Life’s not fair

Anonymous

Don’t expect the insurance companies to tell you about the Fair Claims Settlement Act!

The Fair Claims Settlement Act is a collection of laws that govern how insurance companies should act. There’s a lot more to it, especially with bad faith and “unfair and deceptive acts or practices.” But here are some takeaways.

Where Is The California Fair Claims Settlement Act Located?

The Act is found in the California Code of Regulations beginning with ¶ 2695.1. Here are the regulations: https://oal.ca.gov/publications/ccr/

Here is a helpful PDF of the relevant regulations: https://thecatinstitute.com/wp-content/uploads/2019/08/California-Fair-Claims-Settlement-Practices-Regulations.pdf

And here they are on the website of the California Department of Insurance: https://www.insurance.ca.gov/01-consumers/130-laws-regs-hearings/05-CCR/fair-claims-regs.cfm

What Is The Purpose Of the California Fair Claims Settlement Act?

Basically the Act tells insurance companies how they should handle claims and treat you, the insured. The California insurance commissioner can penalize insurance companies for violating the Act.

What Should I Know About The California Fair Claims Settlement Act?

Here are some important things you should know:

  1. An insurance company must tell you the insured all applicable “benefits, coverage, time limits” under § 2695.4(a); and
  2. No insurance company shall ask you to sign a release “that extends beyond the subject matter which gave rise to the claim payment unless” the release is fully explained under § 2695.4(e)(1).

What Dates Are In The California Fair Claims Settlement Act?

Here are some of the most important dates in the Act:

  1. Generally, an insurance company must respond in writing to you within 15 days under § 2695.5(b);
  2. Generally, an insurance company must start an investigation within 15 days after notice of a claim under § 2695.5(e)(3);
  3. Generally, an insurance company must accept or deny a claim within 40 days under § 2695.7(b); and
  4. Start an investigation within 15 days after notice of a claim under § 2695.5(e)(3).

Can The Insurance Company Lowball Me?

Here’s what the Act says in § 2695.7(g):

No insurer shall attempt to settle a claim by making a settlement offer that is unreasonably low. The Commissioner shall consider any admissible evidence offered regarding the following factors in determining whether or not a settlement offer is unreasonably low:

1) the extent to which the insurer considered evidence submitted by the claimant to support the value of the claim;
(2) the extent to which the insurer considered legal authority or evidence made known to it or reasonably available;
(3) the extent to which the insurer considered the advice of its claims adjuster as to the amount of damages;
(4) the extent to which the insurer considered the advice of its counsel that there was a substantial likelihood of recovery in excess of policy limits;
(5) the procedures used by the insurer in determining the dollar amount of property damage;
(6) the extent to which the insurer considered the probable liability of the insured and the likely jury verdict or other final determination of the matter;
(7) any other credible evidence presented to the Commissioner that demonstrates that (i) any amount offered by the insurer in settlement of a first-party claim to an insured not represented by counsel, or (ii) the final amount offered in settlement of a first-party claim to an insured who is represented by counsel or (iii) the final amount offered in settlement of a third party claim by the insurer is below the amount that a reasonable person with knowledge of the facts and circumstances would have offered in settlement of the claim.

An insurance company should not make an offer that is unreasonably low. Whether an offer is unreasonably low depends on several factors (e.g., did the insurance company consider evidence or legal authority or any other credible evidence).

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