Insurance Bad Faith: Recognizing and Responding to Unfair Practices
Under California’s legal framework, initiated by the Unfair Insurance Practices Act (UIPA) of 1959, policyholders are protected against deceptive and unfair actions of insurance companies. This act clearly outlines what constitutes bad faith — ranging from unjust denial of benefits to not conducting proper claim investigations.
As policyholders, understanding these regulations and recognizing when an insurer is not abiding by the rules is essential. Moreover, knowing how to respond effectively can secure the compensation you rightfully deserve and uphold your rights under California law. A skilled lawyer can assess your specific circumstances and build a bad-faith claim on your behalf to obtain the justice you deserve.
How to Recognize Bad Faith Insurance Practices
California has an exhaustive set of regulations governing the operations of insurance companies, established via the Unfair Insurance Practices Act (UIPA), codified as Cal. Ins. Code § 790. A significant amendment came in 1972 with the addition of Insurance Code § 790.03(h), which specifies 16 particular unfair claim practices that are considered bad faith actions by insurers.
These prohibited practices encompass a range of unfair methods, such as the following:
- Unjustly denying benefits to policyholders
- Not providing clear reasons for claim denials
- Lack of communication with the policyholder regarding the status of claims
- Inadequate explanation for claim denials
- Misrepresenting facts or the benefits provided under the policy
- Violating the terms of the insurance contract
- Refusing to pay the full value of a claim
- Not conducting a timely and thorough investigation of claims
- Delaying response to claims
- Not setting reasonable standards for processing claims
- Stalling in approving or denying a claim after receiving all necessary documentation
- Pushing claimants toward litigation by withholding settlement offers
- Making unreasonably low settlement offers despite substantial proof of the claim’s validity
- Subjecting the policyholder to unnecessary medical examinations to delays in processing
- Not adhering to California’s “Fair Claims Settlement Practices Regulations”
- Not authorizing medically necessary treatments covered under health insurance policies
These actions, among others, illustrate how insurers may not be fulfilling their legal duties to settle claims fairly. A skilled lawyer can investigate your case and obtain evidence of bad faith in order to seek compensation for your losses.
How to Respond to Bad Faith Insurance Actions
In California, if an insurance company refuses to settle a legitimate claim or unnecessarily delays payment, you have the legal right to initiate a bad-faith insurance lawsuit. Bad faith insurance lawsuits generally fall into two categories: first-party claims and third-party claims.
First-party bad faith claims occur when you, the policyholder, take legal action against your own insurance provider. For instance, this might happen if your home is destroyed by fire and your homeowner’s insurance offers a settlement far below the home’s value or if your uninsured motorist insurance does not cover the costs of your vehicle repairs or injuries from a no-fault accident.
Third-party bad faith claims involve suing another individual’s insurance company when it does not cover a claim that benefits you. A typical scenario is when you are injured in an automobile accident, and the responsible party’s liability insurance either denies your claim or proposes an unfairly low settlement.
Recoverable Damages in a Bad Faith Lawsuit
In California, when an insurance company does not uphold its “duty to defend,” there are multiple types of damages a policyholder can pursue. Unlike many states where bad faith insurance lawsuits are governed by common tort laws, UIPA allows victims to file both statutory breach-of-contract and tort lawsuits against insurers who unlawfully deny claims.
The damages recoverable in such cases include the following:
- Payment of the claim
- Attorney fees and court costs
- Lost income
- Lost opportunities
- Emotional distress damages
- Interest
The amount awarded for emotional distress in a bad faith lawsuit is not fixed and typically depends on what is considered reasonable under the circumstances. In severe instances, although infrequent, punitive damages may also be awarded for a particularly egregious breach of the duty to defend. If your insurance claim in California is handled in bad faith, you are entitled to recover all damages resulting from this misconduct.
Speak With the Bad Faith Insurance Lawyers at Eric Ratinoff Law Corp.
Dealing with insurance companies in bad faith can leave you feeling overwhelmed and financially vulnerable. At Eric Ratinoff Law Corp., we understand the nuances of California’s insurance regulations and have years of experience holding insurers accountable. Our approach involves a deep commitment to understanding your case from every angle, presenting it compellingly using advanced visual storytelling techniques that resonate in court. This unique strategy, combined with our extensive network of credible expert witnesses, allows us to fight for the compensation you deserve.
From the moment we take your case, we handle every detail, from managing the complexities of paperwork to negotiating with insurance adjusters. This allows you to focus on what truly matters — your recovery.
