Understanding The Steps To Take In A Bad Faith Claim

In this article, you will discover:

• The specific steps to take to pursue a bad faith insurance claim.
• Top reasons for claim denials that are not grounds for bad faith claims.
• The top qualities an insurance claims attorney can bring to your case.

Are There Specific Steps To Pursue A Bad Faith Insurance Claim In California?

Many times, bad faith claims can be challenging to identify. Often, individuals think nothing of their experience and dismiss the improper handling of their claims as “bad customer service.” However, having your concerns dismissed or denied due to your carrier’s incompetence or negligence may not just be a bad customer experience; it might be cause for a lawsuit.

The first thing you should do if you believe you’ve been a victim of a bad faith claim is to contact an attorney who can review the particular facts of your case and give you legal guidance.

Generally, you should know that proving bad faith requires that you establish two things:

1. That the insurer withheld a policy benefit that is provided or withheld a policy benefit expressed in your policy and;
2. The decision to withhold this benefit was unreasonable or lacked proper cause under the terms of the policy or California law.

What Documents Should Policyholders Keep In Order To Pursue A Bad Faith Insurance Claim In California?

After you gather evidence, you should keep records of all correspondence between you and the insurance provider. When you get letters, save them and take pictures to save on your phone. If you send emails, save those emails and take screenshots of everything. If there are phone calls between you and the carrier, take notes and send confirmation emails. All records of these communications will help demonstrate bad faith.

What’s more, having an attorney to guide you through the complexities of bad faith is essential. While you may gather documents and evidence, determining whether they indicate bad faith typically requires legal expertise.

Finally, it’s important to understand that setting up an insurance company for bad faith is not a feasible approach. Many people mistakenly believe they can manipulate the situation, but that’s not the case.

The most effective approach is to answer questions truthfully, cooperate to the best of your ability, and meticulously document everything. This proactive approach, coupled with legal counsel, can greatly strengthen your position, no matter what happens in the end.

In What Situation Might An Insurance Company Be Justified In Denying A Claim Without Being Accused Of Bad Faith In California?

Insurance companies often deny claims – not out of bad faith but simply because the claim isn’t covered. Some of the most common examples of this can include: 

• Excluded Drivers

Excluded drivers are specifically not covered under your insurance policy. For instance, if you own a car and your roommate is listed as an excluded driver, they are not covered by the policy. Therefore, if you lend your car to your excluded roommate and they have an accident, the insurance company has a valid reason to deny your claim. This denial is not considered bad faith; rather, it is a standard application of the policy terms regarding excluded drivers.

• Failure To Pay Your Premium

Another legitimate reason for claim denial could occur if you fail to make your premium payments. If your policy lapses due to non-payment, the denial of your claim is not indicative of bad faith. It simply follows the terms of the policy regarding the requirement for continuous premium payments to maintain coverage.

• Intentionally Misrepresenting The Facts

Intentionally misrepresenting a material fact provides a straightforward basis for denying a claim. For instance, if you’re involved in a car accident and falsely claim the traffic light was green when it was actually red, the insurance company can deny your claim. It’s important to note that not recalling the color of the traffic light may be different and may not constitute intentional misrepresentation. However, deliberately providing false information is grounds for claim denial.

• Refusal To Cooperate

Refusing to cooperate with the insurance company’s requests can indeed lead to the denial of claims. For instance, if the carrier asks you to provide a picture of your driver’s license and you fail to do so, they can deny the claim. Similarly, if your policy requires you to participate in an examination under oath and you refuse to do so, the insurance company has grounds to deny the claim. Cooperation with the insurer’s reasonable requests is typically a contractual obligation under the policy terms.

• Breaching Policy Obligations

Claim denial could involve breaching any other obligations specified in the agreement that haven’t been previously discussed. These obligations can vary widely depending on the type of policy. 

For instance, some policies may require you to undergo an annual physical examination, while homeowner’s policies might mandate regular termite inspections or repairs to the foundation. 

Failing to fulfill these specific obligations outlined in your policy can provide grounds for the insurance company to deny your claim. As such, it’s crucial to thoroughly understand all the terms and requirements outlined in your policy to ensure compliance and avoid potential claim denials.

There are many reasons why you may not be able to file a bad faith claim. However, there are also many situations where an insurance carrier may be held liable for breaching a contract, but not for acting in bad faith if the carrier’s decision regarding the claim was reasonable. This legal principle is known as the genuine dispute doctrine. 

It’s essential to grasp the significance of this doctrine because insurance companies often train their adjusters on the genuine dispute doctrine, instructing them to document files in a manner that minimizes costs for the company while appearing reasonable. For example, they may hire experts, issue reservation of rights letters, or make partial payments for damages under dispute, such as in cases of house fires where there’s disagreement over the value of flooring or carpet. 

All in all, these actions are taken to deny a portion of the claim and avoid being accused of bad faith.

Are Bad Faith Cases Difficult To Prove, And Are They Always Worth The Fight?

Insurance is indeed a unique contract, as it’s one of the few products people purchase hoping they’ll never need to use. The California Supreme Court has highlighted this distinction, emphasizing that insurance is bought not to gain a commercial advantage but to protect against unforeseen disasters.

As such, when an event occurs that requires insurance coverage, insurance companies hold a significant advantage. They draft the contract, understand the regulations, collect premiums, and possess substantial resources to contest claims if they choose to do so. This often leaves you, the policyholder, in a very vulnerable position, emphasizing why having an experienced attorney in your corner is very important.

In California, every contract carries with it an implied covenant of good faith and fair dealing, and breaching this covenant is known as acting in bad faith. This covenant represents a promise that the parties will act honestly and fairly to fulfill their contractual obligations. However, uniquely in the realm of insurance contracts, California law permits policyholders to file lawsuits against insurance companies seeking general tort damages, rather than solely pursuing monetary compensation for breach of contract. This legal action is commonly referred to as a bad faith claim.

So, while California can very much be on the side of the policyholder – and while these cases can be complex – they are typically worth the fight. Specifically, there are three instances in which the insured or policyholder is deemed blameless…

• You’ve Made Every Effort To Cooperate

The insured is expected to make reasonable efforts to cooperate with the insurance company throughout the claims process. This includes fulfilling requests such as sitting for an examination under oath or allowing an inspection of your home or vehicle. 

However, there are limits to this duty to cooperate. If the insurer demands something unreasonable or outside the insured’s control, such as producing the crown jewels, the insured is not obligated to comply. It’s important to cooperate to the extent possible within legal and reasonable boundaries.

• You Can Demonstrate That You’ve Suffered A Hardship

As the insured, it’s essential to demonstrate not only the economic impact but also the emotional distress caused by the loss. This includes providing evidence of the hardship experienced as a result of the incident. Being able to articulate and discuss the emotional toll of the loss strengthens your case and underscores the full extent of the impact suffered.

• You Can Show That The Insurance Carrier Was Unreasonable

As the insured, you must be able to establish that the decisions made by the insurance carrier were unreasonable. Of course, in the vast majority of cases, it’s nearly impossible for a layperson to prove bad faith without the guidance and support of legal counsel. 

Fortunately, this is exactly where an attorney steps in, possessing the knowledge, experience, and resources to navigate the complexities of insurance law and effectively advocate on behalf of the policyholder.

Do I Need A Bad Faith Insurance Claims Attorney To Help Me? Or Can I File These Claims On My Own?

As policyholders, we purchase insurance and pay premiums to safeguard ourselves against financial losses resulting from various incidents such as car accidents, theft, property damage, fires, and more. Unfortunately, while insurance companies are legally obligated to treat us fairly and uphold the terms of our valid policies, they don’t always fulfill these obligations. 

Ultimately, insurance companies are businesses driven by profit motives. When an insurance company fails to act in accordance with the law and in the best interests of the policyholder, they may be engaging in bad faith practices – and these actions can cause significant anxiety, fear, and trauma for the policyholders affected.

Naturally, it’s challenging to stand up for yourself in these circumstances – so here are a few key reasons you should consider hiring an attorney… 

• Depth Of Knowledge

Insurance claims attorneys possess invaluable experience when it comes to this area of the law. Given the complexity of the legal framework governing the insurance industry and the obligations of insurance companies, having a skilled attorney by your side can make a significant difference. 

Their knowledge and insight can greatly enhance your ability to pursue a bad faith claim effectively, helping you navigate the complexities of the legal process with confidence and increasing your chances of achieving a favorable outcome.

• Balance Of Power

Insurance companies are powerful corporations and businesses set on protecting the bottom line – especially as many are publicly traded entities with a primary duty to their shareholders, meaning that they have to make the maximum profit. 

Because of this, insurance companies are equipped with legal teams spanning multiple states, armed with comprehensive knowledge of regulations, laws, and case precedents. This makes them adept at exploiting legal loopholes and strategies to their advantage. However, having a skilled attorney on your side who understands these tactics enables you to effectively level the playing field and protect your rights as a policyholder.

• Ability To Litigate

Insurance companies often resist resolving bad faith claims or claims they’ve wrongly denied without the pressure of a lawsuit. Going into court on an insurance case is a daunting task, and having a lawyer who understands what the insurance companies are doing, how they’re doing it, and the rules of court can give you the edge you need to win your case.

• Interest Exclusivity

No matter how nice an adjuster or insurance company representative is, their duties are to the company. Conversely, when you hire a lawyer, their goal is exclusively to protect your rights and advocate for your interests. Therefore, if you believe that an insurance company has jeopardized your interests, the best course of action is to seek legal representation promptly. By doing so, you can ensure that your rights are protected and that you have a dedicated advocate working tirelessly on your behalf. For more information on Steps To Take In A Bad Faith Claim In California, an initial consultation is your next best step.