Understanding Bad Faith Claims in Insurance Coverage Disputes
Insurance is meant to provide a safety net, but disputes can arise when insurance companies fail to honor legitimate claims. These situations often involve allegations of bad faith, where an insurer acts dishonestly or unreasonably in denying or delaying coverage. If you find yourself in this situation, you need a knowledgeable attorney to hold the insurer accountable.
Attorney David Schwartz, founder of the Law Offices of David H. Schwartz, INC., is a seasoned business litigation attorney with over 45 years of experience representing clients in insurance coverage disputes. His firm serves clients in the San Francisco Bay Area, including San Jose, Santa Clara, San Mateo, Alameda County, and Oakland, California.
This blog provides an overview of bad faith insurance claims and what to look out for to identify bad faith tactics used by insurance companies.
What is a Bad Faith Claim in Insurance?
Bad faith in insurance occurs when an insurance company does not honor its legal or contractual obligations to a policyholder. This could mean denying a claim without a valid reason, delaying payment unnecessarily, or failing to thoroughly investigate a claim.
Insurers typically possess far greater resources than policyholders, making bad faith claims a source of considerable financial and emotional strain for individuals and businesses.
California law holds insurers to a high standard of conduct, requiring them to deal fairly with policyholders and fulfill their contractual obligations in a timely manner. When an insurer acts otherwise, the policyholder can seek legal recourse. Filing a bad faith claim involves proving the insurer acted unreasonably or dishonestly in handling the case.
Signs of Bad Faith by Insurance Companies
Recognizing bad faith behavior by an insurer is the first step in protecting your rights. Some common indicators that an insurance company has acted in bad faith include, but are not limited to, the following.
Unreasonable delays: The insurer takes an excessive amount of time to process or investigate your claim.
Unfair denials: The insurer denies your claim without valid reasons or does not adequately explain the basis for the denial.
Insufficient investigation: The insurer fails to conduct a detailed investigation before denying or underpaying your claim.
Lowball offers: Offering a settlement amount significantly below what is fair or justified.
Misrepresentation of policy language: Misleading the policyholder about coverage, limits, or terms to avoid paying a claim.
Failure to communicate: Failing to keep the policyholder informed about the status of their claim or providing regular updates.
Requesting excessive documentation: Repeatedly asking for unnecessary or duplicate documents to stall the claims process.
If you or someone you know has experienced any of these behaviors from an insurance company, it could be a sign that your insurer is failing to act in good faith. Contact an experienced attorney who can help you understand your rights and determine the best course of action.
California Laws Governing Bad Faith Insurance Claims
California laws seek to protect policyholders from unfair practices by insurance companies. The state imposes a duty of good faith and fair dealing on all insurers to act fairly and reasonably when handling claims. Some key legal considerations for bad faith claims in California that you should be aware of include the following.
Implied covenant of good faith and fair dealing: Every insurance contract in California includes an implied covenant of good faith and fair dealing. This means insurers must fulfill the agreed-upon terms of the policy honestly and fairly. They must not unfairly withhold benefits owed under the policy or delay claim payments without valid justification.
Unfair Claims Settlement Practices Act (UCSPA): California’s insurance code prohibits insurers from engaging in certain unfair or deceptive practices, such as failing to acknowledge or act on claims promptly, misrepresenting facts or policy terms, or compelling policyholders to go to court to receive fair payments.
Punitive damages: If an insurer behaves egregiously, such as acting with fraud or malice, California courts may award punitive damages. These damages are meant to punish the insurer and deter similar conduct in the future.
Requirement for a thorough investigation: Insurers must conduct a thorough and prompt investigation of claims. Failure to investigate a claim adequately before denying it can constitute bad faith and lead to legal consequences.
Prohibition of unreasonable denial of claims: An insurer cannot unreasonably deny a claim without a valid basis. If a denial is based on improper reasoning or insufficient evidence, it may be considered an act of bad faith under California law.
Why Legal Representation Matters
Dealing with insurance disputes can feel like an uphill battle, especially if you're relying on timely payouts to cover medical costs or other fees. However, don’t let an uncooperative insurer hold you back; effective legal representation can turn the tide in your favor.
Attorney David Schwartz’s approach is rooted in strategic thinking and advocacy. With a passion for helping clients tackle complicated litigation, his success stems from his ability to assess the unique circumstances of each case and craft tailored strategies.
Whether it’s securing compensation for denied claims or challenging unfair settlement offers, the Law Offices of David H. Schwartz, INC. can help you protect your best interests.
Insurance Coverage Disputes Attorney Serving the San Francisco Bay Area
If you believe an insurance company has acted in bad faith, it's important to consult an attorney as soon as possible to pursue a claim. The Law Offices of David H. Schwartz, INC., provides trusted legal representation for clients throughout the San Francisco Bay Area.
Over the past 45 years, Attorney Schwartz has handled cases involving trade secrets, business disputes, Civil RICO claims, and shareholder derivative actions. With a measured and tactical approach to litigation, the firm serves clients throughout San Jose, Santa Clara, San Mateo, Alameda County, and Oakland, California. Reach out today to schedule a consultation.