Bad Faith Claims

Legal Compliance Resource
March 7, 2013 — 1,177 views  

The role of the insurance policies is to protect individuals or companies against losses. But sometimes, an insurance firm, for no specific reason, might deny the claim to the claimant. Such a situation, where the insurer does not uphold the rules in the contract and fails to make the claim settlement, results in bad faith insurance.

The Types of Bad Faith Insurance

Bad faith insurance can broadly be split into two groups. One of them is the first-party bad faith claim where the claims are mostly made by the insurance policy holders. The other type is the third-party bad faith claim where the claim is made against the policy holders. The first type deals with the insurer making inappropriate or unacceptable claims. This could be due to various reasons like denial, underpayment, etc.

The second usually deals with failure to settle or defend the claims by the policy holders. Discrepancies here may arise at the time of accidents. The insurer of the person who was at fault should compensate for the victim involved in the accident. If the company fails to do so, a bad faith claim can arise.

Insurance Bad Faith in California – Reasons & Solutions

A few examples of insurance bad faith in California are:

  • Refusal towards imparting a medical treatment that is rightfully reasonable and very much necessary to the claimant.
  • Unreasonable delay in the payment of insurance claims by the insurer.
  • An insurance claim that is not sufficiently paid as required or mentioned in the insurance policy.
  • An outright denial of claim settlement without a strong reason for an insurance claim that is rightfully covered.
  • Outright refusal to defend the claimant when sued and to have full access to the liability coverage.

If faced with any of these issues at the time of your insurance claim in California you could do the following:

  • Send a firm yet polite letter to the insurance company pointing out your problem faced during claim settlement.
  • Clearly describe the cause and the reason for writing the letter.
  • Be sincere in your facts and information provided about the bad faith situation.
  • If you do not receive a response, you could try contacting the California Department of Insurance to lodge a complaint. 

California Fair Settlement Law

The California Supreme Court was one of the first courts to recognize bad faith by an insurance company, because of which the law was introduced. The insurance companies by law are required to hand out claims compulsorily. This is according to the California Fair Claims Settlement Practices regulation. These regulations are written by the California Department of Insurance. They provide certain guidelines, and minimum standards which the insurance companies must follow while handling claims. If the insurance company fails to comply with the law, severe actions could be taken.

It is always a better practice to follow the regulations set by the California Department of Insurance. Checking whether the insurance company is run by skilled lawyers while signing a policy is another good practice to follow, which helps to avoid facing problems related to bad faith claims.

Legal Compliance Resource