Insurance Bad Faith Claims 

What is Bad Faith Insurance?

Bad faith insurance occurs when an insurance company fails to honor the duty to deal fairly and honestly with its insured, thereby denying or delaying benefits to which its policyholder is entitled. In simple terms, when you pay your premiums, you have a reasonable expectation that your insurer will act in good faith, investigating claims properly, communicating transparently, and paying valid claims promptly. When the insurer violates that expectation without justification, it may be liable for “bad faith.” 

In the legal context, “bad faith” refers to a tort (a wrongful act) or breach of the implied covenant of good faith and fair dealing inherent in every insurance contract. The insurer’s obligation is not just to follow the written contract but also to honor the spirit of fairness implicit in the policy. That means an insurer must not use loopholes, gamesmanship, or delay tactics to avoid paying its insureds. 

At DL Law Group, we help individuals who believe their insurer has acted in bad faith. We guide you every step of the way; explaining your rights, handling filings, negotiations and court proceedings, and working to maximize the compensation you deserve. Because we work on a contingency fee basis, you pay nothing upfront; we get paid only if we win your case. 

Below, you’ll find a more detailed discussion of what constitutes bad faith, real examples, the legal rights of California policyholders, and what to do if you suspect your insurer is acting unfairly. 

What Constitutes Bad Faith Insurance 

Bad faith is not merely a denied claim. It’s when the insurer acts unreasonably or unfairly in the handling of your claim. Here are some common types of bad faith, with real-world illustrations of how they play out and why they cause harm: 

1. Unreasonable Delays in Investigating or Paying a Claim 

What it can look like: 

• You submit a claim, but the insurer often delays reviewing it for weeks or months. 
• They fail to return calls, repeatedly request the same documents, or refuse to acknowledge your submissions. 
• Once they “approve” the claim, they delay issuing payment beyond a reasonable timeframe, even though the damage is covered. 

Harm caused: 

• You may suffer financial hardship because you were counting on that payment (e.g., for repairs, medical bills, replacement costs). 
• Delays can exacerbate damage (e.g., water damage spreading, mold, structural weakening). 
• Your trusting reliance on the insurer’s promise is undermined. 

2. Denial of a Claim Without a Valid Reason 

What it can look like: 

• You file a disability claim supported by medical records, but the insurer rejects it, citing ambiguous or irrelevant policy terms without explaining how. 
• They deny a long-term care or health insurance claim by claiming an exclusion that doesn’t apply. 

Harm caused: 

• You’re left without needed funds or coverage while the insurer saves money unjustly. 
• Recovering your rightful benefits becomes costly, time-consuming, and stressful. 

3. Failing to Conduct a Proper Investigation 

What it can look like: 

• The insurer ignores key medical records or the opinion of your treating physicians. 
• They refuse to interview witnesses or examine evidence in your favor. 
• They rely on biased or self‑serving experts without vetting alternatives. 

Harm caused: 

• The insurer reaches a conclusion designed to deny coverage rather than ascertaining the truth. 
• You lose out because their “investigation” was superficial or predetermined. 

4. Misrepresenting Policy Language or Coverage 

What it can look like: 

• The insurer tells you that certain benefits are excluded when your policy actually covers them. 
• They send summaries or brochures rather than the full policy, hiding unfavorable terms. 
• They twist or distort the meaning of clauses to limit your coverage. 

Harm caused: 

• You may make decisions (e.g., whether to proceed with treatment or incur costs) based on incorrect information. 
• You risk losing trust and may relinquish claims to which you are legally entitled. 

5. Offering Significantly Less Than What the Claim Is Worth 

What it can look like: 

• After you document your losses (medical bills, property damage, future costs), they propose a “lowball” settlement far below what a fair valuation would support. 
• They pressure you to accept before you can consult counsel or recalculate properly. 

Harm caused: 

• You may accept a low offer under financial or emotional pressure and lose the difference. 
• Your only recourse may be litigation, which is expensive and stressful. 

6. Threatening or Pressuring the Policyholder 

What it can look like: 

• The insurer warns they will cancel your policy, raise premiums, or deny future claims if you pursue an appeal or hire an attorney. 
• They hint at “legal consequences” if you dispute their decision. 

Harm caused: 

• Intimidation may coerce you into giving up your rights. 
• Your insurer’s misconduct is hidden behind fear tactics. 

These bad faith tactics don’t just rob you of compensation; they erode your trust, delay justice, and impose hardships you never should have borne. 

Legal Basis & Policyholder Rights in California 

In California, policyholders are protected by both statutory law and judicial decisions. Here are the foundations for your rights: 

Implied Covenant of Good Faith and Fair Dealing 

Every insurance contract in California includes this implied covenant. It mandates that the insurer must act reasonably and in good faith toward the policyholder when managing claims and may not deprive the insured of the policy's benefits.   

California Insurance Code § 790.03 (Unfair Claims Settlement Practices)   

This statute prohibits certain bad-faith practices, such as: 

• Misrepresenting policy language or coverage 
• Failing to acknowledge and act promptly on communications 
• Denial of claims without a valid investigation 
• Offering amounts substantially less than what is justified 
• Unreasonable delays in paying claims   

California Civil Code § 3294 (Punitive Damages)   

If you can show that the insurer acted with fraud, malice, or oppression, the court may award punitive damages in addition to compensatory damages. 

Jury Instruction CACI 2330: “Bad Faith” 

This is a standard jury instruction used in California courts, clarifying that to prove bad faith, the insured must show the insurer “unreasonably or without proper cause” acted in a way that deprived the insured of policy benefits. 

Case Example: Hangarter v. Provident  

One of Mr. Lilienstein’s most notable accomplishments was in Hangarter v. Provident, a Ninth Circuit case influential in disability insurance law, where the court confirmed an insurer’s duty to act in good faith in claims handling and held that punitive damage awards may be justified when the insurer acts with malice or deceit. Interested in learning more about this? Click here.   

What Should You Do If You Suspect Bad Faith? 

If you believe your insurance company is acting in bad faith, here are steps you can take: 

1. Document Everything:  Keep all emails, letters, notes of phone calls, and policy documents: record dates, names, and summaries of conversations. 
2. Review Your Policy:  Understand your coverage, exclusions, deadlines, and obligations. Compare what the insurer is saying to what your contract actually states. Need help doing this? Let our team take a look by scheduling a consultation today. 
3. Send a Formal Demand or Proof of Loss:  Depending on your policy type, insurers often require a formal “proof of loss” or demand before beginning liability exposure. Our team will guide you through preparing and submitting a proper formal demand or proof of loss, ensuring it aligns with your policy requirements and meets insurer expectations. 
4. File a Complaint with the California Department of Insurance (CDI):  The CDI oversees insurer conduct in California and can open investigations into complaint patterns. If needed, our team can assist you in filing a complaint with the CDI and help you navigate the process to ensure your concerns are clearly documented and submitted correctly. 
5. Consult with DL Law Group:  You don’t have to go it alone. At DL Law Group, we offer a free consultation to review your claims and determine whether you have a valid bad faith case. 
6. Preserve Evidence:  Don’t delete files, documents, or recordings. We may be able to subpoena internal insurer records, claim notes, communications, or internal policies. 
7. Act Promptly (Watch the Statute of Limitations):  Claims for bad faith are subject to the statute of limitations; waiting too long can forfeit your legal rights. 

If you're unsure whether your insurer’s behavior amounts to bad faith, reach out now. A quick review can help you understand where you stand and whether you can take legal action on your case. 

Why Choose DL Law Group for Your Bad Faith Case? 

1. Deep Experience in Insurance Litigation 

We specialize in handling complex claims, ERISA violations, long-term care denials, disability, health insurance, and more. We bring decades of experience to each case. 

2. National Reach, Local Focus in the Bay Area 

Though we serve clients nationwide, we maintain a strong presence in San Francisco and the surrounding region. We understand local courts, judges, and insurance market trends. 

3. Free Consultations & Contingency Fees 

You pay nothing up front. We cover all expenses and get paid only when we win or settle your case. That aligns our interests with yours. 

4. Comprehensive Support 

We guide you through every step: paperwork, negotiations, mediations, court filings, appeals, and collection. You never face the insurer alone. 

5. Accountability & Commitment 

Insurers have teams of lawyers and adjusters; you deserve equal representation. We fight to hold them accountable and recover full value, including penalties, interest, and punitive damages when warranted. 

If your insurer is delaying, denying, underpaying, or acting unreasonably, don’t wait. Contact DL Law Group today for a free consultation to explore your rights and legal options. Your insurance contract is more than just a piece of paper; it’s a promise. When that promise is broken, we’ll help you enforce it.