What You Need to Know About Bad Faith Insurance Claims

After an accident you expect your insurance company to act fairly. You pay premiums and believe they will handle your claim honestly and in a reasonable timeframe. When they do not do so California law calls that bad faith.

The Insurance Company’s Legal Duty

Every insurance policy in California includes an implied covenant of good faith and fair dealing. That means your insurer must deal with you fairly, investigate claims properly, and pay what they owe under the policy without unreasonable delay or denial.

Examples of Bad Faith Behavior

• Denying a valid claim without a reasonable basis
• Unreasonably delaying payment while your bills accumulate
• Failing to properly investigate the claim including ignoring key medical records or evidence
• Misrepresenting policy coverage or facts about what your policy requires

First-Party vs Third-Party Bad Faith

First-party bad faith involves your own insurance company when you file a claim under your policy for medical payments, property damage, or uninsured/underinsured motorist coverage.

Third-party bad faith arises when someone files a claim against the at-fault party’s insurer. In most cases you cannot sue them for bad faith unless the insured gives you that right after a judgment or settlement.

How California Law Defines Bad Faith

California Insurance Code section 790.03 lists practices that are unfair including not responding promptly to claims, misrepresenting policy facts, failing to investigate or giving undue delay.

To prove a bad faith claim you generally need to show you had a valid policy, the claim was covered, the insurer acted unreasonably, and you suffered harm because of their actions.

What You Can Recover

If an insurer is found liable for bad faith you may recover more than what was originally owed under the insurance policy. Damages may include medical bills, lost income, interest, emotional distress.

If the insurer’s conduct was especially egregious such as lies or knowing misrepresentations you may also be eligible for punitive damages.

Time Limits to File a Claim

There are strict deadlines for filing a bad faith lawsuit.

For breach of contract claims (your insurer did not fulfill the terms of the policy) you typically have four years from the date of breach.

For tort claims (for example emotional distress or punitive damages) you generally have two years from when you knew or reasonably should have known the insurer acted unfairly.

Why Legal Representation Matters

Bad faith cases are complex. Insurance companies have legal teams and tactics to avoid large payouts. A specialized attorney knows how to gather evidence such as communications, internal documents, policies and precedent legal decisions. A skilled lawyer also makes sure all procedural rules and deadlines are met.