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Looking at the elements of a bad faith insurance claim

Previously, we began looking at California’s Fair Claims Settlement Practice Regulations, which identify some of the minimum standards insurance companies need to follow in order settle claims fairly. In addition to this statute, another source of law for bad faith insurance claims is implied covenant of good faith and fair dealing.

The duty of good faith and fair dealing obligates parties in any contract to act in good faith. This means both parties are obligated to avoid doing anything that would unfairly interfere with the other party’s right to receive the benefits of the contract. In order to prove there was a violation of this duty, a handful of elements must be proven. 

In order to prove breach of the duty of good faith and fair dealing, a plaintiff must prove each of the following points:

  • The parties entered into a valid contract;
  • The plaintiff fulfilled all, or substantially all, of his or her significant obligations under the contract, and that he or she was excused from fulfilling those obligations that were not fulfilled;
  • All the conditions required for the defendant’s performance of his or her obligations under the contract were fulfilled;
  • The defendant unfairly interfered with the plaintiff’s right to receive benefits under the contract; and
  • The defendant’s conduct harmed the plaintiff.

Proving each of these points with relevant, reliable evidence is not necessarily an easy matter. In general, bad faith litigation can be challenging, particularly because insurance companies may provide a different account of the underlying facts of the case. Whether or not an insurance company breached its duty of good faith and fair dealing is a fact-dependent determination, and sorting these matters out requires the knowledge and experience of an experienced attorney

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