Did Your Insurance Company Refuse to Defend Your Legal Claim?
The California insurance bad faith lawyers Gianelli & Morris are ready to help.
When you buy a policy from an insurance company, you are buying security and peace of mind. You are paying for the knowledge that, should anything covered by the policy happen, you will be taken care of financially and logistically. Insurance companies, in turn, owe certain responsibilities to policyholders. They must not only pay what they owe under the terms of the policy; they must also act in good faith every step of the way once a claim is filed. If a liability policyholder faces a lawsuit for a covered risk, the insurance company must come to the policyholder’s defense.
When insurance companies fail to defend policyholders against claims or otherwise breach their contracts and commit bad faith conduct, policyholders have the right to fight back. The bad faith insurance attorneys at Gianelli & Morris help policyholders get the coverage they deserve and hold unscrupulous insurance companies liable for their harmful, bad faith actions.
What is the Duty to Defend?
In California, insurance companies owe certain duties and responsibilities to policyholders. By purchasing an insurance policy, you are buying the right to not only be covered by the policy, but also for the insurance company to act in your best interests with regards to implementing the policy. If you own liability insurance, your insurer not only owes you indemnification under the terms of your policy; they also have a duty to defend you against third-party lawsuits based on covered risks.
For example, if you were involved in a car accident and the other driver alleges that you were at fault, your auto insurance provider has a duty to defend you against any resulting lawsuit. They cannot simply abandon you and leave you to your own devices. Likewise, your homeowners’ insurance company must step in to defend you against claims resulting from injuries on your property.
When Does an Insurer Have a Duty to Defend?
In California, the insurance company’s duty to defend and indemnify the insured party kicks in so long as the claim is even “potentially” covered. If, for example, the cause of an accident or other key circumstances are unknown–meaning the policyholder might not be at fault, or the situation might not be covered, absolving the insurer of liability–the insurer must treat the legal claim as a covered risk until they discover otherwise.
If coverage is legitimately disputed, a California court will look at the language in the policy and ask whether the insured party had a “reasonable expectation” of coverage, given the language and the circumstances. If there is an ambiguity in the policy language, the court will resolve the ambiguity in favor of the policyholder. The insurer drafted the policy, meaning it’s their responsibility to make clear exclusions. If the facts are unclear and coverage is not certain, the insurer must conduct a proper investigation and defend the policyholder until it has proper grounds not to do so.
Insurers must not deny claims out of hand without conducting a proper investigation. Insurance companies have a duty to act in good faith with regard to claims under their policies. That means they cannot distort the facts or the terms of their policy in order to avoid liability.
Penalties for Failure to Defend
Insurance providers who fail to uphold their duty to defend can face several consequences. First of all, the insurer is still required to indemnify the insured party for covered claims. If the policyholder loses in court and faces a hefty judgment, the insurance company cannot then step into court and challenge the judgment or other matters adjudicated in court. They are stuck with what the judge or jury says they owe.
Moreover, failure to provide a legal defense for a policyholder in a situation covered by the policy is an act of insurance bad faith. It’s a breach of contract and a breach of the implied covenant of good faith and fair dealing. If an insurer engages in bad faith to the detriment of the insured party, the insurance provider can face a number of penalties, including:
- Amounts the insurer owes under the policy, based on the injured party’s claims
- Costs the policyholder expended in defending the lawsuit
- Additional damages suffered by the policyholder, including anxiety, mental anguish, and emotional distress
- In exceptionally egregious cases, punitive damages
Emotional distress and punitive damages can lead to very serious penalties for insurers who fail to defend policyholders as they are required to do under law and policy language. If your insurance provider has refused to provide you with a proper legal defense, a seasoned insurance bad faith attorney can walk you through your options and your potential damages.
Call Gianelli & Morris for Help Recovering Compensation After a Bad Faith Failure to Defend
If you’ve been treated to a failure to defend or other bad faith insurance conduct by your insurance company, our knowledgeable and passionate insurance law attorneys are ready to help. Call the California insurance lawyers Gianelli & Morris at 213-489-1600 for a no-cost, confidential consultation. We’ll take the time to evaluate your situation and let you know how we can help.