When you purchase an insurance policy, you depend on the insurance carrier paying out for valid claims. But what happens if the insurance carrier refuses to pay a claim? To be sure, there are times when insurance carriers rightfully deny a claim. However, there are cases when insurance carriers practice what is called bad faith, and that is certainly a problem. Here, we want to discuss what constitutes a bad faith insurance claim in California.
California Law Surrounding Bad Faith
All insurance is based on a contract. In exchange for the policyholder paying their premiums, insurance carriers have a legal duty to provide coverage based on the terms of the insurance policy and pay valid claims. However, insurance is also a business in California. It is not uncommon for insurance carriers, in an effort to increase their profits, to deny valid claims or offer to pay far less than the claim is worth.
When this occurs, insurance carriers could be guilty of bad faith insurance practices, and it may be possible to hold them accountable through a bad faith insurance lawsuit.
Bad faith exists anytime an insurance carrier unreasonably fails to uphold its end of the bargain. Not every insurance claim denial or low settlement offer is going to be a case of bad faith. However, California law does define certain acts or conduct that can qualify as bad faith on the insurance carrier. This includes:
Unreasonably denying policy benefits
Misrepresenting policy provision or the facts to the claimant
Failing to respond promptly to acclaim
Failing to have reasonable standards for the prompt investigation and processing of a claim
Failing to approve or deny a claim within a reasonable timeframe after the claimant submits adequate proof of loss
Refusing to make a good faith effort to settle a claim fairly after liability has been determined
Compelling the claimant into litigation because the carrier refused to offer a fair settlement
Attempting to settle the claim for an amount that is unreasonable when compared to the statements made in written or printed advertising material
Failing to provide adequate or prompt justification for the denial of a claim
Attempting to get the claimant not to hire an attorney
Misleading a claimant about the deadline for filing a claim or initiating a lawsuit
These are just some examples of what could constitute insurance bad faith in California. Every alleged case of bad faith is unique, and it is very important for individuals who feel they have been mistreated by their insurance company to work with an attorney. An attorney will be able to review the terms of the insurance policy as well as the circumstances of the situation to determine whether or not there is a viable claim.
Remedies for Insurance Bad Faith in California
There are various possible remedies available if an insurance carrier has indeed committed bad faith:
The claimant can recover damages for breach of contract, including the benefits due to them under the policy plus interest.
Claimants may also be able to recover bad faith damages, which can include their economic losses, emotional distress, and attorney fees.
Claimants may also be entitled to punitive damages if they can show that the insurance carrier acted with oppression, malice, or fraud.
The potential remedies available to claimants in these situations will vary depending on the circumstances surrounding their particular case.