Bad faith claims against insurers in California

Dealing with insurance companies can be frustrating. People often encounter layers of bureaucracy and delays when making claims with insurers, all while trying to deal with the problem necessitating the claim itself such as an auto accident, medical treatment, damage to a home or onset of a disability. It may seem like the insurance company is deliberately wasting time responding to the claim, and people may feel like there is nothing they can do about it. However, insurance companies have an obligation to deal with the claims in good faith. When companies operate in bad faith, people may bring lawsuits against the companies.

What is bad faith?

The obligation to deal in good faith with insurance claims comes from a variety of sources. An implied duty of good faith and fair dealing stems from common law. Additionally, California has passed the Unfair Claims Practices Act, which sets out what constitutes bad faith on the part of insurers. Federal law also addresses insurance companies' actions in the Employee Retirement Security Act of 1974, commonly known as ERISA, pertaining to group employee benefit plans.

Some examples of bad faith by insurance companies include:

  • Misrepresenting facts or policy provisions relating to the claim
  • Failing to address communication about claims with reasonable speed
  • Failing to adopt reasonable standards to investigate and process claims with reasonable speed
  • Failing to make a decision about a claim within a reasonable amount of time after providing documentation of the loss
  • Using improper standards to reject a claim
  • Using coercive or abusive techniques to settle a claim

Elements of bad faith claims

In order to recover in a bad faith claim against an insurance company in California, a person must prove:

  • That he or she is in a contractual relationship with the insurance company or is a beneficiary of a policy
  • The insurance company owes benefits under the policy
  • The insurance company is withholding benefits unreasonably

If a person seeks to recover punitive damage from the insurance company in a bad faith claim in addition to the money owed under the policy, he or she must also show that the actions of the insurer were malicious, fraudulent or oppressive.

Pursuing a bad faith claim

Insurers are required to deal honestly with claimants, but some companies depend on people being unaware of their rights so they can take advantage of claimants and not pay claims. If you have been treated unfairly by an insurance company who refuses to pay a legitimate claim, it is important to hold the insurance company responsible for its actions. Speak with a skilled bad faith claim attorney who can help you obtain justice and recover what is due to you.