Practical. Principled. Approachable.

Insurance companies must deal fairly with those they serve

On Behalf of | Jul 31, 2023 | Insurance Disputes

Like other states, California has laws that require insurance companies to treat their policyholders and those who file claims fairly. Bay Area residents may have heard this requirement called the duty to deal in good faith.

Basically, these laws protect the public from an insurance company, or an employee of the company, from taking advantage of the fact that the person making the claim usually is vulnerable and needs money.

In exchange, those filing claims are expected to be honest with the insurance company and cooperate with the insurance company’s investigation.

The idea that an insurance company must deal in good faith prohibits them from a number of hard-ball tactics. This list is only a summary what California’s insurance laws require and prohibit:

  • Insurance companies may not play a waiting game. They must instead move forward with a prompt investigation and communicate regularly with the person making the claim.
  • They may not make low-ball offers with the idea that the insured does not have the time or resources to take the insurance carrier to court or to demand more.
  • They have to be completely upfront and honest in what they tell people making claims.
  • While the insurance company may ask reasonable questions, they may not bury a person with irrelevant or repetitive information requests or requirements.
  • They may not unreasonably refuse to settle a claim.
  • Insurance companies have other obligations as well.

If an insurance company does not act in good faith, a victim has options

In some situations, a person who suspects their insurance carrier is dealing in bad faith can contact  the California Department of Insurance and get assistance.

There are other cases though where an insurance carrier might hold out on defending their insured from a liability claim or paying out on a claim and their actions hurt policyholders.

In these cases, a policyholder might be able to recover compensation for their losses, even if those losses are more than the limits of their insurance policies.