Top 10 Signs of California Insurance Bad Faith

Top 10 Signs of California Insurance Bad Faith

Californians invest thousands of their hard-earned dollars into insurance policies every year. The assurance that your business, home, and family will be well taken care of in the event of a tragedy is worth it.

When an insurance company denies your policy benefits, delays payment, or pays less than you deserve, the consequences can be devastating.

Insurance companies have the right to deny claims when they fall outside of your agreement. But some insurers choose to put profits over policyholders’ interests. This type of activity, known as Insurance Bad Faith, is illegal under California law - and it’s more common than one would think.

With intentionally confusing legal jargon and reams of paperwork, insurance companies make it difficult for policyholders to spot their illegal activities. Through deception and loopholes, insurers may try to misrepresent your coverage, conduct shoddy investigations, delay payments, refuse to settle, fail to defend a policyholder, or deny coverage altogether.

Sometimes they deny a claim because the claims handler feels an obligation to save the insurer’s money more than the obligation to take care of its client – you.

Policyholders are rarely insurance law experts. They may not detect a problem, accepting the insurance company’s argument that their claim isn’t within the scope of the policy. Some know there is a problem but aren’t equipped or willing to fight back.

Dishonest insurers take advantage of this - paying less and profiting more.

An insurer’s failure to fulfill its contractual duties is more than just a business deal gone wrong. It leaves the policyholder in dire straits with little means to recover. Not only do wronged policyholders suffer financial turmoil, but overwhelming feelings of helplessness and anxiety a can debilitate a family.

Because of the severe effects of insurer misconduct, California law holds insurance companies to stringent standards and gives wronged policyholders the right to sue insurers who act in bad faith – not only for the claim amount, but also for mental suffering and emotional distress damages, legal fees, even punitive damages to punish the misconduct.

When a policyholder can prove an insurer acted in bad faith, the court may grant financial compensation totaling far above the policy limit or denied claim amount.

Has an insurance company denied your policy benefits? Were your insurance payments delayed or less than you deserve? Familiarizing yourself with the common signs of bad faith misconduct goes a long way in ensuring that you receive the insurance coverage you’ve paid for and deserve.

Policyholders should look out for the following 10 telltale signs of insurer bad faith conduct:

To learn more about your rights as a California policyholder, the California insurance bad faith claims process, and your options under the law, click here to read our free eBook - Guide to California Insurance Bad Faith Lawsuits.

Sign #1. Don’t Understand Why Insurer Denied Benefits

You’ve been paying for your American Family policy and you’re familiar with what should be covered and what isn’t covered. The lightning strike damage to your Newport Beach home should clearly be covered under your plan. Yet American Family says that the damage occurred under exceptional circumstances and therefore does not meet the requirements for coverage.

You look through your policy and can’t find anything that would exclude the situation. This is a red flag. Anytime you feel you should be covered, you probably should be - especially if you feel relatively familiar with your policy.

Don’t take the insurer’s word for it, even if they try to point you to the areas of the contract to which they are referring. Vague language in an insurance policy is often interpreted in favor of the insured and against the insurer, so if they are pointing you to a vague clause to justify their denial, do not simply accept their assertion.

Have an experienced California insurance bad faith attorney look over your policy with you to determine whether or not you deserve coverage.

Sign #2. Insurer Refuses to Defend You in Litigation

After accidentally rear-ending a Lambo in Beverly Hills, you get out to inspect the damage. Everyone is fine. The other car doesn’t have a scratch. You exchange insurance information and you are on your way.

One month later, you receive notice that the other driver is taking you to court. He claims he suffered whiplash from the accident and needs extensive physical therapy and medical treatment. You contact your insurance company and ask how you should proceed.

Your Allstate agent says he doesn’t know how to advise you. Unfortunately, it’s out of his hands. Because you rear-ended the car, Allstate won’t help defend you in court.

An insurance company’s refusal to defend a policyholder in litigation is a clear sign of bad faith. Insurance companies have a duty to defend the insured anytime the allegations could potentially be covered by the policy. In other words, they must defend you first and ask questions later.

Even if the allegations against you are false, the insurance company has a duty to defend you in litigation. If an insurance company refuses to defend you, have an experienced insurance bad faith attorney review your case and explain your rights and legal options.

Sign #3. Insurance Agent Wants to See More Paperwork

The candle your mother in law gave you last week went rogue and ended up catching the dining room on fire. You speak with your insurance company and submit a detailed preliminary claim report and photos of the damage, looking forward to being able to make repairs and use the room again.

A week later, your Progressive agent calls saying she needs a formal proof of loss form (though you explained everything in the preliminary report).

Requesting duplicate proofs of damage or excessive amounts of paperwork is a bad faith scheme some insurance companies use to delay your payment - activity that could qualify you to file a bad faith claim against the insurer.

While your agent will tell you all the paperwork requests are a normal part of filing a claim, always question it when you are asked to supply more than one form of evidence or proof of damage. You should never have to supply two forms of the same information.

Sign #4. Agent Says You’re Covered, Insurance Company Disagrees

You’ve been shopping around for an insurance policy in Riverside that will cover your car, RV, and motorcycle all in one. Most plans cover one or two vehicle types, but not all three. A meeting with a State Farm agent seems promising.

Though the policy doesn’t specifically say it covers motorcycles, the agent assures you that if you sign up today, she will add motorcycles to the policy. She hand writes a note about it on your policy paperwork and gives you a copy. Finally, you’ve found a reasonably priced policy that meets your needs.

Eight months later you wreck your motorcycle taking a tight corner. You contact State Farm who explains that your policy doesn’t cover motorcycles. When you show up with the copy of your policy that says “motorcycles” on it, they tell you that the agent didn’t understand. Sorry, you aren’t covered.

Under California law, insurers cannot deny coverage because an agent misrepresented your coverage provisions. Insurers must abide by their agent’s statements regarding your policy provisions.

Misrepresenting policy provisions, omitting relevant coverage, or misinterpreting requirements, terms, or provisions to a policyholder can give rise to an insurance bad faith claim. If you were told one thing, and later the insurance company says another, you may be eligible to collect financial compensation in a bad faith lawsuit.

Sign #5. Insurer Taking Too Long to Investigate Claim

After a particularly rare rainy season, the finished basement in your San Bernardino home has flooded. Luckily you have flood insurance. You contact the insurance company immediately to file a claim. Two and a half weeks later, no one has come to the house to photograph the damage. The water has seeped high into the drywall and mold is becoming an issue.

When the investigator finally shows up, he snaps one interior photo and jots down a few notes. Is this really all the information they need to provide proper coverage?

Such a long delay is unacceptable and an obvious sign that something is wrong. For an insurer to provide proper coverage, they must respond promptly to the situation and conduct a complete and thorough investigation. Sloppy or delayed investigations are a big indication of insurance bad faith activity.

If your insurance company takes longer than two weeks to respond, contact a California insurance bad faith attorney to discover whether you have a claim.

Sign #6. Insurance Agent Fails to Answer Questions, Return Phone Calls

Insurance companies have a duty to communicate with their policyholders. You are paying your insurer for prompt and honest communication. Yes, insurance agents are busy people dealing with multiple policyholders and numerous claims, so it may take a few days for an agent to get back to you. But unreasonable delays are inexcusable.

Under California law, insurers must provide a complete and informed response to your inquiries within 15 calendar days. They must also answer your questions, meaning supplying you with the information you are requesting – not just giving a general, generic response or repeatedly putting you off.

Insurance companies have a duty to promptly affirm or deny insurance coverage, to explain their reasons for denying claims, to respond to claim-related communications with reasonable promptness.

Bad faith insurance companies may put off responses in an attempt to delay payments or even surpass deadlines and statutes of limitations so you can’t file a claim against them. An insurance bad faith attorney can help answer any questions about communications with your insurance company.

Sign #7. Insurance Company Offers Low Settlement Amount

Though you had a long hospital stay, are now unable to work, and will probably have back pain for the next few years, your car accident could have been much worse. You have faith that insurance will cover your current and future medical bills, income for missed work, pain and suffering, and loss of earning capacity.

However, your insurer’s settlement offer barely covers half of that. You respond to the low offer with a written summary of your expenses, including medical documents and doctor opinions, and supply a counteroffer that you deem acceptable.

Still, the insurance company won’t budge. The agent says you aren’t covered for everything because you contributed to the accident – though the wreck was caused by something entirely out of your control.

Offering a low settlement amount is a sign of insurance bad faith. Insurance companies have one goal, to spend the least amount of money as possible. When they take this intent across the line of your rights as a policyholder, you have the right to sue for damages.

Either the insurer will suddenly agree to your counteroffer or could end up being found guilty of bad faith and paying even more than your policy allows. An experienced insurance bad faith lawyer will know whether it is in your best interest to pursue a lawsuit for compensation.

Sign #8. Insurer Makes False Allegations Regarding Your Claim

Your grandmother’s death came sooner than expected. Doctors gave grandma two years to live. She made it one and a half. Regardless, the family was prepared, purchasing life insurance that would cover funeral expenses and trust funds for the grandchildren.

As you begin to make funeral arrangements, the Prudential agent contacts you to say evidence gathered in their investigation shows your grandmother’s death isn’t covered. The medical examiner concluded grandma died from cancer, but Prudential hired a second and third medical examiner just to double check.

The second examiner agreed on cancer as the cause of death, but the third examiner found something different - grandma had a high blood alcohol level. Her cause of death was alcohol poisoning, and therefore isn’t covered under the life insurance policy.

The extreme investigation into this grandmother’s death is a prime example of insurance bad faith. Regardless of how grandma died, insurance claim investigations must seek to determine reasons for approving a valid claim, not for denying it. Hiring separate medical examiners until one makes a decision that will save the insurer money is acting in bad faith.

If your insurer is making strange or false allegations about your accident or property damage, you could be dealing with a biased investigation. Cases of biased investigation can be difficult to detect. A skilled insurance bad faith attorney will have the investigative resources necessary to prove misconduct.

Sign #9. Insurer Says Getting an Insurance Lawyer Is a Bad Idea

After your insurance company denies your claim for money to cover the lightning damage to your San Francisco Bay home, you mention that you’d like to have an insurance lawyer go over your policy with you.

Your Farmers insurance agent discourages you, saying insurance lawyers aren’t necessary since the insurance company is happy to answer any questions about your policy and knows more about your specific policy than any outsider. Maybe your agent says they will have to discontinue your coverage if you consult with a lawyer.

When someone participates in illegal activity, they are likely to ask that you don’t mention it to the police. Similarly, when an insurance company is acting in bad faith, they may try to discourage you from contacting an insurance lawyer.

This is a violation of the Unfair Insurance Practices Act (UIPA) and California’s Unfair Claims Settlement Practices Act (UCPA) [Ins. Code §§790 et seq.] and qualifies policyholders to file a lawsuit against their insurer.

Sign #10. Insurer Abruptly Cancels or Fails to Renew Policy

When you enter into a contract with an insurance company and have made payments toward your policy, the insurer can’t just cancel your policy in the middle of your policy period unless you breach your side of the agreement.

For example, if you fail to make your payments, lose your driver’s license, fail to register your vehicle, or make false statements in your application, your car insurance company can cancel coverage. Different types of insurance (auto, medical, home, business) will have different rules regarding cancellation.

Insurers must supply written notice of cancellation or nonrenewal at least 60 days in advance. Under California law, insurers must give notice of nonrenewal and the reasons for nonrenewal at least 60 days and no more than 120 days before your policy ends.

Bad faith insurers may wrongfully cancel a policy or refuse to renew it to get out of paying on a claim. If an insurance company cancels or fails to renew your policy without notice, you could be eligible to file a bad faith lawsuit.

How Much Do Insurance Bad Faith Lawsuits Recover?

California law offers such strict protections for policyholders because bad faith insurance practices cause incredible levels of harm that often extend beyond mere financial loss. Policyholders who are mistreated by their insurance company can experience major life stressors, mental pain and suffering, even deterioration of physical health.

California insurance bad faith lawsuits offer recovery of damages for all levels of harm the policyholder suffers.

If you can prove the insurer acted with oppression, malice, or fraud, you may also be able to collect punitive damages (meant to punish the insurer). Punitive damages are important in holding the insurance company accountable for its actions and set an example for other insurance companies that such behavior will not be tolerated.

Overall, a California bad faith lawsuit against your insurer could recover the following damages:

Contract Damages

  •   Benefits due according to policy (first-party claims)
  •   Amount spent or incurred up to the policy limits (third-party claims)
  •   Interest on delayed benefits

Bad Faith Damages

  •   Estimated future financial losses
  •   Consequential economic damages (lost earnings, loss of property use, investment losses, loan interest, costs of medical care for emotional or mental harm)
  •   Past and future emotional distress compensation (amount jury deems suitable)
  •   Attorneys’ fees

Punitive Damages

  •   Amount sufficient to punish or to dissuade future misconduct

Bad faith insurance lawsuits recover millions of dollars for wronged policyholders every year. In addition to breach of contract and bad faith damages, policyholders may have a number of other causes of action or claims against other relevant defendants that could recover additional damages.

What Will My Insurance Company Argue?

It’s important to remember whom you’re going up against. Not only do insurance companies know how to fight bad faith claims, they also have the money to hire the nation’s best legal defense teams.

Attempting to recover what you’ve lost to a bad faith insurance company means being prepared for some of the common defenses an insurance company will use against you.

For example, insurance companies may try to argue that they didn’t participate in bad faith practices because you don’t have valid coverage. Another common defense is for the insurance company to say you yourself acted in bad faith - blaming you for wrongful conduct, saying you lied on your application, or participated in some form of fraud.

The insurance company may also try to argue that you made the damage worse by your own actions, therefore unfairly increasing the amount you are asking to recover.

For example, they may agree that the basement in your Los Angeles home flooded because of heavy rains, but the $10,000 repairs would have actually been only $4,500 if you had properly weatherproofed your basement windows - so they only owe you $4,500.

If there is any remote possibility that you were too late in filing your complaint against the insurance company, the insurer could argue that the statute of limitations bars you from filing a bad faith lawsuit.

Statutes of limitations apply to breach of contract and bad faith claims, along with any time limitations described in your policy. In general, you have two years from the day you knew or should have known of the insurance company’s bad faith conduct to file a bad faith lawsuit.

The exact deadline date can be difficult to determine as statutes of limitations may vary depending on each specific case. If you suspect your insurance company of acting in bad faith, contact your California insurance bad faith lawyer immediately to avoid missing any deadlines.

These and other defenses can aid insurance companies in a court of law, making it all the more critical that wronged policyholders have an aggressive, experienced insurance bad faith attorney to gather evidence, prepare the case, and beat the defense at their own game.

Your California insurance bad faith lawyer will work to show that your bad faith claim is indeed valid and that you are (or were) covered during the relevant time period. A solid legal team will gather evidence to show that you did not act in bad faith or that your actions did not lessen the insurer’s obligation to pay.

Your lawyer will also be prepared to show that any level of damage was out of your control, that you acted reasonably (how the average person would have acted) in protecting yourself from harm, and that you are indeed within the proper time limits for filing a claim.

To learn more about your rights as a California policyholder, the California insurance bad faith claims process, and your options under the law, click here to read our free eBook - Guide to California Insurance Bad Faith Lawsuits.

If you have further questions about filing an insurance bad faith claim, your rights as a policyholder or other concerns, please call California insurance bad faith attorney Steve Hochfelsen at 714-907-0697 or visit www.hoclaw.com. We can help you determine whether your insurer is acting within their legal rights.

Attorney Steve Hochfelsen’s Newport Beach, California business litigation law firm represents clients located in Orange County, Beverly Hills, Riverside, San Diego, Los Angeles, San Bernardino, San Jose, San Francisco, Silicon Valley, and across the state of California.

Share


Steve Hochfelsen is an Orange County, California business litigation lawyer and author.
To connect with Steve: [hidden email] or 714-907-0697.



Recent articles: