Insurance Bad Faith Litigation
California insurance companies are obligated by law to investigate, negotiate, and pay covered claims in a fair and timely manner. Insurers must also defend policyholders against lawsuits and indemnify them up to policy limits when the policyholder is sued by a third party and the underlying claims are covered under the policy. If an insurer refuses to do so, they are said to be acting in bad faith.
In California, insurance carriers may act in “bad faith” by:
- failing to conduct a full, prompt and fair investigation,
- lacking reasonable standards for investigating their potential and covered claims,
- failing to communicate with their insureds regarding a claim,
- unreasonably delaying or refusing to settle and pay a valid claim,
- failing to adequately explain full or partial denial of a claim,
- misrepresenting facts about policy or coverage,
- failing to properly defend their policyholders or compromising the policyholder’s ability to defend a lawsuit in any way, etc.
Insurance bad faith litigation attorneys help clients pursue their legal rights against insurers who breached their duty under the law.
What “Good Faith” Obligations Do Insurers Owe to Customers?
Generally, insurance companies must:
- Communicate with claimants and insureds. The insurance company, either directly or through an agent, must timely respond to correspondence and answer questions or inquiries.
- Investigate claims. Insurers may not simply deny claims outright. They must conduct fair and reasonable investigations into submitted claims to determine who is liable for the injuries, and must do so in a timely manner.
- Determine to deny or approve claims. Insurance companies may also not leave claims in ‘limbo’, refusing to act on them. They must adhere to timeframes specified in state law when denying, approving, and paying approved claims. When denying a claim, whether partially or fully, insurers must explain to the claimant the reason(s) for denial.
- Pay claims. Insurance companies should pay reasonable amounts for their claims when their policyholders or their victims experience covered risks, namely whatever is covered under their policy language and whatever reasonable expectations their insureds may have based on such language.
- Defend policyholders against third-party claims. If the insured is sued and the claim would be covered by the insurance policy, the insurer must defend the insured and pay damages, up to the limits specified in the insurance policy, and
- Use other good faith attempts to defend and indemnify policyholders and their victims, and settle their claims in a reasonably fair and timely fashion.
Did your insurance act in bad faith?
Talk to an attorney. Take advantage of free and individualized consultations.
Understanding the Duty of Defense and Indemnification
The duty to defend policyholders against third-party lawsuits seems fairly straightforward when the facts and circumstances make it clear that the policyholder was wholly at fault and that the claimed damages are covered under the terms of the contract. California law also requires insurers to defend claims when it is not immediately clear that the insured would be liable. In other words, insurance companies cannot escape their duty to defend policyholders on the grounds that the policy might not cover the claimed damages.
Let’s look at an example: Patty Policyholder was involved in an auto accident and was sued by the driver of the other vehicle. Patty believes Big Insurance Co. is obligated to defend her against the lawsuit under her insurance policy, but they’ve refused to do so, claiming it is not clear that Patty was at fault. In this scenario, an insurance bad faith attorney may be able to help Patty recover damages because the insurer owed her the duty of defense and indemnification.
What Damages are Potentially Available in Insurance Bad Faith Litigation?
As with any type of litigation, specific damages available in an insurance bad faith litigation case will vary, depending on the underlying facts of the case. In general, policyholders who pursue insurance bad faith litigation claims may be entitled to receive:
- Attorney fees and other costs related to the suit
- The amount of the settlement or award the policyholder had to pay to the injured party in the initial suit
- Damages for emotional distress
- Punitive damages
Why Hire an Insurance Bad Faith Litigation Attorney?
Consulting with an insurance bad faith litigation attorney is the first step in determining the relative strength of your case. Litigation attorneys who work in this practice area understand applicable insurance statutes and regulations. These legal professionals are used to going head-to-head with major insurance companies’ legal teams and are not afraid to advocate for clients’ rights.
When you hire a litigation attorney for your insurance bad faith matter, your lawyer will handle all subsequent communications with the insurer on your behalf, making an otherwise stressful process easier.
