What Is a Bad Faith Insurance Claim in California?
When it comes to insurance coverage, most people trust their insurance company will handle claims professionally and fairly. However, this isn’t always the case.
In California, an insurance company is legally obligated to act in good faith while processing claims. When an insurer fails to do so, it could violate California’s bad faith insurance laws.
Do you have questions about pursuing a bad faith insurance claim in California? Read on to learn more about what constitutes bad faith, first-party versus third-party bad faith claims, and what to do if you suspect your insurance company has acted in bad faith.
Review of the Basics of California’s Bad Faith Insurance Law
In California, insurance companies owe their policyholders a duty of good faith and fair dealing. In simple terms, insurers must handle claims within a reasonable timeframe and according to the policy’s provisions. Failure to meet these expectations can be considered “bad faith” and may warrant legal action.
When you buy an insurance policy, you enter into a contract with the insurance company. Your requirement is to pay insurance premiums on time, while the insurer commits to covering specific risks as outlined in the policy. If an insurance company fails to adhere to this contractual obligation, they likely have engaged in bad faith practices.
Despite their duty to act fairly, insurance companies are businesses aiming to maximize profits. This motive can lead to some adjusters blurring the lines or crossing over to commit bad faith practices.
For example, adjusters deny legitimate claims or offer settlements that are significantly less than the actual worth of a claim. Such actions can have serious financial and emotional consequences for policyholders.
Bad Faith Insurance and California Law
California’s regulatory framework for insurance practices started with the Unfair Insurance Practices Act (UIPA) in 1959. Over the years, these laws have evolved and now include specific actions that give rise to bad faith insurance claims in California. Some examples of unfair practices include, but are not limited to, the following:
- Denying policyholder benefits without any reasonable cause,
- Not providing clear reasoning for denying a claim,
- Not communicating with the policyholder about their claim,
- Refusing to pay the total value of the policyholder's claim,
- Misrepresenting facts or policy benefits,
- Not denying or approving a claim within a reasonable amount of time after receiving proof of claim, and
- Breaching the insurance contract.
If you believe your insurer has acted in bad faith, you can file a bad faith insurance claim in California. Contact Starpoint Law to learn more about your rights.
Types of Bad Faith Insurance Lawsuits in California
Bad faith insurance lawsuits generally fall into two categories: first-party and third-party claims. In first-party bad faith claims, you are the policyholder. You can file a lawsuit against your own insurance company. For instance, if your homeowners insurance fails to cover damages after a natural disaster, you can file a first-party claim.
Third-party bad faith insurance claims involve filing a suit against another party’s insurance company. Some states allow victims to file a lawsuit for third-party bad faith, but California does not. Third-party victims have minimal rights when the other carrier commits bad faith.
However, the insured party may be able to transfer their right to sue for bad faith to you under an assignment of rights agreement.
Damages Recoverable in Bad Faith Insurance Lawsuits
California allows victims of bad faith insurance to recover a wide array of damages, including:
- Payment of the claim,
- Attorney fees and court costs, and
- Emotional distress damages.
Exemplary damages—also referred to as punitive damages—are possible with bad faith claims in California as well.
Your attorney can explain more about what damages you’re entitled to receive.
The Importance of Avoiding Bad Faith Lawsuits
Insurance companies are averse to bad faith lawsuits primarily because of the financial ramifications.
A successful case can cost them far more than simply settling a claim, especially when exemplary damages are involved.
Experienced California bad faith insurance claims attorneys can often negotiate with insurance companies to avoid such lawsuits. However, when negotiations fail, filing a bad faith claim becomes necessary.
Contact a Bad Faith Insurance Attorney in California
If you believe you have a bad faith insurance claim in California, consulting with an experienced attorney is crucial. At Starpoint Law, we have years of experience helping clients navigate the complex terrain of California bad faith insurance claims.
When you hire Starpoint Law, you’ll meet one-on-one with attorney Aidin Ghavimi to discuss your case and legal options. We are committed to giving every client the individualized attention you deserve. Don’t hesitate to contact us to schedule a free, no-obligation consultation today.