Bad faith law requires insurance companies to act in the best interest of their policy holders. This often means that an insurance company has the duty to look for coverage when the policy holder has a legitimate claim against them, rather than looking for ways to deny coverage.
Bad Faith Law in California
Bad faith law is covered under California Insurance Code 1033, which requires insurance companies to deny or pay for a claim within a reasonable amount of time. This law defines certain acts that qualify as bad faith:
- Unreasonable denial of policy benefits
- Failing to respond or act promptly with respect to a claim
- Attempting to settle claims for an amount that appears unreasonable compared to statements made in written or printed advertising material that accompanied the application for insurance
- Threatening to appeal an arbitration award in an attempt to compel the insured to accept a settlement less than what was awarded
- Advising a claimant not to hire an attorney
- Misleading a claimant as to the legal deadline for filing a claim or initiating a lawsuit
Can I Sue My Insurance Company?
Yes, you can sue your own insurance company if your dispute is for $12,500 or less. Examples of small claims lawsuits against insurance companies include:
- Failure to pay on a covered claim: if your insurance company and its adjusters denied a claim that is within the insurance policy you purchased, you can sue them in small claims court
- Failure to reimburse you for all expenses you have incurred: if you spent $3k fixing your vehicle and the insurance will only cover $1,500, then you can sue them to get the full amount
- No response from your insurance company: if your insurance company fails to reimburse you and begins ignoring your calls, you can file a lawsuit against them.
What is an Insurer’s Obligation?
Insurance policies are contracts between the insurer and a policyholder. California law requires that both parties have a duty of “good faith” to act in a manner that fulfills their obligations as stated within the insurance contract. Neither party can interfere with a party’s right to receive benefits. Typical insurance contracts require insurance companies to:
- Pay claims when the policyholder experiences a potentially covered risk
- Provide the policyholder with a legal defense against third-party claims
- Investigate a claim to determine who is liable for the injury
- Use good faith attempts to settle claims against the insured
Bad Faith in Personal Injury Lawsuits
Bad faith in a personal injury lawsuit usually occurs when there’s a “failure to indemnify.” Indemnification is defined as obligating one party, the insurer, to compensate the other party for specific liabilities and losses. If the insurance fails to fulfill this duty, then it constitutes as bad faith.
So, in the case of a Personal Injury Lawsuit, a defense’s insurance company could be acting in bad faith by refusing to settle with the injured plaintiff. In certain circumstances, this can put the policyholder’s personal wealth and assets in jeopardy if the case heads to trial.
For example, if the jury rules in the plaintiff’s favor, awarding them $4 million dollars and the defense’s insurance policy is $1 million dollars, the remaining $3 million will come from the defendant’s personal assets. So, this could potentially be considered bad faith if the insurance refused to settle, resulting in the policyholder having to pay millions of dollars.
Get Legal Help with Your Personal Injury Claim in California
If you or a loved one has been injured in an accident, the attorneys at Maison Law can help you get the compensation you need. Even if you were found partially at fault or the insurance company denied your claim, you are still entitled to fair compensation. Contact Maison Law today for a free consultation and case evaluation. Our firm does not require any upfront payments for our services and we don’t get paid unless we win your case.
