Printer Friendly View
Add To Favorites
Send To A Friend
WHAT IS INSURANCE BAD FAITH AND HOW DOES IT EFFECT YOU?
by: ADAMS • NOBLIN • VRATARIC LLP
Attorneys
Insurance companies are in the business of making money. Insurance companies make money by selling insurance policies. Insurance companies lose money by paying claims. So insureds can expect to have their claims denied, reduced, or delayed at every available opportunity. Thus, it is crucial for every person who has an insurance policy to stay well informed as to their rights under their policies and to avoid being the victims of insurance "bad faith."
An insurance policy is an insurance company's promise to protect you, your family, home, car or business against the financial costs of harmful events. The policy is a legal and binding contract between the insurance company and the insured. You have contractual rights and can enforce those rights against the insurance companies. Usually, insurance policies are long and complex, and by looking at the policies, it seems almost impossible to figure out exactly what your legal rights may be. Even with a dictionary, it is difficult to understand exactly what the policy covers and what it does not. This is because insurance policies are primarily composed of standardized forms created by insurance companies, brokers and attorneys. That is why it is important for everyone to understand that regardless of the complexity of the language contained in an insurance policy, there are rules that all insurance companies must follow.
An insurance company commits "bad faith" when it fails to perform those obligations which are written and implied in the policies it issues. For example, an insurance company commits "bad faith" when it wrongfully denies coverage, excludes claims, delays payment, pays less that what is owed and, in some cases, denies the existence of an insurance policy.
An insurance company has a legal duty to deal fairly with its insureds. Every insurance policy contains an unwritten or "implied" promise of good faith and fair dealing. In other words, an insurance company must be fair in its handling of all insurance claims, regardless of what the policy says. This means an insurance company must fulfill the reasonable expectations of the insured and must always give as much consideration to our financial interests as it does its own financial interests. An insurance company must thoroughly and promptly investigate all claims and examine all possible facts that might support an insured's claims. Upholding this duty of good faith and fair dealing has proven to be a difficult task for many insurance companies, adjusters and claims handlers.
In addition to the insurer's duty to perform implied obligations, an insurance company must also perform each and every written obligation in the policy. California courts have made it clear that insurance policies are broadly interpreted according to the plain meaning of the terms. And where those terms are confusing or ambiguous, the policy will be interpreted in favor of finding coverage for the insured. Alternatively, exclusions and limitations in the policy, which can result in a denial of a claim, must be clear and unmistakable language. Exclusions and limitations are to be interpreted as narrowly as possible. Essentially, when it is a toss up, courts will find coverage for an insured's claim. Courts try to protect our reasonable expectations.
Bringing a "bad faith" lawsuit against an insurance company is sometimes an insured's only option when a claim is wrongfully delayed, reduced or denied. In a "bad faith" lawsuit, an insurance company's business practices and conduct become an issue to show motive, opportunity, intent, plan, knowledge, absence, mistake or accident in the way the company dealt with the insured's claim. It is not necessary to prove that the insurance company intended to cause harm to the insured, only that the insurance company failed to fulfill its promise(s) and had no valid reason to decline payments rightfully due under the insurance policy.
California courts have recognized that insureds will suffer financial pressure and emotional distress if a claim is not paid, and that insureds are vulnerable to oppressive tactics by insurance companies. It is presumed that a denial of insurance benefits will cause the insured emotional distress. As such, an insured can recover all damages caused by the insurance company's "bad faith." This includes money owed, loss of use of insurance proceeds, general damages, attorneys' fees and, in cases of extreme and outrageous misconduct, punitive damages.
The above information is intended for general information only. For specific legal advice, contact your legal counsel.
Law Offices of Nicolas C. Vrataric
826 South "A" Street
Oxnard, CA 93030-7140
805-486-7600 phone
805-486-7655 fax
Our law firm represents clients in Oxnard, California, and in the surrounding Southern California area including the cities of Agoura Hills, Calabasas, Camarillo, Carpinteria, El Rio, Fillmore, Goleta, Isla Vista, Malibu, Moorpark, Ojai, Santa Barbara, Santa Paula, Simi Valley, Thousand Oaks, Ventura, Westlake Village; Ventura County, Santa Barbara County, Los Angeles County, and along the Pacific Coast Highway.
