Question

What counts as insurance bad faith in California?

Terrence J. Coleman

Answered by:
Terrence J. Coleman

Located in San Francisco, CA
Pillsbury & Coleman, LLP

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Answer

Here in California, we are fortunate to have some of the nation’s strongest pro-consumer laws that protect policyholders. These laws are intended to ensure that your insurance company delivers on the promise that it made years ago when it sold you the policy. If it doesn’t uphold its side of the bargain, you have the right to sue for full compensation. 

Understanding The Covenant Of Good Faith And Fair Dealing 

A “covenant of good faith and fair dealing” is implied in every insurance policy sold in California. Even though those words aren’t actually written in the policy, state law imposes it as part of the contract. Essentially, this covenant is a bundle of obligations on the part of the insurance company. Among other things, it is obligated to:

  • Thoroughly investigate your claim
  • Look for evidence that supports payment, not just evidence that supports a denial
  • Look after your interests, not merely its own bottom line
  • Be open and honest with you, engaging in meaningful dialogue instead of taking an adversarial approach

When An Insurance Company Treats You Unfairly, You Have Options

If your insurance company withholds policy benefits unreasonably or without proper cause, it is guilty of bad faith. A jury can award not only what you deserve under the policy, but also all other damages caused by the insurance company's denial. In the disability insurance context, for example, such an award of damages can include all future benefits payable under the policy so that you don't have to deal further with an insurance company that has already acted in bad faith.

In bad faith cases, the jury can also choose to award attorney fees to you. This means the insurance company ends up paying for your lawyer, and you don’t have to worry about your rightful benefits being diminished by having to pay for legal representation.

In California, you are also allowed to seek compensation for emotional distress. Money is not a perfect remedy for the worry and stress you suffered, but it can help soften the blow and provide new peace of mind.

In some cases, the conduct of an insurance company is so bad that punitive damages may be appropriate. Punitive damages are meant to punish and deter bad behavior. It is in this area that Pillsbury & Coleman, LLP, has been able to help keep the insurance industry honest. We have a history of obtaining record-breaking punitive damage awards – including the largest disability insurance punitive damage verdict in California. Our mission is to hold insurance companies accountable and help our clients obtain justice.

Disclaimer: The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.

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