An insurance carrier and a policyholder have a contractual relationship. The policyholder pays premiums in exchange for insurance coverage for certain events and losses as set forth in the policy. Insurance bad faith occurs when an insurance carrier unreasonably fails to investigate or pay a covered loss, which happens more often than one might think. The following are some examples of conduct that may constitute bad faith in California:
– Denial of a valid claim as defined by the policy
– Arbitrary determination of whether an incident or occurrence is covered
– Failure to perform an adequate investigation of a claim
– Arbitrary demands for proof of loss
– Failure to timely acknowledge and promptly reply when notified of a claim
– Unreasonable delay in resolving or denying a claim
– Deliberate misrepresentations to avoid paying a valid claim
– Failure to pay full benefits
– Cancellation of a policy in order to avoid payment on a claim
– Forcing a policyholder to pursue a claim against another party before settling a valid claim when settlement is required
This list is not exhaustive and an experienced attorney can help you determine if your insurance provider has acted in bad faith. Note that in some instances even if there is no coverage, a bad faith claim may still exist as result of how the claim was handled. Essentially proving bad faith requires a showing that the insurance carrier acted unreasonably and contrary to the industry’s customary business practices.
Is There a Time Limit for Filing a Bad Faith Lawsuit?
A statute of limitations is the deadline for a plaintiff to file a lawsuit. If the lawsuit is not brought within the proscribed time limit, then the plaintiff loses the right to recover from the cause of action. In California, the statute of limitations for a bad faith lawsuit is dependent on the nature of the cause of action asserted. For example, a claim for insurance bad faith is a 
tort, and the plaintiff generally has two (2) years from the time the insurer engages in wrongful behavior. It is important to note that there are exceptions to this rule and some insurance policies may contain a time limitation provision for bringing bad faith claims.
In certain instances, the court may permit a tolling of the statute of limitations. The most common reason for a tolling would be if the insurance carrier misled the insured as to the time limit for filing a bad faith claim.
Since the statute of limitations for bad faith claims are more complex than other types of claims, be sure to consult an attorney as soon as you believe you may have a claim against your insurance carrier.
Bad Faith and Damages
If you are successful in a bad faith lawsuit you will recover the benefits due under the policy plus interest. You may also be entitled to recover consequential economic damages and attorneys’ fees. If the insurer acted maliciously or fraudulently, you may be able to recover punitive damages.
For more information on how to file a bad faith claim against your insurance provider, contact experienced insurance attorney Drew E. Pomerance today.
