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  • By: Moss Bollinger
  • Published: March 12, 2024
Image of insurance paperwork with misleading terms, illustrating bad faith insurance tactics - Moss Bollinger LLP.

In this article, you will discover:

  • The common types of bad faith practices by insurance companies.
  • The deadlines for processing bad faith claims in California.
  • How punitive damages can be awarded from bad faith claim lawsuits in California. 

How Can Policyholders Recognize Signs Of Potential Bad Faith Practices By Their Insurance Company?

Identifying instances of bad faith practices can be crucial in navigating personal injury claims. Here are five potential indicators to watch out for:

  1. Unreasonable Claim Denial

If you find your claim denied without a valid explanation, it might be a sign of bad faith. Some insurance companies obscure their denial with convoluted policy language or vague explanations. Consulting with a legal expert can help clarify whether your denial is unjustified.

  1. Failure to Defend

In the event of an accident where you’re at fault and face a lawsuit, your insurance carrier should provide legal defense. However, if they neglect this duty, it could indicate bad faith on their part.

  1. Unwarranted Fraud Accusations

Beware of baseless accusations of fraud when presenting your claim. Some insurers invoke these allegations as grounds for denial, often stemming from policy clauses regarding misrepresentation. It’s essential to understand your rights in such situations, as unwarranted accusations can lead to legal repercussions.

  1. Unreasonable Delay

Prompt assessment of claims is crucial, especially in urgent situations like home loss due to fire or vehicle damage from an accident. However, some insurers might intentionally prolong the investigation process, delaying crucial decisions on your claim’s validity. This delay tactic could signal bad faith practices.

  1. Policy Rescission Or Cancellation

While insurers have the prerogative to rescind or cancel policies under specific circumstances, doing so to evade claim payments is unacceptable. If you suspect your policy was rescinded or canceled unfairly to avoid honoring your claim, it could warrant legal action for bad faith.

Such tactics employed by insurance companies to sidestep claim payments demand serious attention. While they prolong claim resolution, there’s a risk of other coverages lapsing, leaving you and your family vulnerable. If you suspect you’ve been subjected to these bad faith practices, it’s imperative to seek legal counsel promptly.

Working with an attorney will provide you with a legal advocate who can assess your situation, fight for your rights, and navigate the complexities of insurance disputes on your behalf. Don’t hesitate to reach out for assistance in safeguarding your interests and securing the compensation you rightfully deserve. Your peace of mind and financial well-being are paramount.

Are There Specific Deadlines Within Which Insurance Companies In California Must Respond And Process Claims To Avoid Bad Faith Accusations?

Regulations and insurance codes set clear deadlines for insurers to follow when handling claims. When a claim is received, whether through an insurance agent or internal channels, immediate action is necessary. Within 15 days of receiving the claim, the insurance company must acknowledge receipt, provide the policyholder with necessary instructions, and promptly begin investigating the claim.

Additionally, insurers must respond promptly to inquiries: within 15 days of an inquiry from the policyholder and within 21 days of an inquiry from the California Department of Insurance. These timeframes ensure that claims are handled in a timely and efficient manner, protecting the rights and interests of policyholders throughout the process. Adhering to these regulations is crucial for maintaining transparency and fairness in insurance operations.

If you’re dissatisfied with how your claim is being handled and decide to notify the California Department of Insurance, an additional 21-day timeframe kicks in from that moment. Within 40 days of receiving notice of the claim, the insurer must either approve or reject it, unless they communicate otherwise in writing. If the insurer communicates any delay, they must provide reasons for the delay and update you every 30 days. Additionally, they must clearly state whether they accept or deny liability.

For instance, if you file a claim on January 1st, you should receive notification by February 9th on whether the claim is accepted or denied, to what extent (in full or partially), and what the insurer’s position on liability is. This ensures transparency and prompt resolution of claims, empowering you with the clarity and information you need to make informed decisions about your insurance coverage.

After coverage is determined or a settlement agreement is reached, insurance claims must be settled and paid within 30 days following the 40-day deadline. These timeframes establish the minimum standards for good faith adjustment practices. It’s crucial to understand that while insurance companies are required to follow these timelines, they can extend the claims process for an additional 30 days by providing written notice.

Therefore, it’s important to stay alert for any delays and to question the reasons given for such delays. As a policyholder, you have the right to assert your rights during the claims process. Keeping track of your claim’s progress and advocating for prompt resolution ensures that you receive the coverage and compensation you deserve according to your policy.

Can An Insurance Company In California Be Held Liable For Punitive Damages In Cases Of Bad Faith Claims Handling?

In California, there’s a recognition of a special relationship between an insurance company and its policyholder. Unlike a product that can be returned if it’s faulty, “garbage” insurance policies cannot be returned because once a claim occurs – and it’s unlikely to find coverage elsewhere. This means that only under unique circumstances are punitive damages awarded under California law.

To qualify for punitive damages under California law, the policyholder, represented by their attorney, must demonstrate that the insurance company not only acted in bad faith but that its conduct reached a level of maliciousness, fraudulence, or oppressiveness. For this purpose, the same acts that constitute “bad faith” can also be the basis for punitive damages if they rise to that level.

Punitive damages have been granted by California courts in bad faith cases under various circumstances, typically including issues such as:

  1. Violation of an insurance company’s duty to properly investigate a claim.
  2. Failure of the insurance company to inform the policyholder about available coverage.
  3. Unreasonable delays in handling or investigating a claim.
  4. And more…

Furthermore, many cases have held that punitive damages are especially appropriate where a particular insurance company has demonstrated a standardized practice that is unreasonable. In fact, there’s a greater chance for punitive damages to be upheld if an insurance company’s established practices and claim handling prove to be consistently harmful to policyholders.

To this end, the existence and frequency of similar past conduct is evidence that raises the likelihood of support for punitive damages. In California, when you’re suing in bad faith, the plaintiff, (the policyholder), is allowed to conduct a “pattern and practice discovery” to see if the company has a history of doing this repeatedly.

All in all, punitive damages are difficult but not impossible to recover. The main problem lies in that insurance companies fight claims vigorously, often employing defenses such as motions to dismiss or summary judgments.

However, if a jury has the chance to punish an insurance company, the awards can be quite substantial. Remember, jurors are everyday people who have had hostile experiences with insurance companies and are predisposed to sympathize with your situation. This alone can set the stage for the outcome to be in your favor right from the start. For more information on Bad Faith Insurance Claims In California, an initial consultation is your next best step.

Moss Bollinger LLP - Sherman Oaks, CA

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