California Insurance Bad Faith
Our client was injured in a major high impact collision. His injuries were severe and included head trauma. He felt like the guy on the left in the white shirt when dealing with his insurance company. Here’s a bit more about what happened.
Prior to the collision, our client was lawfully driving down a dirt road. Approaching him from the other direction at a high rate of speed were two trucks racing each other. One of the trucks struck our client head-on totaling both vehicles.
All parties brought claims against the other. The truck driver was uninsured.
Originally our client’s insurance company took the position that our client (it’s insured) was not at fault for causing the collision. Asserting this liability argument, the insurance company then settled the claims brought against our client by the other drivers for pennies on the dollar.
During this same period, our client finished his treatment and asserted an uninsured motorist claim against his insurance company. Despite having a $100,000 uninsured motorist policy, our client’s insurance company said the policy coverage was only $30,000. They also took the position, for the first time, that our client did something wrong and was at fault for causing the accident and his injuries.
After two years of litigation, we were able to show that the coverage was not $30,000 but was $100,000 with an additional $1,000,000 umbrella. We also presented evidence supporting the fact that our client was not at fault, and the underinsured motorist claim was eventually resolved via binding arbitration for $855,047.80.
Once the uninsured arbitration decision was reached, we then sued our client’s insurance company for insurance bad faith. We did this because they flip-flopped on liability to accommodate their needs and also misrepresented their insurance policies and limits.
After a great deal more work, a final bad faith settlement was reached against this same insurance company for $2,500,000. The total amount paid by the insurance carrier was $3,355,047.80. Note that this is after the insurance carrier stated in writing the only coverage available was $30,000.
What is Insurance Bad Faith?
In California, Insurance bad faith is a civil wrong, also known as a tort, by an insured person against his or her insurance company for bad, wrongful and even illegal acts. Under California law, an insurance company owes a duty of good faith and fair dealing to the people they insured. This duty is often known as the “implied covenant of good faith and fair dealing” which automatically exists by operation of law in every insurance contract.
If an insurance company violates that covenant by failing to act lawfully (and this happens way too often), the insured person (or “policyholder”) may sue the insurance company on a tort claim. A tort claim allows for both compensatory and punitive damages. Additionally, the insured may also sue on a breach of contract claim and for consequential damages. On a bad faith claim, an injured claimant may be able to sue for more than the amount of the policy.
Bad faith applies when insurance companies and adjusters mislead their insureds as to policy amounts or coverage. We see big insurance companies manipulate the facts to try and avoid paying out claims and putting their corporate profits over people. Denying a claim in full claiming an act isn’t covered under the terms of an insurance policy is also an issue we see often.
A majority of the insurance claims adjusters are good people who are simply doing their job. Having said that, the fact of the matter is that insurance bad faith exist and can be a real problem for consumers. Understanding your legal rights as to insurance bad faith is important, especially when it comes down to protecting you and your family.