Lesser Law Group

San Rafael California Insurance Law Firm

What California policyholders need to know about 'bad faith' laws

Insurance companies in California typically have several advantages over policyholders because of their significant resources and negotiating strength. This is why many states have laws requiring insurance providers to act in good faith when dealing with their customers and handling claims. If an insurer acted in "bad faith," a policyholder might be able to pursue legal action. There are several elements that constitute what's termed bad faith insurance.

This type of insurance law can vary from one state to another, with some states broadly defining bad faith as being any actions considered unreasonable or without proper cause. Also, some states consider questionable claim-related behavior a breach of contract while others consider it a wrongful civil act (tort). In order to pursue a common law bad faith claim, a policyholder typically has to prove benefits for a valid claim were withheld and that the reason for doing so was unreasonable.

California takes over insurance company after wildfires

Regulators in California have taken over an insurance company that was unable to pay claims resulting from massive wildfires that destroyed more than 13,000 homes throughout the state. As a result, homeowner claims will now be paid by the California Insurance Guarantee Association. The largest fire in the state, which started on Nov. 8, almost completely destroyed the city of Paradise and many of the surrounding areas. There were also many losses in Ventura and Los Angeles County.

The insurance company is not expected to fight the takeover from the state. No other insurance companies who provided coverage for homeowners affected by the fire have reported insolvency as of the beginning of December. Not all damage has been assessed by insurers by this point, so it's not clear whether this will change in the future. Regulators aim to ease the suffering of impacted residents whenever needed.

What to do when accountants engage in negligent behavior

Business owners in California and throughout the country may hire accountants to keep track of their finances. Individuals who have large estates or many assets to manage may do the same. Ideally, an accountant will make sure that an individual pays taxes on time and generally follows accepted rules and accounting methods. However, there is a chance that an accountant will make a mistake or willfully disregard existing laws or other best practices.

If an accountant is preparing a statement on a person's behalf, he or she will follow Generally Accepted Accounting Principles. When an accountant is auditing records, he or she will follow Generally Accepted Auditing Standards. In the event that these guidelines aren't followed, an individual may take legal action against an accountant. The type of action a person takes depends on whether a mistake was intentional or was merely negligent in nature.

Denial of an insurance claim may be bad faith

Many people are great believers in insurance and purchase a variety of policies to help ensure total protection. Others begrudgingly take on only the bare minimum as required by law or for some specific contractual agreement. In any case, when a claim needs to be filed, the insured fully expects the company to stand up and pay on the claim. However, many California residents have been dismayed to find out that insurance claims are often denied.

It's important to realize that an insurance policy is in essence a contract that is interpreted according to the written terms but which also must adhere to some general rules of all contracts. One such general provision legal experts point out is the requirement to act in good faith. This is particularly important in insurance claims because it is the insurer that first determines its own liability to pay on a claim. When a repeated pattern of denials is observed within a particular insurer, a red flag is raised.

Negligence or misrepresentation could be accounting malpractice

Individuals and businesses in California often rely on accountants to track financial activity and prepare financial statements and tax returns. Accounting mistakes have the potential to get clients in financial or even legal trouble. Professional malpractice may occur when mistakes arise from negligence, misrepresentation or deviation from professional standards and practices. Under these circumstances, a client could pursue damages from the responsible professional.

A formal agreement to provide services between the accountant and client generally specifies that the accountant will comply with professional standards. Intentional departures from recognized standards could represent a breach of contract. The breach by definition must cause direct harm to the client.

Fire-floods threaten businesses in California

California business owners are familiar with the devastating effects of wildfires. In 2018 alone, wildfires have destroyed over 1.2 million acres in the state and demolished around 8,500 buildings. Hundreds of people have lost their businesses and livelihoods due to the blazes that continue to ravage the state.

Unfortunately, these fires are bringing businesses another natural disaster: fire-floods. A fire-flood occurs when rain lands on burned soil and cannot absorb into the ground. The mixture of rain and loose soil then rolls down hillsides in a form similar to a mudslide or flash flood.

Malpractice complaint demands $100 million

A $100 million legal malpractice lawsuit has been filed claiming a conflict of interest as a law firm allegedly represented both the lenders and the borrower during a legal action related to promissory notes. The plaintiff company in the case claims the law firm engaged in deceptive practices and breached fiduciary duties. California readers might be interested in the specifics of the case.

According to court filings, a Texas company called Quantum retained the law firm in 2016 and that representation continued even though Quantum ceased giving the firm work after some time. Thereafter, in 2017, Quantum issued promissory notes to two other companies. As part of that transaction, a fourth company, Empire Stock Transfer Inc., was authorized to reserve shares of common stock sufficient to compensate the lenders in the event that the terms of the notes were not honored.

California doctor awaits sentencing for insurance fraud

A jury in Riverside County returned a guilty verdict on charges of insurance fraud and perjury against an 86-year-old doctor on Oct. 4. He could potentially receive 18 years in a state correctional facility. After paying $30,000 in bail, the doctor secured his release while awaiting his sentencing hearing.

According to evidence presented at his trial, he had committed fraud on workers' compensation cases by billing for medical-legal reports. Doctors prepare these reports for disputed work injury cases. He sent bills to multiple employers within the state for reports on disputes that did not exist. The district attorney's office reported that he had billed companies for $90,000 to write reports that no one requested.

Former CEO faces accounting fraud charges

Businesses and individuals in California and around the country rely on professionals such as attorneys, accountants and brokers to manage their affairs, and both professionals and their employers can face severe penalties when documents required by state or federal law are falsified or not submitted in a timely manner. One such case involves an accountant who served as the chief financial officer of a leading management consulting company between 2008 and 2016. Media accounts reveal that the man has been indicted in connection with a scheme that allegedly led to his employer underreporting approximately $12 million in workers' compensation expenses.

According to prosecutors, the man falsified his employer's periodic filings with the Securities and Exchange Commission by improperly reporting workers' compensation costs as fees and payroll taxes. The man is said to have taken advantage of the scheme by selling 35,300 shares that he had purchased using his stock options for $467,261. Court records reveal that the man received more than $2.4 million when he sold the shares.

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