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What is insurance bad faith?

On Behalf of | Jul 6, 2022 | Insurance Law

Because you are a responsible homeowner, you are never late with your insurance premiums. This is true even though your insurance costs have climbed steadily over the past decade. Now that you need your insurance company to come through, you expect it to act quickly.

As you may suspect, insurance companies have an interest in settling claims for as low as possible. To protect its bottom line, your insurer may employ a variety of tactics. Still, if the company acts in bad faith, you may have grounds to take legal action against it.

A legal duty

According to California law, insurers have a legal duty to act in good faith when dealing with policyholder claims. This means your insurer should accept and investigate your claim promptly. You also should not have to wait forever to receive a fair settlement offer.

Insurance bad faith

Bad faith insurance practices may occur in any of your insurance policies, including the coverage you have for your home, car and health. Still, bad faith requires more than just disagreeing about your final settlement.

If your insurer does any of the following, you may have a bad-faith cause of action:

  • Failing to give you a reason for denying your claim
  • Not performing an adequate investigation
  • Giving you a low-ball settlement offer
  • Refusing to pay your claim
  • Delaying the processing of your claim
  • Threatening you

It can be intimidating to push back against shady insurance tactics, of course. Ultimately, though, because you have lived up to your end of the bargain, you should not stand idly by while your insurer acts in bad faith.