Lawsuits Against Insurance Companies for Bad Faith in California
Insurance companies don’t always uphold their end of the bargain. Here’s how to sue an insurance company for bad faith in California.
A bad faith case arises against an insurance company when they engage in unfair or unreasonable business practices after a policyholder files a claim to recover damages. If an insurance company acts in bad faith, the wronged individual can request a review of the claim from the insurance company. If the result is still unsatisfactory, the individual can send a demand letter to try and fix the situation, with a lawsuit constituting the final remedy.
What is Bad Faith in Regards to Insurance?
An insurance policy is a contract. The policyholder pays premiums in exchange for the legal expectation that the insurance company will compensate them for damages after they file a valid claim. In addition, insurance companies have a duty of good faith, which means they are expected to investigate thoroughly, provide a reasonable amount of compensation based on the policy, and generally conduct themselves in a fair and proper manner. However, this does not always occur; insurance companies may sometimes misrepresent facts of the claim in order to reduce their liability or otherwise engage in unfair and unreasonable practices. This is referred to as acting in bad faith.
California Insurance Code Section 790.03(h) describes what constitutes unfair business practices in relation to the claims settlement process, which is another way of saying what constitutes insurance company bad faith practices. These practices include, but are not limited to:
- Misrepresenting facts or provisions relevant to the claim
- Attempting to settle a claim for less than the amount that a reasonable person would believe that they were entitled to based on advertising material
- Telling a claimant not to consult an attorney
- Failing to affect reasonable and prompt settlements in good faith
Suing an Insurance Company for Bad Faith
If an individual believes their insurance company acted in bad faith and wishes to remedy the situation, they should begin with rereading their insurance policy to fully understand whether or not that which they are requesting coverage for is actually covered. An attorney may be useful for this as insurance policies are typically long and complex.
Related: How to Sue an Insurance Company: What You Need to Know
If the individual is assured that the insurance company acted in bad faith, they should document all communications between them and the insurance company. This must include the specific denial of the claim. The individual should also ensure that they have all relevant documents, such as photos (if applicable).
The next step is to request a review of the claim. The insurance company will then complete this review and respond accordingly. This step is always recommended as lawsuits can be expensive and labor-intensive, and it is always possible that the claim was denied due to a mistake that a reviewer will catch.
If the insurance company’s response after the review is unsatisfactory and the individual wishes to escalate further, the next step is to send them a demand letter stating that the insurance company’s decision is not accepted. The individual should include evidence supporting their stance and request a response within a certain amount of time. The letter may include a warning that the individual will file a lawsuit if the claim is not resolved.
If the insurance company does not respond or the response is unsatisfactory, the individual may then file an official complaint with the California Department of Insurance or simply file suit. Filing an official complaint is recommended, however, because the government’s conclusion will provide important evidence in a lawsuit if they agree that the company acted in bad faith.
A lawsuit is the final remedy. If the wronged individual has not already hired an attorney, it is highly recommended at this point. Insurance companies are often large and powerful, and as such will have expert attorneys. Contact Her Lawyer to be put in touch with an insurance attorney who will help ensure that your case is as strong as possible.
Related: What Is an Insurance Bad Faith Expert?
FAQs about Suing an Insurance Company for Bad Faith in California
What does it mean when an insurance company acts in bad faith?
“Bad faith” refers to utilizing unfair and unreasonable business practices. This includes deception and the denial of a valid claim. Insurance companies have a legal responsibility to honor the policy and to act in good faith, but they do not always do so.
What is an example of an insurance company acting in bad faith?
There are countless ways that an insurance company can act in bad faith. For example, an insurance company may be obligated to pay the claimant a certain amount of money after an accident, but they may attempt to pay the claimant less than they are entitled to because the company wants to save money.
Can I sue an insurance company for acting in bad faith?
Yes, but there is a process that you should follow first. This includes collecting all relevant documents, requesting a review of the claim, and sending a demand letter.
What can I recover in a bad faith lawsuit?
You could recover the money that you were entitled to under the policy, attorney’s fees, and damages for emotional distress. In some egregious cases, you may even be awarded punitive damages.
Do I need a lawyer?
It is highly recommended. Insurance policies are complicated and filing a lawsuit is even more complicated, so competent legal counsel can be critical. Contact Her Lawyer if you are in need of an attorney for your bad faith lawsuit.
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