A bad faith insurance claim arises when your own insurer denies, delays, or underpays a valid claim without a proper reason. In California, every policy carries a duty of good faith and fair dealing. You can hold the company to it. For homeowners and business owners, bad faith often surfaces after a fire, water, or other property loss. This article covers what counts as insurance bad faith, how to prove it, and your deadlines.
What is a bad faith insurance claim?
A bad faith insurance claim is a claim against your own insurer for breaking its duty to treat you fairly. Every California insurance policy includes an implied promise of good faith and fair dealing. When the company withholds benefits it owes you without proper cause, it breaks that promise.
However, a bad faith claim differs from an ordinary policy dispute. In a routine dispute, you and the insurer disagree in good faith about coverage or value. Bad faith goes further, because it involves unreasonable conduct by the company. That difference is what can open the door to remedies beyond the policy benefits. Bad faith insurance claims typically grow out of a denial, a long delay, or an offer that does not match the damage.
What counts as bad faith in California?
Bad faith in California means withholding benefits unreasonably or without proper cause. California Insurance Code section 790.03 lists unfair claims practices. The Fair Claims Settlement Practices Regulations set deadlines insurers must meet.
Common signs of bad faith include:
- Denial of a valid claim without a reasonable basis
- Delays with no written explanation or status updates
- Lowball offers far below documented repair or replacement costs
- Failure to do a real investigation or inspection
- Misstatements about what the policy covers
- Silence on evidence that supports the claim
For example, under Insurance Code section 790.03, insurers may not misrepresent policy provisions, ignore claim communications, or fail to explain the basis for a denial. Only the Insurance Commissioner can enforce the statute. In Moradi-Shalal v. Fireman’s Fund (1988), the California Supreme Court held that it does not create a private right to sue. Instead, a policyholder’s lawsuit rests on the implied promise of good faith in the policy itself.
The Fair Claims Settlement Practices Regulations add firm deadlines. An insurer must acknowledge a claim within 15 calendar days. It must then accept or deny it within 40 calendar days of proof of claim. Also, a denial must come in writing and explain every reason behind it.
How do you prove insurance bad faith?
To prove insurance bad faith, you generally show two things, as California courts explained in Love v. Fire Insurance Exchange (1990). First, benefits due under the policy were withheld. Second, the insurer’s reason for withholding them was unreasonable or without proper cause.
An honest disagreement is not enough. In Wilson v. 21st Century Insurance (2007), the California Supreme Court addressed this point. A genuine dispute over coverage or value defeats bad faith, but only when the insurer holds its position in good faith and on reasonable grounds. In addition, the court held that an insurer may not ignore evidence that supports the claim or deny it without fully investigating.
Next, gather evidence. Helpful proof includes:
- The denial letter and every written reason the insurer gave
- A complete copy of your policy, endorsements, and declarations page
- Photos, video, and repair estimates for the property damage
- A log of calls, emails, and dates with the adjuster
- Outside reports that challenge the insurer’s findings
What can you recover in a bad faith insurance claim?
In a successful bad faith insurance claim, a policyholder may recover the policy benefits owed, plus other losses the insurer’s conduct caused. However, every case turns on its own facts, so no outcome is certain.
Depending on the facts, damages may include:
- Policy benefits the insurer wrongfully withheld
- Economic losses caused by the denial or delay
- Damages for emotional distress caused by the insurer’s conduct, as recognized in Gruenberg v. Aetna (1973)
- Attorney’s fees spent to recover policy benefits, under Brandt v. Superior Court (1985)
- Punitive damages, but only with clear and convincing evidence of oppression, fraud, or malice under Civil Code section 3294
How long do you have to file a bad faith insurance claim in California?
The deadline to file a bad faith insurance claim depends on what you are seeking, because two deadlines can apply. First, any claim for policy benefits, even one framed as bad faith, falls under the suit clause in your policy. For fire coverage, Insurance Code section 2071 requires at least 12 months from the start of the loss. If the loss is related to a declared state of emergency, the minimum is 24 months.
That clock pauses from the time you report the loss until the insurer denies the claim in writing, under Prudential-LMI v. Superior Court (1990). Second, a bad faith claim for damages beyond the policy benefits generally carries a two-year deadline under Code of Civil Procedure section 339(1). Because the deadlines overlap and the dates are often disputed, confirm yours with a lawyer early.
When should you talk to a lawyer?
Talk to a lawyer as soon as a denial, delay, or low offer does not match your policy or the evidence. Early advice protects your deadlines and keeps your record complete. Still, not every dispute needs an attorney, especially when the insurer is still adjusting the claim fairly and on time.
Based in Sherman Oaks, Viciti Law represents policyholders across Southern California. A bad faith insurance attorney at the firm reviews your policy, claim file, and the insurer’s reasons before you decide what to do.
The firm also handles homeowners insurance claims and commercial property insurance claims, including fire, water, and business interruption losses. You speak with the same team from the first call, have direct access to your attorney at every stage, and can talk with the firm in Spanish or Russian.
Frequently asked questions
How do you sue an insurance company over a bad faith claim?
To sue an insurance company for bad faith, you file a civil lawsuit for breach of the implied covenant of good faith and fair dealing. That claim usually travels with a breach of contract claim. Before filing, gather the policy, the denial letter, and your claim records, then confirm which deadline applies. A lawyer can send a demand letter first, giving the insurer a final chance to pay before a suit.
Can I file a bad faith insurance claim against my own insurer?
Yes. In California, you bring a bad faith claim against your own insurer. Homeowners and business owners can bring one when their property insurer unreasonably denies, delays, or underpays a covered loss. The duty of good faith runs from the insurer to you as its insured.
Is a lowball offer insurance bad faith?
It can be. An offer far below documented repair or replacement costs is a warning sign. It is especially telling when the insurer will not explain how it reached the number. California rules require a reasonable explanation for any compromise offer. Still, a low offer based on a genuine, reasonable dispute over value is not bad faith on its own.
What is bad faith insurance in simple terms?
Bad faith insurance describes an insurer that puts its own interests ahead of yours when handling your claim. For example, it denies a valid claim, stalls without explanation, or offers far less than the loss is worth. California courts judge bad faith by whether the insurer acted reasonably. Getting less than you hoped for is not enough on its own.
Can I report bad faith to the California Department of Insurance?
Yes. You can file a complaint with the California Department of Insurance online or call its consumer hotline at 1-800-927-4357. In addition, the department enforces Insurance Code section 790.03. However, a complaint is not a lawsuit, so keep your filing deadline in view.
How much does it cost to talk to Viciti Law?
Consultations are free. The team speaks English, Spanish, and Russian. Bring your policy, your denial letter, and any photos or estimates.
Talk to Viciti Law about a bad faith insurance claim
If you believe you have a bad faith insurance claim, contact Viciti Law for a free consultation and a review of your denial letter.
Past results do not guarantee a similar outcome. This article provides general information about California insurance law and is not legal advice. Reading it does not create an attorney-client relationship. Attorney Advertising.
