests still an option
Insurers will be able to seek restitution through civil court for any losses due to their contractual relationship with crime victims, but several witnesses said they don’t expect that to happen frequently. Other states that have banned criminal restitution payments to insurers have seen very little bump in civil restitution cases, they said.
Even with the amendment, several Republicans, including Reps. Scott Slaugh of Brighton and Rebecca Keltie of Colorado Springs, said they expect to remain opposed to the bill because they feel it absolves criminals of repayment responsibilities they should have. Keltie suggested that she would back a proposal that caps the monthly restitution payments required to insurers or caps the interest rate on those payments but believes companies still should be made whole by criminals.
“To me, it just rubs me the wrong way, because if you do the crime, you do the time and you pay it with your own dime,” Keltie said. “I still believe that criminals should be ordered to pay the restitution that they have to pay.”
Insurers stay silent on proposal
Bill backers, however, said the state law needs to differentiate between human victims and deeper-pocketed businesses.
“There is a meaningful difference between compensating an actual person who was harmed and a corporation,” Givings said.
About a dozen insurers, insurance industry groups and business groups have registered with the Colorado Secretary of State’s office as lobbying the bill, but each of them is listed as either monitoring HB 1017 or seeking amendments right now. No one has registered formal opposition to the bill.
HB 1017 comes, however, after some insurers expect to lose millions of dollars this year because of a new law, passed during the August legislative special session, that eliminates a longtime substantial tax credit they received for having at least 2.5% of their workforce based in Colorado.