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Unfair Practices in the Business of Insurance: Is Your Insurance Company Acting in Bad Faith Toward You?

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As a policyholder, you expect your insurance company to act in good faith and honor its obligations when you file a claim. Unfortunately, not all insurance companies prioritize their policyholders’ interests. Some engage in unfair practices, wrongfully denying claims or delaying payments. California has laws in place to protect policyholders from unfair practices, although the help of a skilled attorney is often essential to exercising those rights and holding insurance companies accountable when they violate the law.

Below we look at some unfair insurance practices prohibited by California law. If you’ve had a claim wrongfully denied or if you’ve otherwise been mistreated by your insurance company, reach out to Gianelli & Morris in Los Angeles to explore your options for justice and compensation with the help of a leading California insurance law firm.

Duty to Investigate Claims

Under California Insurance Code Section 790.03, insurance companies are required to conduct a thorough investigation when a policyholder files a claim. This duty emphasizes the importance of gathering all relevant facts before making claim determinations. Insurance companies must not rush to conclusions or unfairly dismiss legitimate claims. This ensures policyholders are treated fairly and their claims are evaluated on their merits. Insurance companies routinely violate this provision of the law by issuing blanket denials of certain types of claims without conducting an independent investigation of the individual claim.

Duty to Process Claims

Insurance companies have a duty to process claims promptly and efficiently. California Code of Regulations Title 10, section 2695.9 stipulates that insurers must establish reasonable standards for the prompt investigation and processing of claims. Delays can cause significant financial and emotional distress to policyholders. By processing claims in a timely manner, insurance companies show respect for their policyholders’ rights and minimize unnecessary hardships.

Duty to Pay Claims Fully, Promptly, and in Good Faith

When a policyholder’s claim is valid and supported by the policy terms, insurance companies must promptly pay the claim in full. California Insurance Code Section 790.03(h)(5) explicitly describes an unfair claims settlement practice as “not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.” This provision emphasizes the importance of insurers acting in good faith and paying policyholders what they are owed once their liability is established.

Duty to Deal Fairly With Policyholders at All Times

Insurance companies must maintain fair dealing with policyholders throughout the claim process. California Insurance Code Section 790.03 prohibits insurers from misleading policyholders by making false statements or engaging in unfair practices. It also requires insurers to refrain from unfairly discriminating against claimants. By treating policyholders with respect, insurers uphold their duty to deal fairly and maintain trust in the insurance industry.

In addition to the laws cited here, California courts have held that all insurance contracts contain an implied covenant of good faith and fair dealing. Insurers who act in bad faith can be liable for a wide range of damages their misconduct has caused, above and beyond the benefits of the claim itself.

Hold Insurance Companies Accountable for Unfair Practices

Understanding the provisions outlined in the California Insurance Code and California Code of Regulations is crucial for policyholders who believe their insurance companies are engaging in unfair practices. At Gianelli & Morris, we are dedicated to protecting the rights of policyholders and holding insurance companies accountable for their actions. If you have experienced wrongful claim denials, unreasonable delays, or other bad faith insurance practices, contact our experienced team today. We will fight to ensure that you receive the coverage and benefits you deserve.

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