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Defining Insurance Bad Faith in California: A Guide for Policyholders

Insurance is the bedrock of economic and personal security in society. It provides policyholders with much-needed peace of mind, promising financial coverage when unpredictable events occur. When you purchase an insurance policy, you trust that the insurer will act in good faith, fulfilling their end of the contract and supporting you when adversity strikes. Unfortunately, this is not always the case. There are situations where an insurance company acts in what is known as “bad faith,” causing undue hardship for policyholders. Gianelli & Morris, a leading California insurance law firm protecting the rights of policyholders, is committed to helping clients understand and navigate these challenging situations.

Read on for a basic introduction to the concept of insurance bad faith in California, and contact Gianelli & Morris if your life, health or disability claim has been wrongfully denied or if you have otherwise been treated unfairly regarding a claim.

What Is Insurance Bad Faith?

In its simplest form, insurance bad faith refers to a situation where an insurance company acts dishonestly or fails to uphold its duty to deal fairly and act in good faith with policyholders. This duty is inherent in every insurance contract, and its breach may result in a bad faith claim against the insurer.

Bad faith can manifest in various ways, including unreasonable denial of a claim, undue delay in processing a claim, failing to conduct a proper investigation, or offering a significantly lower amount than what is rightfully due. These actions, among others, can leave policyholders without the necessary funds to recover from their loss, exacerbating their distress and financial insecurity.

California’s Interpretation of Insurance Bad Faith

California has been a pioneer in recognizing and addressing the issue of insurance bad faith, shaping its legal landscape over many decades. Under California law, every insurance contract includes a duty of “good faith and fair dealing,” which means insurers must not only honor their explicit contract terms but also refrain from any actions that would undermine the rights of the insured to receive the benefits of the policy.

Importantly, California extends the concept of bad faith beyond just breach of contract. The state recognizes a separate tort for insurance bad faith, which means policyholders may seek additional damages beyond the policy limits. These can include emotional distress damages and potentially punitive damages if the insurer’s conduct is egregious enough. This is designed to deter insurance companies from acting in bad faith and to fully compensate policyholders who have been wronged.

California’s legal approach to bad faith is rooted in a set of court decisions, notably the landmark case of Gruenberg v. Aetna Ins. Co. (1973), which established that an insurer can be held liable if it unreasonably refuses to pay a claim. Other important cases include Crisci v. Security Insurance Co. (1967), which established the principle that insurers owe a duty of utmost good faith to their insured, and Egan v. Mutual of Omaha (1979), where the court affirmed that punitive damages could be awarded in cases of egregious bad faith conduct by insurers.

As a law firm that vigorously litigates bad faith insurance claims in state and federal courts in Los Angeles and statewide, Gianelli & Morris is steeped in the legal history of California bad faith insurance law, including recent decisions where our own firm has been directly involved in shaping the landscape of the law in this vital area.

Don’t Put Up With Bad Faith Conduct From Your Insurer. Get Help Today From Gianelli & Morris

Navigating the complexity of insurance law, particularly in the realm of bad faith, can be daunting for policyholders. At Gianelli & Morris, we strive to provide not just legal representation, but also education and empowerment for our clients. Our dedicated team is experienced in all facets of insurance bad faith law, and we are committed to helping policyholders protect their rights and get the insurance benefits they are entitled to.

If you believe your insurance company has acted in bad faith, it’s essential to seek legal help promptly. Let our expertise be your guide in this challenging journey, and together, we can ensure that you receive the justice you deserve.

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