Insurance Bad Faith Claims
Insurance bad faith claims can arise in a variety of ways, but in general they are all based on the proposition that the insurance company treated the policyholder unfairly, unreasonably or otherwise unjustifiably failed to honor the terms of the policy. Most insurance bad faith cases arise when a valid claim is denied, underpaid or improperly investigated.
The California Department of Insurance is charged with the responsibility of enforcing the California Insurance Code, including those sections relating to unfair and deceptive acts or practices by insurance companies. Despite this mandate, the Department rarely takes action to enforce the code because of their limited resources.
While the California Insurance Code does not provide for a private right of action by consumers against insurance companies, its provisions can be used by attorneys to help prove that an insurance company’s actions amounted to bad faith. For example, Section 790.03(h) of the code provides a list of specific actions that will be considered unfair claims settlement practices. This list is far from exhaustive in terms of what constitutes insurance bad faith. However, when taken as a whole, Section 790.03(h) and other provisions of the insurance code can help consumers and attorneys determine if an insurance bad faith claim should be pursued and may help bolster a plaintiff’s case. The acts prohibited by Section 790.03(h) include:
- Misrepresenting to claimants the pertinent facts or insurance policy provisions relating to any coverages at issue.
- Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.
- Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.
- Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured.
- Not attempting in good faith to effectuate prompt, fair, and equitable settlements in which liability has become reasonably clear.
- Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds, when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered.
- Attempting to settle a claim by an insured for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application.
- Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured, his or her representative, agent, or broker.
- Failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made.
- Making known to insureds or claimants a practice of the insurer of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.
- Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.
- Failing to settle claims promptly, where liability has become apparent, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.
- Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement.
- Directly advising a client not to obtain the services of an attorney.
- Misleading a claimant as to the applicable statute of limitations.
- Delaying the payment or provision of hospital, medical, or surgical benefits for services provided with respect to acquired immune deficiency syndrome or AIDS-related complex for more than 60 days after the insurer has received a claim for those benefits, where the delay in claim payment is for the purpose of investigating whether the condition preexisted the coverage. However, this 60-day period shall not include any time during which the insurer is awaiting a response for relevant medical information from a health care provider.
Again, the acts noted above are not the only activities that may constitute bad faith on the part of an insurer. If you feel that you have been wronged or treated unfairly by an insurance company in any way, you should consult with an experienced California attorney right away. If you would like to discuss the facts of your case with one of our attorneys, contact the Brady Law Group by phone or email today.