Unfair Practices in the California Insurance Code

The California Supreme Court has ruled that every contract for insurance issued in the state of California, including health insurance and life insurance policies, includes an implied covenant of good faith and fair dealing. Insurers who break this covenant are therefore violating California law, and they can be liable to the policyholder for the harm caused by their conduct, including compensatory damages (both economic and non-economic) as well as punitive damages in appropriate cases.

But how do you know when an insurance company is acting in bad faith? One resource is the California Insurance Code, which provides a list of unfair claims practices. While this list is not exclusive or all-encompassing, it provides a starting point for evaluating an insurance practice for compliance with the law or lack thereof.

At Gianelli & Morris, we fight every day to hold health insurance companies like Anthem Blue Cross, Health Net, and Molina, and life insurance companies like Aetna, Unum, and Northwestern Mutual, accountable for bad faith insurance practices and the harm they inflict on policyholders and their families. If your claim for benefits has been wrongfully denied or unreasonably delayed, contact our office to review the matter with a skilled and experienced Los Angeles insurance bad faith attorney.

Unfair Practices in CA Ins Code 790-790.15

Article 6.5 of the California Insurance Code, found in sections 790 through 790.15, sets out the California statutes for Unfair Practices in the business of insurance. The laws provide general rules governing insurance and include unfair practices related to unfair methods of competition among insurance companies as well as unfair or deceptive acts or practices directed at policyholders. Article 6.5 applies to all persons engaged in the business of insurance, specifically including nonprofit hospital associations and life agents, for example. It broadly prohibits any such person from engaging in any trade practice defined as an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.

Unfair and Deceptive Acts (790.03)

Section 790.03 specifically defines what types of conduct constitute unfair methods of competition and unfair and deceptive acts or practices in the business of insurance. These laws make it clear that insurers are to be honest and forthright in their dealings with customers. These rules include, for example:

• Misrepresenting the terms of a policy or the benefits promised, the financial condition of the company, or any misrepresentation designed to induce the policyholder to lapse, forfeit or surrender their insurance (790.03(a))
• Making any statement which is known or which by the exercise of reasonable care should be known to be untrue, deceptive, or misleading (790.03(b))
• Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or life annuity (790.03 (f)(1))
• Stating or implying that the insurer is a member of the California Insurance Guarantee Association or is insured against insolvency (790.03(g))

Unfair Claims Settlement Practices in 790.03(h)

When it comes to the critical practice of paying claims and providing benefits, subsection h of section 790.03 provides a long list of unfair claims settlement practices. It is a violation of subsection h for an insurer to knowingly commit or perform these practices with such frequency as to indicate a general business practice. These acts include:

1. Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue.

2. Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.

3. Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.

4. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured.

5. Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.

6. Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds, when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered.

7. Attempting to settle a claim by an insured for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application.

8. Attempting to settle claims on the basis of an application that was altered without notice to, or knowledge or consent of, the insured, his or her representative, agent, or broker.

9. Failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made.

10. Making known to insureds or claimants a practice of the insurer of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.

11. Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.

12. Failing to settle claims promptly, where liability has become apparent, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

13. Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement.

14. Directly advising a claimant not to obtain the services of an attorney.

15. Misleading a claimant as to the applicable statute of limitations.

16. Delaying the payment or provision of hospital, medical, or surgical benefits for services provided with respect to acquired immune deficiency syndrome or AIDS-related complex for more than 60 days after the insurer has received a claim for those benefits, where the delay in claim payment is for the purpose of investigating whether the condition preexisted the coverage. However, this 60-day period shall not include any time during which the insurer is awaiting a response for relevant medical information from a health care provider.

At Gianelli & Morris, we have seen insurance companies violate pretty much all of these requirements at one time or another. Some are out-of-state insurers who don’t bother to familiarize themselves with California legal requirements, but many times these acts are driven by nothing more than a desire to deny a claim to save the insurer money. We have seen firsthand the damage caused and the suffering inflicted by such callous actions, which is why we focus our firm’s practice on preventing and stopping such activity while ensuring that victims of bad faith insurance practices are fully compensated for the harm done.

Contact Gianelli & Morris to Fight Bad Faith Insurance Practice in California

If you believe you have been the victim of bad faith insurance practices when it comes to your California health or life insurance policy, let the experienced insurance lawyers at Gainelli & Morris take a look at your situation and let you know how we can help. Contact us at our Los Angeles office for a free consultation to discuss your claim.

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