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What Is Insurance Bad Faith?

Insurance bad faith is when your insurance company doesn’t treat you fairly. Bad faith refers to unreasonable or unfair conduct by an insurance company. An insurance company must give at least as much consideration to you as it does to its own interests.

In California, when an insurance company issues a policy of insurance, there is an implied covenant (i.e., promise) of good faith and fair dealing. That means the insurance company will not do anything that will injure your rights to receive the benefits of the policy.

In other words, every time an insurance company issues a policy to you, they promise to treat you fairly. Sometimes they don’t. For example, maybe the insurance company withholds or delays the benefits of the policy from you. A bad faith action generally arises when the insurance company unreasonably acts or fails to act in a manner that deprives you of the benefits of the policy.

Generally speaking, bad faith claims overlap with breach of contract claims. For example, if you sue in bad faith because the insurance company didn’t treat you fairly, you’d also sue in breach of contract because the insurance company prevented you from receiving the benefits of the policy. This can get complicated, so this is just a general overview.

For example, CACI 2300 lists the three elements you must prove to state a breach of contract claim against your insurance company:

  1. You suffered a loss covered under an insurance policy issued by the insurance company;
  2. The insurance company was notified of the loss; and
  3. The amount of the covered loss the insurance company failed to pay.

CACI 2331 lists the five elements you must prove to state a breach of the implied covenant of good faith and fair dealing (i.e., a bad faith claim):

  1. You suffered a loss covered under an insurance policy issued by the insurance company;
  2. The insurance company was notified of the loss;
  3. The insurance company unreasonably failed to pay the benefits or denied the benefits;
  4. You were harmed; and
  5. The insurance company’s actions were a substantial factor in causing that harm.

Who Can Sue For Bad Faith?

Generally speaking, the “named insureds” under the policy can sue for bad faith. “Additional insureds,” as defined by the policy can also sue for bad faith. Also, a right to sue in bad faith can be “assigned” to another person. In bad faith lawsuits, this happens a lot.

Can An Insurance Agent Be Sued In Bad Faith?

Generally speaking, no. Unless there is some “special relationship” between the agent and an insurance company, an agent can only be sued for professional negligence.

How Do I Know If There’s Bad Faith?

Call a San Diego Bad Faith Attorney. But first know that bad faith claims are generally analyzed by looking at three questions:

  1. Whether there is a breach to justify contract damages;
  2. Whether the breach is unreasonable and justifies tort damages; and
  3. Whether the breach is so bad that it justifies punitive damages.

There’s a lot more to say, and this is a complicated area of law.

Questions? Contact Me!

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