If you’ve been denied an insurance claim or felt like your insurance company was unreasonable in handling your claim, you may be able to recover damages from the insurance company by filing an insurance bad faith claim.
What is Insurance Bad Faith?
In California, an insurance company that unreasonably handles its policyholders’ claims is considered to have committed bad faith. Every insurance company must treat its policyholders fairly. Every insurance policy contains an implied covenant of good faith and fair dealing. When an insurance company is unreasonable in handling claims, there is a breach of this implied covenant.
There are a wide variety of situations that would be considered bad faith in California for example:
- Denial of your covered insurance claim for no reason
- Denial of your covered insurance claim without proper research
- Refusing legitimate and necessary medical treatments
- Presenting a settlement offer that is unconscionably low
- Ignoring your letters or phone calls regarding your claim
- Using intimidation tactics
- Stating that your statute of limitations has run out when, in fact, it has not
- Unreasonable delays in paying your insurance claims
- Refusal to defend you if you are sued and you have an active liability policy
What Should You Do If You Feel Your Insurance Company is Acting in Bad Faith
The very first thing you should do if you feel that your insurance company isn’t handling your claim properly is to send them a polite, yet firm letter. This letter does not have to be typed, but it must be legible and understandable. Describe the facts behind your insurance claim and keep emotion and opinion out of it. State that you expect your claim to be handled fairly, promptly, and fully. Keep a copy for your own records.
Next, you should contact the California Department of Insurance to file a written complaint against the insurance company. Then discuss the matter with your insurance agent or broker, letting them know that you are having problems getting your claim processed.
At this point, it is valuable to seek out an experienced insurance bad faith attorney licensed in California, such as the attorneys at The Sevey Law Firm. Our experienced attorneys know your rights and are well-versed in communicating with insurance companies and their adjustors. If you can’t get your claim handled outside of court, you may need to file a lawsuit. You can rest assured that we will represent you with a wealth of knowledge and expertise about insurance bad faith law. Insurance law is very complex and is best left to professionals.
Insurance Bad Faith Damages
There are three types of insurance bad faith damages you may sue for in the state of California: contract damages, tort damages, and punitive damages. We’ll discuss each of these in turn.
Contract damages are those losses that have been caused by the insurance company’s denial of your claim, or refusal to pay what it owes based on the terms of your active policies. For example, let’s say that you have a homeowner’s insurance policy, and your home is damaged. The contract damages would include costs associated with your home repair, and interest if there is a significant delay in having your claim covered. In the case of a health insurance policy, the contract damages would consist of medical bills. For a liability insurance policy, the cost of your defense in addition to the payment of judgments or settlements on your behalf would represent the contract damages.
The statute of limitations for contract damages in California is four years from the date of the insurance company’s first action in bad faith.
Tort damages are also called bad faith damages. You can claim these damages if you can prove that your insurance company has unreasonably handled your claim. Tort damages include, but are not limited to:
- Mental and emotional distress
- Reasonable attorneys fees
- Losses suffered due to the unreasonable actions of the insurance company, such as:
- Lost business earnings
- Medical expenses warranted due to the stress from the bad faith
- Lost business opportunities
- Loss of use of property
Punitive damages are those that do not have a definite “price tag.” To receive punitive damages, you must first show that there were compensable damages suffered as a result of the bad faith action. In addition, you must also prove two things:
- The insurance company acted with fraud, malice, and oppression as defined by California Statute, and
- The fraud, malice or oppression was supported by a managing agent of the insurance company.
California Insurance Claim Handling Procedures
In the state of California, all insurance companies are required to fairly handle claims as mandated by statute and the California Fair Claims Settlement Practices Regulations. These Regulations have been written by the California Department of Insurance to provide for minimum standards insurance companies must adhere to when handling their policyholders’ claims.
It comes as no surprise that an insurance bad faith attorney in California would see an insurance company’s failure to comply with the above Regulations as clear evidence of bad faith. Conversely, lawyers representing the insurance companies take the opposite position – that the violation of the Regulations does not constitute bad faith.
California Department of Insurance Involvement
One might think that since the California Department of Insurance mandates that the Regulations be followed, they could also make an insurance company pay a claim. This isn’t exactly how things work, though.
The California Department of Insurance, or DOI, doesn’t have the authority to mediate your insurance dispute like a court does. Once you have filed a complaint with the DOI, it may investigate the insurance claim and let you know it’s opinion on whether or not the insurance company has properly denied or handled the claim. If it decides that your claim was handled improperly by the insurance company, it may get involved and attempt to convince the insurance company to pay the claim as per the policy agreement. The DOI can not force the insurance company to pay the claim in part or in full.
The only truly effective way to force an insurance company to pay a claim that it has handled improperly is to hire an experienced insurance bad faith attorney. You’ll not only receive what your insurance policy states, but you’ll also receive additional damages that your insurance company caused due to their bad faith actions. The attorneys at The Sevey Law Firm invite you to contact our office for a free evaluation of your claim. You can contact us by phone at (916) 788-7100, or through our online contact page.