Know Your Rights
Where California law applies, insurance companies must use “good faith and fair dealing” to not deprive their insureds of the policy benefits or protections. An insurance company acts in “bad faith” where it fails to pay benefits due under the policy unreasonably or without proper cause. The duty of good faith and fair dealing includes the duty to not unreasonably withhold benefits and to thoroughly and promptly investigate your claim. The insurance company must diligently search for evidence supporting the claim. Looking only for evidence to deny the claim is bad faith.
Under California Insurance Code Section 790.03(h) there are numerous practices which are defined as unfair claims settlement practices. These include
- Misrepresenting pertinent facts or insurance policy provisions;
- Failing to act reasonably promptly upon communications with respect to claims;
- Failing to implement reasonable standards for the prompt investigation and processing of claims;
- Failing to affirm or deny coverage of claims within a reasonable time;
- Not attempting to good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear;
- Failing to provide promptly a reasonable explanation of the basis of a denial of a claim;
- Directly advising a claimant not to obtain the services of any attorney;
- Misleading the claimant as to the applicable statute of limitations.
The damages that a claimant can recover from their insurance company depend on the conduct of the insurance company. Under California law there are three levels of wrongful conduct by an insurance company. As the conduct worsens, the company’s potential liability increases.
A simple breach of contract allows the insured to collect the contractual benefits – those promises to be paid under the policy.
“Bad faith conduct” by the insurer in refusing to pay benefits allows an insured to collect for all their resulting losses, including emotional distress and attorney’s fees.
Fraud, malice or oppression makes the insurer liable for punitive damages – an additional sum intended to punish this misconduct.