Identifying Bad Faith Practices by Insurers
Health insurance companies in California owe their policyholders a duty of good faith and fair dealing. Under California law, insurers are required to handle claims promptly, fairly, and reasonably. This means health insurers must pay covered benefits when they are due or provide thorough and reasonable explanations for any denials. If an insurer delays, denies, or underpays a legitimate claim without a valid reason, it may be acting in bad faith.
An experienced Los Angeles insurance bad faith attorney can explain what California law expects of insurers and outline warning signs consumers should be aware of when filing health insurance claims. If you believe your claim has been improperly handled by your insurer, Gianelli & Morris can help you evaluate your situation and pursue justice.
Insurers Must Handle Claims Fairly and Promptly
California law clearly prohibits insurance companies from engaging in unfair or deceptive practices. Insurers cannot misrepresent important policy provisions or pertinent facts related to coverage. They must respond to claim communications within a reasonable timeframe and adopt fair standards for investigating claims. An insurer must promptly determine whether it will approve or deny a claim once properly submitted, and cannot offer substantially less than a claim’s fair value in an attempt to force policyholders into litigation. Simply put, insurers must handle claims without unjustified delays, dishonesty, or obstruction.
These standards apply to health plans regulated by the state, including companies such as Anthem Blue Cross, Blue Shield, Aetna, HealthNet, and similar providers. The California Department of Insurance oversees traditional health insurers, while the Department of Managed Health Care regulates managed care plans, including HMO plans. Both agencies ensure that insurers handle claims in a responsible and transparent manner.
California Courts and the Covenant of Good Faith
California courts have long recognized an implied covenant of good faith and fair dealing in every insurance policy. This covenant means insurers cannot undermine the policyholder’s right to receive agreed-upon benefits. For example, if a health insurance policy covers a particular treatment and the insurer refuses payment without proper justification, the insurer could be held liable for bad faith.
The landmark California Supreme Court decision Gruenberg v. Aetna established that if an insurer unreasonably withholds payment of a valid claim, it can be sued for damages beyond the coverage amount. Similarly, the Egan v. Mutual of Omaha decision clarified that insurers breach their good faith obligations if they fail to properly investigate claims, such as neglecting to consider relevant medical evidence or ignoring the opinion of treating doctors. Insurers must thoroughly and fairly review all pertinent documentation and medical opinions when deciding whether to approve or deny claims.
A Court of Appeal decision, McCormick v. Sentinel Life Insurance Co., emphasized that insurers cannot excuse their investigative duties due to minor omissions in claim forms or paperwork. The court held that unreasonable delays in paying claims, even without outright denial, can constitute bad faith. Therefore, insurers cannot merely stall payment indefinitely without justification.
Recognizing Bad Faith Practices
Certain warning signs may indicate that an insurer is not handling your claim fairly. For instance, if your insurer repeatedly denies or significantly underpays medically necessary treatments without a valid explanation, this may signal bad faith. Excessive delays, such as prolonged periods without communication after a claim submission or repeated assurances without follow-up, are also red flags.
Repeated requests for identical documentation can indicate deliberate stalling tactics. Similarly, if your insurer ignores critical medical records or the opinions of your treating doctors, instead relying solely on their hired reviewers, this could reflect a breach of their duty of good faith.
Misleading statements, such as changing explanations about what your policy covers or incorrect assertions about medical necessity, may be evidence of deceptive practices. While these factors may not individually definitively prove bad faith, collectively, they can indicate a troubling pattern that warrants closer scrutiny.
Steps to Take if You Suspect Bad Faith
If you believe your insurer is acting improperly, careful documentation is crucial. Keep detailed records, including copies of all claims, correspondence, emails, and notes from phone calls. Request written explanations for any denials or delays in claim processing. You can file a complaint with the California Department of Insurance or the Department of Managed Health Care, depending on your type of insurance. However, regulatory processes can often be lengthy and may not always provide a timely resolution.
Ultimately, legal recourse may be your best option. California law allows policyholders to pursue lawsuits for bad faith against insurers. Through legal action, you can seek recovery of the benefits owed, consequential damages, and emotional distress damages, if substantial emotional harm resulted directly from the insurer’s actions. In particularly egregious cases, where the insurer acted maliciously, oppressively, or fraudulently, you may also obtain punitive damages, which are designed to punish wrongdoing and deter future misconduct.
Because bad faith insurance litigation can be complex, seeking advice from an attorney experienced in insurance law is essential. An attorney can thoroughly evaluate your situation, determine if your insurer’s conduct constitutes bad faith, and pursue your claim aggressively to recover rightful benefits and other appropriate damages.
Contact Gianelli & Morris
If you suspect your health insurer is engaging in bad faith practices, such as unjustified claim denials, unexplained delays, or ignoring medical evidence, do not hesitate to seek experienced legal guidance. California law protects your rights, and an experienced attorney can ensure you are treated fairly.
Contact Gianelli & Morris today for a free consultation to discuss your insurance bad faith claim and learn how we can help you hold your insurer accountable.
