Insurance Bad Faith in California: Recognizing and Fighting Unfair Tactics

When you file an insurance claim, you expect your provider to honor the agreement in good faith. But what happens when they don’t? Unfortunately, insurance bad faith is more common than many Californians realize. A 2023 study by the American Association for Justice found that some of the largest insurers in the country systematically delay, deny, or underpay valid claims, placing profits over people.

At State Law Firm, we’ve seen firsthand how these unfair practices affect real lives. Whether it’s a car accident victim waiting months for reimbursement or a policyholder denied coverage with little to no explanation. As a Sherman Oaks car accident lawyer, we’ve helped clients uncover key evidence—like traffic camera footage—and take on insurance companies that refuse to play fair.

This guide will help you understand what insurance bad faith looks like in California, how it affects your rights, and most importantly, what steps you can take to hold insurers accountable. As a boutique personal injury firm run by young attorneys who are evolving into litigators, we’re passionate about fighting more complex cases—and arming you with the knowledge to fight back too.

Understanding Insurance Bad Faith: Definition and Legal Framework

Insurance companies in California are legally obligated to treat policyholders fairly under the implied covenant of good faith and fair dealing. When they breach this duty by unreasonably denying, delaying, or undervaluing a valid claim, they may be acting in bad faith.

Under California law, bad faith can arise in both first-party (your insurance) and third-party (the at-fault party’s insurer) contexts. The law recognizes two primary forms:

• First-party bad faith: When your insurer unreasonably refuses to pay your claim (e.g., property damage or uninsured motorist coverage).
• Third-party bad faith: When your insurer fails to defend or indemnify you in a liability claim within policy limits.

Pro Tip: Keep records of all communications with your insurer—including emails, letters, and adjuster calls. These can become key evidence if a claim becomes contentious.

The Common Signs of Insurance Bad Faith Practices in California

Not every denied claim signals bad faith, but patterns of delay, deflection, and dismissal can be red flags. Here’s what to watch for:

• Unreasonable delays in investigating or processing your claim
• Failure to explain a claim denial or provide policy-based reasons
• Lowball settlement offers that don’t align with the evidence.
• Requests for excessive documentation that is not reasonably necessary
• Ignoring communications or failing to respond to inquiries
• Misrepresenting policy language or coverage limitations

If you’ve experienced any of these tactics, it may be time to dig deeper—and potentially escalate.

Pro Tip: If the insurance company provides vague or inconsistent reasons for denial, request a written explanation referencing specific policy provisions.

The Impact of Insurance Bad Faith on Policyholders and Their Rights

The harm caused by bad faith isn’t just financial—it’s personal. Delayed payments can lead to unpaid medical bills, mounting debt, and property loss. Worse, the emotional distress of navigating a stonewalling insurer can be overwhelming.

Policyholders in California have legal rights, including:

• The right to prompt, fair claims handling
  
• The right to transparency and explanations behind claim decisions
• The right to dispute unreasonable claim denials through legal channels

Our team at State Law Firm has witnessed firsthand the devastatingimpact these tactics canhave onr real people. That’s why we fight to level the playing field and push back when insurers abuse their position.

Steps to Take When You Suspect Insurance Bad Faith by Your Provider

If you believe your insurer is acting in bad faith, taking the proper steps early can make all the difference:

1. Request all claim-related documents in writing.
   
2. Keep a timeline of communications, decisions, and delays.
3. Save all written and digital correspondence.
   
4. Request a clear explanation for any denial or delay.
5. File a complaint with the California Department of Insurance if needed: https://www.insurance.ca.gov/
   

Pro Tip: You can also consult a personal injury attorney to evaluate whether your case has the hallmarks of insurance bad faith—and whether you may be entitled to damages beyond your policy limits.

Legal Remedies Available for Victims of Insurance Bad Faith in California

California law provides potent remedies for policyholders who have been wronged by insurance companies acting in bad faith. You may be entitled to:

• Compensatory damages (to make you whole)
• Emotional distress damages
  
• Punitive damages (if the insurer acted maliciously or fraudulently)
• Attorney’s fees and court costs
  

You can pursue these remedies through a breach of contract and/or tort claim, depending on the facts. If successful, your recovery could exceed the limits of your original policy.

At State Law Firm, we’re not afraid to take on insurance companies that hope you’ll walk away. Our attorneys are driven to litigate more complex cases, and we’re building a track record of doing just that.

Empowering Yourself Against Unfair Tactics – Know Your Rights and Seek Justice!

Dealing with a difficult insurer can feel isolating, but you don’t have to go through it alone. Understanding your rights under California law is the first step. Whether you need help uncovering traffic camera footage to support your car accident claim or guidance in holding an insurer accountable for bad faith, our team is ready.

At State Law Firm, we’re a boutique personal injury firm built by attorneys who care about getting it right— or you. If something feels off in your claims process, trust your instincts. It might be more than just a delay—it could be a case of bad faith.

Let us help you make it right.