Insurance Bad Faith

At its heart, an insurance policy is a contract between you and your insurance company.  But, this is not just any contract.  Under California law, every insurance policy is deemed to contain an implied covenant of good faith and fair dealing.  Webster's defines "covenant" as a formal, solemn, and binding agreement.  That is, when the insurance company accepts your premiums and issues an insurance policy to you, California effectively mandates that the insurance company solemnly agree to act in good faith with you regarding that policy and to deal fairly with you.  Insurance bad faith can occur when an insurance company improperly refuses to pay benefits or takes other unreasonable actions in violation of the implied covenant of good faith and fair dealing contained in every insurance policy.

Unreasonable Denials and Other Bad Faith

Consumers buy insurance products for the peace of mind and security those insurance products promise to provide.  Consumers have certain reasonable expectations when it comes to the insurance policies they buy.  It is reasonable to expect that insurance companies will reasonably investigate claims and only pay benefits to policyholders with unexpired polices and covered losses. In fact, if you were a shareholder of an insurance company, you would not be happy if it paid claims without confirming that the claims were valid. However, when insurance companies take unreasonable measures with the motivation of denying claims, they run the risk of engaging in insurance bad faith, and those companies can and should be held liable for the damages their unreasonable actions cause.

There are various ways insurance companies can act in bad faith, including (but not limited to) the following:

  • Rescinding or cancelling an insurance policy in order to avoid payment
  • Denying that a valid claim is covered
  • Paying only partial benefits
  • Failing to defend a third-party claim against the insured
  • Refusing to settle with a third party claim against the insured
  • Failing to properly investigate a claim
  • Undue delay in claims processing, even if benefits are eventually paid
  • Offering an unreasonably low settlement amount

Bad Faith Versus Breach of Contract

Not all claim denials, even those which are ultimately deemed incorrect, result in a finding of bad faith.  An insurance company can sometimes make the wrong decision and not be in bad faith. Proving bad faith means showing that the company's practices were unreasonable in light of the customary course of business in the industry and also that the company's motives were wrong. However, even if an insurer wrongly denies a claim in good faith, it may still be liable to the policyholder for breach of contract. In such a case, the policyholder should still be able to recover damages and receive the benefits promised by the policy.

Ever since he became an attorney more than 20 years ago, Los Angeles insurance attorney, Eduardo A. Brito, has handled insurance cases involving allegations of bad faith insurance practices.  Having handled a multitude of these cases (the majority of which while serving as insurance defense counsel), Mr. Brito can advise you if your insurance company might be found liable for insurance bad faith and how best to pursue the bad faith claim against your insurance company. 

Whether your case involves bad faith or not, the Law Offices of Eduardo A. Brito will help you take on your insurance company and make sure it is held accountable for its conduct.