California Bad Faith Insurance Practices

California Bad Faith Insurance Practices

Buying insurance is supposed to bring policyholders peace of mind. But when disaster strikes, the last thing you expect is an uncooperative insurance company that delays or refuses to honor a claim. This is bad faith conduct that should not be tolerated.

At Engstrom, Lipscomb & Lack, we understand the negative impact of unethical insurance practices. When devastating events happen, small businesses and families can face years of financial hardship. Our legal team has a long track record of recovering compensation for consumers victimized by bad faith insurance practices in California and elsewhere.

Remedies for Bad Faith Insurance Lawsuits

Policyholders who have suffered acts of bad faith are entitled to remedies. Most remedies aim to recover contractual losses and extracontractual damages. However, some cases may qualify to receive punitive damages.

Contract Damages

Contract damages involve the amount of the claim that was denied. Your policy specifies what your insurance was obligated to cover. If your claim was denied in bad faith, the insurance company may be required to pay the full value of your claim plus interest.

Extracontractual Damages

Extracontractual damages include any other financial losses caused by the unfair treatment of a claim. Economic damages may be recovered from filing for bankruptcy to hiring an attorney to defend your policy contract.

In addition, any emotional stress or mental anguish may be recoverable. Prolonged emotional distress can take many forms, including clinical depression and sleep disturbances. Studies have shown how chronic stress can alter a person's brain chemistry and reduce the production of mood-stabilizing hormones.

Punitive Damages

Punitive damages are very different from contractual and extracontractual damages. While the first two focus on the losses experienced by the policyholder, punitive damages strictly punish wrongdoing. The premise of awarding punitive damages is to severely financially impact the at-fault party and deter similar behavior in the future.

Why You Should Hire Engstrom, Lipscomb & Lack

Engstrom, Lipscomb & Lack has been recognized for our significant involvement in bad faith insurance litigation since we opened our doors in 1974. Over the course of 50 years, we have litigated an increasing number of bad faith actions.

Insurance carriers throughout the country have been making it their practice to circumvent the law and breach the covenant of good faith and fair dealing concerning claims made by their policyholders. This covenant of good faith and fair dealing is, by law, part of every insurance contract. Contact our firm today if your claim is denied for questionable reasons.

We Have Helped Shape Bad Faith Insurance Tort Law in California

In addition to influencing bad faith law through the appellate process, the firm has handled some of the largest dollar value cases in the bad faith area, including:

  • Northridge Earthquake class action against Allstate (12,000 homeowner claims)
  • State Farm Earthquake cases (over $100,000,000 recovery)
  • Mandalay Bay Hotel sinking and a series of underwriting fraud claims against Maryland Casualty on behalf of major construction firms in Nevada
  • Over 800 individual claims arising out of the Northridge Earthquake of 1994
  • More than 800 individual claims arising out of the California firestorms of 2004 and 2007

Our cases have earned us international recognition for our contributions to insurance law.

We Have a Reputation for Being at the Forefront of Bad Faith Insurance Law

Our attorneys working in bad faith and insurance litigation division have been practicing together for several years. We are often consulted by:

  • The state legislature
  • The California Department of Insurance
  • The California Attorney General's office

Some of our team's prominent cases include:

  • Kransco vs. American Surplus Lines Ins. Co., 23 Cal.4th 390 (2000), (holding the doctrine of comparative bad faith does not apply in California)
  • Allegro vs. State Farm, 45 Cal.4th 1093 (1997), (unfair competition statute can be used in bad faith case)
  • Unigard Ins. Co. vs. O'Flaherty (1995) (insurer can bring a legal malpractice action against a lawyer it hires to defend the insured).

Insurance Companies Are Required to Process Claims in Good Faith

Good faith is a doctrine that refers to an insurance company's obligation to treat policyholders and claims in a fair and just manner. Insurance policies tend to be confusing to those outside the industry. The language of the contract is often written in heavy jargon, and the policy limits and nuances of coverage can be complicated.

Misunderstandings are notorious. Under California law, insurance companies must act in good faith by ensuring a prospect, policyholder, or claimant is well-informed regarding the details of their contract. Insurers must disclose all relevant information in a timely manner, including during the claims process.

An insurance company's good faith responsibilities include but are not limited to the following:

  • After claims are processed and accepted, payment must be made within 30 days of approval
  • Every claim is required to be investigated fully
  • Insurers must disclose all pertinent information within a reasonable time period
  • Claims should be processed and accepted or denied in a timely manner
  • Claim payments should reflect the benefits of the policy
  • Communications should be returned within a reasonable time period

A fair payout on a claim should be based on the policy limits and the losses experienced by the policyholder. Major accidents and catastrophic events often qualify for the maximum payout under an insurance policy.

Understanding Bad Faith Insurance Practices in California

Bad faith describes an insurance company's failure to handle a claim ethically. While there are many circumstances that may qualify as an act of bad faith, the most common examples involve delay tactics and denials.

Delay Tactics

Insurers have various means to delay a claim. In some cases, the insurance company may take its time investigating a claim. Evidence is time-sensitive in disasters and accidents. Delaying an investigation may cause critical evidence to be lost that would support a policyholder's claim.

An insurance company may delay the process of a claim by failing to respond to communication or by requesting documentation piece by piece rather than all at once. The policyholder is responsible for supplying requested documents to the insurance adjuster. In many cases, medical records and other pertinent information may take time to gather. When an insurer asks for documents separately, they may be imposing an unfair burden on the policyholder.

After a claim has been processed and the amount agreed upon, companies have 30 days to send a payment. If an insurance company has not paid the claim within a reasonable time and has failed to provide an explanation, it may be a sign of bad faith insurance practices.

Denying a Claim

Denying a claim is not always an act of bad faith. In some cases, a claim may be denied due to a missed deadline or lack of supporting documentation. However, if your claim is rejected after supplying all the requested information to the insurer and responding to all communications promptly, it may be a sign of bad faith.

When a claim is denied, an insurance company is required to give a reason. If the company fails to give cause for your denial, it would be in your best interest to seek experienced counsel to determine if your situation qualifies for a bad faith insurance case.

Altering or Terminating a Policy

An aggressive tact insurance companies may use to alter or terminate your policy in an attempt to deny your claim. Insurers must notify policyholders of any changes to their contracts. If your insurance company fails to communicate the changes to your policy and those alterations exclude your circumstances from coverage, it may be a sign of bad faith practices.

Contact a Bad Faith Insurance Attorney in California Today

Engstrom, Lipscomb & Lack is at the forefront of insurance law. We have a long history of recovering exceptional results for our clients. Our firm has cultivated a reputation for strong, aggressive advocacy with individualized personal service for nearly five decades.

If you believe your claim has been denied due to bad faith practices in California, you are not alone. Our firm has the resources and extensive knowledge to protect your rights and recover the financial compensation you deserve. Contact a bad faith insurance attorney in California to schedule a free evaluation of your case.