California law requires insurance companies to deal with personal injury claimants in good faith – that is, honestly and fairly. However, an insurance company doesn’t commit bad faith simply by making an error. Rather, they need to act dishonestly or with utter carelessness.
What Are the Elements of a “Bad Faith Insurance” Claim in California?
- The existence of an insurance policy (not necessarily yours, but at least a policy you are making a claim against);
- Benefits are due under the policy:
- The defendant unreasonably denied or withheld benefits;
- The defendant had knowledge of, or acted with reckless disregard of, the lack of a reasonable basis; and
- You suffered damages thereby.
In California, even a third-party beneficiary of a liability insurance policy has a limited right to sue an insurer for bad faith. To win your claim, however, you must prove all of these elements by a “preponderance of the evidence” (greater than 50% likelihood).
Examples of “Good Faith” Claim Denials
When is an insurance company entitled to deny your claim, delay processing it, or refuse your settlement offer? Following are some examples:
- Normal red tape: Insurance companies are typically large, bureaucratic organizations that must follow standard procedures to process claims. Sometimes, they take a while. The real question is whether they were necessary and whether they are industry-accepted practices.
- Legitimate disputes over the value of your claim. Merely disputing your assessment of the value of your claim, without more, does not necessarily constitute bad faith. You can be certain that the insurance company will value your claim lower than you will, and that doesn’t necessarily constitute bad faith. If it was, every insurance company would be acting in bad faith all the time.
- Demanding a certain amount of evidence and documentation. If you were running an insurance company, you would demand evidence and documentation before you’d pay a claim, wouldn’t you? Insurance companies are businesses, not public charities, and they need proof of every claim. Of course, they may ask you for more than what you think of as reasonable, but that in itself does not constitute bad faith.
- Denial of your claim for a good reason. Any insurance company that paid every claim would go bankrupt within months. An insurance company does not act in bad faith by denying your claim for good reason, even if you disagree with the reason. In practice, as long as the insurance company’s denial is defensible, even if ultimately wrong, they are not acting in bad faith.
- Refusing your settlement offer and countering with a ‘lowball’ offer. This may be frustrating, but it’s standard procedure. It only constitutes bad faith if the insurance company takes it to the extreme.
In most of these instances, it’s a judgment call. Extreme behavior by the insurance company might constitute a bad faith insurance practice even when a moderate version of the same behavior would not.
Examples of Bad Faith Insurance Practices
Following are examples of when an insurance company goes too far and steps across the line into bad faith practices:
- Unreasonable delay in their acknowledgment of your claim.
- Failing to conduct a reasonable investigation of your claim before denying it.
- Denying your claim without a reasonable basis.
- Repeatedly offering you an unreasonably low settlement.
- Misrepresenting facts or policy terms.
- Failing to explain the denial of your claim or the insurance company’s low offer/counteroffer.
- Delaying payment on a settled claim.
- Using harassing or oppressive tactics to pressure you into accepting a low settlement.
- Repeatedly ignoring your reasonable settlement offers.
- Advising you against seeking legal advice can sometimes constitute bad faith practice.
Winning a bad faith claim against an insurance company in California, like in many jurisdictions, can be challenging. While California has policyholder-friendly laws and a well-established legal framework for insurance bad faith, these cases can still be complex and difficult.
Why Winning a Bad Faith Insurance Claim Is Difficult
Winning a bad faith claim in court can be quite difficult for the following reasons, among others:
- It is often difficult to meet the burden of proof;
- Bad faith insurance claims tend to be legally complex;
- Insurance companies have plentiful resources to fight your claim;
- Differing interpretations of policy language;
- The potential for a long legal battle; and
- The need for expert testimony.
That doesn’t mean you can’t win; people win bad faith insurance claims every day.
Remedies You Can Get Through a Bad Faith Claim
You can seek the following remedies, depending on your circumstances:
- Compensation for impact on your health caused by the insurance company’s failure to pay your medical expenses.
- Compensation for the time you spent pursuing your claim.
- Expenses that you incurred seeking to enforce your claim.
- The emotional distress caused by the insurance company’s bad faith practices.
In some cases, the insurance company might even face criminal liability.
A Vista Personal Injury Lawyer Can Help You Assert Your Bad Faith Claim
If you are pursuing a bad faith claim in California, you need to seek legal counsel. An experienced Vista personal injury lawyer can gather evidence and present a strong case for you. Since almost all personal injury lawyers work on a contingency fee basis, you’ll only pay legal fees if you win compensation for your claim.