California Insurance Bad Faith

Insurance policies are supposed to provide peace of mind that you will avoid financial ruin if disaster strikes. Insurance companies have superior knowledge of contracts and laws compared to the general public, making it easy to take advantage of claimants during their most vulnerable times. If an insurance company has let you down after you filed a claim, our experienced California bad faith insurance attorneys can help you get the money you deserve.

When you faithfully pay your insurance premium for months, years, or decades, you expect your insurance company to cover your losses when you file a claim.

Whether you have suffered an injury in a car accident, sustained damage to your home, or experienced a major business loss, you may face overwhelming circumstances and have urgent financial needs. You likely have considerably less experience with the claims process than the insurance company. This dynamic makes it easy for insurance companies to take advantage of your position and operate in bad faith.

Our experienced insurance bad faith attorneys at Cutter Law can help you get the coverage you deserve and pursue damages for the emotional distress and financial losses brought on by the insurance company’s failure to pay your claim properly.

Quick Links

What Is Insurance Bad Faith?
Examples Of Insurance Bad Faith
An Insurance Company’s Obligations
What Damages Can I Recover in a Bad Faith Insurance Case?
What Must I Prove in an Insurance Bad Faith Case?
What to Do If Your Insurer Has Acted in Bad Faith
Why Choose Cutter Law to Help Resolve Your Insurance Dispute?
Is There a Deadline to File an Insurance Bad Faith Claim?
How Can Our Bad Faith Insurance Attorneys Help?

What Is Insurance Bad Faith?

Insurance bad faith is an insurance company’s unreasonable refusal to pay the full value of a legitimate insurance claim or process it in a timely manner. Insurance bad faith can occur in any type of insurance policy, including the following:

Homeowner’s insurance
Automobile insurance
Business insurance
Life insurance
Health insurance

If the insurance adjuster makes an honest mistake or an error in judgment that adversely impacts your claim, this alone does not rise to the level of bad faith. The conduct must be conscious, deliberate, and unreasonable.

Examples Of Insurance Bad Faith

Insurance bad faith occurs when an insurer resorts to unfair acts and practices to deny, reduce, or delay coverage for your losses after you have filed a legitimate claim. Insurance companies may act in bad faith in a number of ways, including the following:

Deny your claim without providing a valid reason
Misrepresent the language in the insurance contract
Fail to disclose all exclusions and policy limitations
Overestimate depreciation in a homeowner’s claim
Unreasonably demand arbitration
Fail to investigate your claim
Substantially delay the processing of your claim
Fail to accept a reasonable settlement of a claim against you
Fail to provide a defense when another party sues you
Change the terms of your coverage without your knowledge or consent
Require frivolous medical tests as a condition of coverage

An Insurance Company’s Obligations

Insurance policies are legally binding contracts requiring insurance companies to meet their obligations under the policies and deal with policyholders fairly and in good faith.

Contractual Obligations

The basic overriding obligations in an insurance contract require the insured to pay premiums in exchange for the insurer covering the specified losses. Every contract has express and implied terms.

An express term is a condition explicitly stated in the contract.
An implied term is a condition that a reasonable person would assume exists based on the spirit of the contract, even if not explicitly stated.

Insurance contracts can be lengthy and complex. They often include legalese, making them difficult to understand. They could include clauses that may mean one thing to the average person but are construed differently for the insurer’s benefit after you file a claim.

Insured individuals must rely on insurance agents to explain the insurance contract terms. They have a legal duty to describe the terms accurately and completely without misleading the insured.

Even if you understand the contract, an insurer may appear to follow the contract while using outdated methods to calculate your claim value or relying on loopholes created by obscure laws.

Insurance companies that employ these tactics operate in bad faith. Operating in bad faith is in itself a breach of the implied terms of the insurance contract. California has some of the most comprehensive laws in the country requiring insurance companies to operate in good faith and deal fairly with claimants.

Good Faith and Fair Dealing

California’s good faith and fair dealing laws require your insurance company to consider your interests to the same degree it considers its own. An insurance company violates its obligation of good faith and fair dealing when it resorts to underhanded tactics to escape its contractual obligations to cover your losses.

It is not necessary to prove the insurer intended to deprive you of your policy benefits, but only that the actions were unreasonable. Unreasonable conduct that may constitute bad faith includes a wide range of activities. The California court system has acknowledged that the following patterns of conduct qualify as bad faith:

Evading the spirit of the insurance contract
Lack of diligence
Intentionally making mistakes
Misusing superior knowledge to incorrectly specify policy terms
Interfering with another liable party’s performance of an insurance contract

What Damages Can I Recover in a Bad Faith Insurance Case?

If your insurance company puts you in the position where you need to file a lawsuit to collect the money you’re owed under the policy, you may be able to recover damages significantly higher than the policy limits. Damages may include the following:

The covered losses the insurance company failed to pay
Compensation for your emotional distress
Additional expenses brought on by the delay in payment, such as the cost of preventing further damage to your home
Your legal fees
Punitive damages

The California judiciary has recognized the importance of insurance companies facing damages that exceed policy limits for operating in bad faith, including punitive damages.

Without the threat of substantially higher judgments for operating in bad faith, insurance companies would have nothing to lose by acting unreasonably. Thus, insurance companies would have no incentive to operate in good faith.

What Must I Prove in an Insurance Bad Faith Case?

First-Party Claims

To prove that your insurance company is liable for damages after operating in bad faith, you must prove all of the following:

You suffered a covered loss and notified the insurer.
The insurer unreasonably delayed or withheld legitimate policy benefits.
The insurer’s conduct was conscious and deliberate, not a mere judgment error.
The insurer’s actions substantially caused the harm you suffered.

Third-Party Claims

Your insurance company also has a legal duty to protect your interests when you are the defendant in a third-party claim. These are claims against you and your insurance company by someone alleging you are the liable party. Generally, the insurer has duties to defend you against the claim and indemnify you if you are liable.

Your insurance company must consider your interests as well as its own. Thus, if the other party offers a reasonable settlement within your policy limits, your insurer must accept this offer and agree to pay. Otherwise, you could be exposed to liability for damages beyond the policy limits you must pay out of your pocket.

For example, suppose you have $100,000 in coverage for injuries to others on your homeowner’s insurance policy, and the injured party offers a reasonable settlement of $90,000. Your insurance company should accept the offer. If your insurance company rejects the offer and your case goes to trial, you could face legal fees and a potential verdict of hundreds of thousands or more.

If your insurance company refuses to accept a reasonable settlement and the court awards a monetary judgment exceeding your policy limits against you, you may have grounds to sue the insurance company for your losses.

A settlement offer is generally considered reasonable if a judgment would likely result in the same amount or higher damages.

What to Do If Your Insurer Has Acted in Bad Faith

If your insurance company has acted in bad faith by denying your claim, paying less than you deserve, or stalling your claim, the following steps can help you get the coverage you deserve and collect damages:

Save all written correspondence you receive from the insurance company.
Make notes with dates about any telephone conversations you have had with the adjuster.
Call our award-winning insurance bad-faith lawyers at (888) 285-3333 to schedule a free, no-obligation consultation.

Why Choose Cutter Law to Help Resolve Your Insurance Dispute?

Our skilled insurance bad faith lawyers have decades of experience standing up to large insurance companies that refuse to honor their contractual obligations. Insurance bad faith claims are unique cases that require special knowledge of how insurance claims should be valued and the proper method of depreciating property.

We have helped hundreds of homeowners get their well-deserved coverage in multiple insurance bad faith claims, including from large insurance companies such as Allstate, State Farm, and CSAA, all of whom operated in bad faith after homeowners lost everything in California wildfires and other disasters.

One of the most common methods homeowner’s insurance companies use to undervalue claims is excessive depreciation. California law permits homeowner’s insurance companies to deduct coverage for aged property, but insurers must also consider the property’s condition.

For example, a ten-year-old piece of furniture generally has a lower value than new furniture. However, if an older piece is in new condition, the insurer must consider this when calculating depreciation. This principle also applies to more expensive items like roofs, flooring, and appliances.

How We Beat State Farm

Due to our immense experience and successful track record in bad faith insurance claims, our founder Brooks Cutter was appointed co-lead counsel in Doan v. State Farm, which we helped become certified as a class-action lawsuit. In that case, State Farm had undervalued homeowners’ insurance claims through excessive depreciation.

State Farm illegally used a formula that only considered the properties’ age, allowing for excessive depreciation that resulted in the significant undervaluation of homeowners’ claims. Under Brooks’ leadership, the court denied State Farm’s motions and certified it as a Class-Action lawsuit. State Farm appealed, but we prevailed.

This landmark ruling established a precedent that insurance companies are accountable when they fail to calculate depreciation as required by state law.

Our Success Against CSAA

Brooks Cutter was also appointed co-lead counsel in a bad faith insurance class-action lawsuit against CSAA Insurance after the company violated the express terms of its policies by waiving deductibles when appropriate.

We prevailed against CSAA, resulting in the policyholders receiving full refunds for the deductibles they had wrongfully been forced to pay, including interest. This judgment cost CSAA an estimated $83 million.

Is There a Deadline to File an Insurance Bad Faith Claim?

State law limits the time you have to file all types of civil claims, including insurance bad faith claims. This time limit varies based on the type of lawsuit you file.

If your lawsuit is based on a breach of contract, you may have four years to file your claim.
If the lawsuit is a personal injury claim, you have two years to file your claim.

It is common for bad faith insurance lawsuits to include elements of both types of claims in an insurance bad faith claim. It is best to speak with one of our knowledgeable insurance bad faith lawyers to determine how the statute of limitations applies in your case.

If you miss the deadline, the court will dismiss your claim, and you will lose your opportunity to receive the coverage you deserve and pursue additional damages. To protect your claim, contact our office as soon as possible.

How Can Our Bad Faith Insurance Attorneys Help?

When you hire our talented insurance bad faith attorneys in California, we will put our experience and resources to work for you to ensure you receive the full value of your claim and all the additional compensation the insurance company owes you.

We will manage all communications with the insurance company and gather the necessary evidence to prove the company harmed you by operating in bad faith.

You can expect a personal touch when you work with our skilled and passionate bad faith insurance lawyers at Cutter Law. Our family-owned law firm treats clients like family and works as a team to get you the best results. We understand the difficulty of losing everything and dealing with insurance. Our firm’s John Roussas and his family lost everything in the Tubb wildfire in 2017.

Put our skill, passion, and decades of experience handling insurance bad faith claims to work for you. Contact us today for a free case review.

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Sacramento, CA 95864
Phone: 916-290-9400

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Cutter Law P.C.
1999 Harrison Street Suite 1400
Oakland, CA 94612