Insurance companies in California usually have more experience negotiating and settling claims than policy holders. For this reason, courts hold them under good faith. A provider that acts in bad faith may be held liable. Each state sets its own bad faith requirements, but the laws have elements in common.
Bad faith elements
Several states view bad faith as acting without cause or unreasonable, and other states narrow that definition further. Tort laws commonly state that the insured should be treated fairly because of the nature of the relationship.
Two elements must be proven to bring a bad faith case against the provider. The policyholder must prove they had a legitimate claim outlined in the terms that the company denied. The policyholder may need to attempt collection once more in some states. The reasons the company withheld paying out must be reasonable, which may not include negligence.
Certain behaviors of insurers have been deemed unreasonable by courts. These actions may not be conclusive evidence, but they could make a stronger case. Some actions include not giving a reasonable cause for denial, not approving or denying a claim with reasonable time and misrepresenting facts.
Statutory bad faith
A policyholder can bring a bad faith claim and statutory bad faith claim. Statutes in some states give policyholders protection against unfair practices under the Unfair Insurer Practices Act. Violations of the Unfair Insurer Practices Act commonly get handled at the state level based on laws. The insured could bring litigation against the insurer for failing to make a fair settlement when the liability is clear, not using reasonable investigation standards or denying claims with no investigation.
Insurance bad faith laws can be tricky since they vary by state. An attorney may be able to help the insured decide if they have a case.