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Insurance Bad Faith

The answers specified below apply to insurance bad faith in the state of California.  We hope that you find the information useful, but it should not be used in place of consultation with a qualified insurance attorney.  Should you have questions, please contact an attorney.

  1. What is "bad faith"?  "Bad faith" is a term used to describe an insurance company's actions in some situations and implies something worse than a simple breach of your policy.  Basically, when an insurance company refuses to pay a claim, or acts unreasonably such as delaying payment, are refusing to pay you the benefits to which you are entitled, they are in breach of the insurance contract and may be liable for contract damages (the policy benefits).  They may not necessarily, however, be liable for other damages such as emotional distress.  California law implies a "covenant of good faith and fair dealing" in every insurance contract. If an insurance company not only breaches the insurance contract, but also breaches this implied covenant of good faith and fair dealing, we call it "bad faith."  This occurs where an insurance company acts unreasonably.  If this occurs, the insurance company may now be liable for emotional distress damages and possibly punitive damages.
  1. Can I make my insurance company pay for my attorney's fees?  Sometimes.  Attorney's fees incurred for obtaining your insurance benefits can be recovered if your insurance company acted unreasonably in denying your benefits.  Once insurance benefits are paid, however, there is no recovery available for your attorney's fees.
  1. My insurance company keeps making me give them recorded statements and now they want to take my statement under oath.  Do I have to submit to this?  Yes.  Insurance policies have a cooperation clause" which requires you to cooperate with their investigation.  If you refuse to cooperate, you can actually give the insurance company a reasonable ground to deny the claim! 
  1. Is there a time limit for me to sue my insurance company?  Yes.  Most insurance policies contain time limits within which to make a claim or to sue the insurance company.  California law also has time limits which vary on the type of relief being sought.  It is not always clear when the time limits run so it is always a good idea to file suit within one year of the date of denial.  Even if this time has run, however, there may be ways to proceed on other grounds so it is a good idea to have a lawyer look at your case.
  1. Can I make a complaint with the Department of Insurance?  Yes.  You can file a complaint with the California Department of Insurance, however, they are often quite ineffective.  Even a response from them finding nothing wrong is not controlling.  Don't wait for a response from the Department of Insurance as you may never even get one and if you wait too long, you could be barred from suing the insurance company!  Get advice from a lawyer knowledgeable in insurance law.