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Serving clients in Hawaii and throughout California, including Sacramento, Los Angeles, Chico, Jackson and San Diego

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Bad faith litigation and its elements in insurance law

Bad faith litigation and its elements in insurance law

| Feb 3, 2021 | Insurance Litigation

When a California resident is injured, they expect their insurance company to step up and settle their claim in a manner that covers their medical expenses and whatever wages they have lost. While individuals expect these powerful insurance companies to settle their case fairly, this is not always the case. Since they are in the driver’s seat, companies often fail to act reasonably, which can end up shortchanging policyholders.

Where does the good faith requirement come from?

Companies have more resources and expertise when it comes to handling insurance claims compared to the policy holder. Due to this, courts place an obligation of good faith and fair dealing on them with regards to every policy. This means insurance companies must act reasonably and fairly when dealing when processing, investigating or paying a claim. If they do not, policy holders have a right to file a lawsuit of bad faith.

What is bad faith litigation?

Every denied claim does not have to have bad faith. In order to show bad faith, policy holders must show:

  • It must first be established that there was a valid claim and that benefits that were due to the policy holder were denied. Proper documentation must be demonstrated for this element and state law has to be consulted to ensure the necessary paperwork is collected.
  • Secondly, it has to be shown that the reason for denying benefits was unreasonable. This has to be assessed based on the facts and circumstances existing at the time of the decision.

While nothing is set in stone, certain factors have been previously considered to demonstrate bad faith, such as failing to respond to a claim in a timely manner, failing to approve or deny claims in a timely manner and failing to give a reason for the denial.

Bad faith claims can exist in common law, in statute, in contracts or in tort, depending on state insurance law. Those who believe their claim was wrongfully denied may want to consult an experienced attorney to discuss their options for getting the insurance they deserve and need.

 

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