If you were hurt in a car accident in California and your insurance company is stalling, lowballing, or flatly refusing to pay, you may be dealing with more than a slow claims process. You may be dealing with bad faith, and California law gives you the right to fight back.
This article explains exactly what bad faith means under California law, how to recognize it, how to document it, and what you can recover if you pursue a claim.
The short version:
- California Insurance Code §790.03(h) lists specific unfair claims settlement practices that constitute bad faith.
- Insurers must acknowledge claims within 15 days and decide within 40 days of receiving proof of claim.
- Bad faith applies to your own insurer (first-party) and to the at-fault driver's insurer (third-party), but through different legal routes.
- Recoverable damages go beyond your original claim and can include consequential damages, attorney fees, and punitive damages.
- Every piece of communication with your insurer is evidence. Start saving it now.
If you believe your insurer is acting unfairly, call (818) 794-9947 for a free consultation. No fee unless we win.
What Is Insurance Bad Faith Under California Law
In California, insurance is a contract. When you pay your premiums, the insurer promises to handle your claims fairly and in good faith. That duty is not just a handshake promise. It is built into California law.
Cal. Ins. Code §790.03(h) sets out a list of unfair claims settlement practices that are prohibited by the state. On top of that statutory foundation, California courts have long held that every insurance contract carries an implied covenant of good faith and fair dealing. When an insurer violates that covenant without a reasonable basis, it can be held liable for bad faith, also called "insurance bad faith" or "tortious breach of the implied covenant."
The standard courts use is whether the insurer acted unreasonably. A simple mistake, or a legitimate dispute over coverage, does not automatically equal bad faith. What crosses the line is an insurer that delays, denies, or underpays without a proper factual or legal basis, and either knows it is wrong or acts with reckless disregard for whether it is wrong.
Under California Insurance Code §790.03(h), an insurer commits bad faith when it unreasonably delays or denies a claim without a proper investigation.
Common Bad Faith Tactics: Delay, Deny, Defend
Insurance carriers have internal playbooks. Some of those tactics cross the line from aggressive negotiation into bad faith. Knowing what to look for protects you.
Unreasonable delays. California's Fair Claims Settlement Practices Regulations, found under the California Code of Regulations, require an insurer to acknowledge your claim within 15 calendar days of receiving notice. Once you submit proof of claim, the insurer must accept or deny within 40 calendar days. Dragging out the process beyond these deadlines without a legitimate reason is a warning sign.
California's Fair Claims Settlement Practices Regulations require insurers to acknowledge a claim within 15 calendar days and to accept or deny it within 40 days of receiving proof of claim.
Inadequate investigation. An insurer cannot simply take the word of its own adjuster or ignore medical records, police reports, and witness statements. Failing to conduct a thorough, prompt investigation before denying or limiting your claim is a recognized bad faith practice under Cal. Ins. Code §790.03(h)(3).
Lowball offers without explanation. Offering a settlement that bears no reasonable relationship to the value of your claim, and refusing to explain the basis for the number, is another red flag. The regulations require the insurer to provide a written explanation when it offers less than you claimed.
Misrepresenting policy terms. An insurer that tells you something is not covered when it actually is, or that interprets policy language in a way that no reasonable reading would support, may be acting in bad faith.
Demanding excessive documentation. Requiring you to submit the same documents repeatedly, or conditioning payment on records that have no bearing on your claim, is a delay tactic that regulators take seriously.
Threatening or discouraging you from hiring an attorney. This one is less obvious but real. If an adjuster tells you that hiring a lawyer will slow down your claim or reduce your payout, that is pressure you should ignore, and note.
First-Party vs. Third-Party Bad Faith Claims
California recognizes two distinct types of bad faith claims, and the rules that govern each are different. Understanding which one applies to your situation shapes your legal options.
First-Party Bad Faith
A first-party claim arises when your own insurance company mistreats you. In a car accident context, this most often involves your uninsured or underinsured motorist (UM/UIM) coverage, your collision coverage, or your medical payments (MedPay) coverage.
Because you have a direct contractual relationship with your own insurer, you can sue for breach of contract and for the tort of bad faith. That means your potential damages are broader than just the policy benefits you were owed. You can seek consequential damages (losses caused by the delay or denial), attorney fees, and in cases of oppressive or malicious conduct, punitive damages under Cal. Civ. Code §3294.
Third-Party Bad Faith
A third-party claim is more indirect. Here, you were injured by someone else, and that person's liability insurer is handling your claim. You do not have a contract with that insurer. So the direct bad faith claim belongs to the at-fault driver, not to you.
However, if the at-fault driver's insurer refuses to settle your claim within the policy limits when it reasonably should have, and a court later enters a judgment against the at-fault driver that exceeds those limits, the driver suffers an excess judgment. At that point, the driver may have a bad faith claim against their own insurer for exposing them to that excess. California courts have recognized that the driver can assign that bad faith claim to you, the injured party. That assignment gives you a path to pursue the insurer directly for the harm its refusal caused.
California recognizes both first-party bad faith, where you sue your own insurer, and third-party bad faith, where the at-fault driver's insurer is the wrongdoer.
This area of law is technical. Whether an assignment is available, and whether the facts support an excess judgment theory, depends on the specifics of your case. An attorney can evaluate whether this route is open to you.
Warning Signs Your Insurer Is Acting Unfairly
Not every delay is bad faith, and not every low offer is actionable. But the following patterns, especially in combination, deserve a closer look.
- No contact after 15 days. If you reported your claim and have not heard back within two weeks, the clock on regulatory compliance has already run.
- Repeated requests for the same documents. One follow-up request is normal. Three requests for the same medical records is not.
- The adjuster keeps changing. Each new adjuster restarts their review, extending delays. It can also mean the file is being managed to slow the process.
- Settlement offers with a tight deadline. A "take it or leave it by Friday" offer is a pressure tactic. A legitimate offer does not evaporate in 72 hours.
- Written denials with vague reasoning. California regulations require denial letters to state the specific policy provision or factual basis for the denial. A letter that says only "your claim does not meet our criteria" is legally insufficient.
- Refusing to explain the valuation. If you ask why the offer is $8,000 and the adjuster cannot or will not give you a written breakdown, that is a problem.
- Blaming you without investigation. An insurer that assigns fault to you before completing its investigation, especially before reviewing the police report or speaking with witnesses, is skipping steps it is required to take.
Documenting Insurer Misconduct
If you believe your insurer is acting in bad faith, your documentation is your case. Start a file today and add to it every time something happens.
What to save:
- Every letter, email, and text message from the insurer or its adjuster
- A written log of every phone call: date, time, name of the person you spoke with, and a summary of what was said
- All requests for documents and your responses, with dates
- Every settlement offer and the insurer's stated basis for the amount
- Any denial letters, with the stated reason for denial
- Your own medical bills, records, and receipts for out-of-pocket expenses that piled up while the claim was pending
Why this matters: A bad faith claim lives or dies on the insurer's conduct over time. A single delayed letter is easy to explain away. A pattern of delays, contradictory explanations, and ignored deadlines is much harder to walk back. Your log creates that pattern in writing.
One practical step: After every phone call with an adjuster, send a brief follow-up email: "This confirms our call today at 2 p.m. You stated that my claim is under review and that you will have a decision by [date]." This creates a paper trail even when the insurer does not put things in writing.
Potential Extra Damages in a Bad Faith Case
One of the most important things to understand about a bad faith claim is that your potential recovery is not capped at what the insurer should have paid you originally. California law allows additional categories of damages precisely because the insurer's misconduct caused additional harm.
The original claim amount. You are still entitled to what you were owed under the policy or under the liability claim in the first place.
Consequential damages. These are losses that flowed directly from the insurer's bad faith conduct. For example, if the insurer delayed paying your medical bills and your credit was damaged as a result, or if you had to borrow money at high interest to cover expenses the insurer should have covered, those losses may be recoverable.
Attorney fees. In California, a plaintiff who prevails in a bad faith case against an insurer can recover attorney fees as part of the tort damages. This is a meaningful exception to the general rule that each side pays its own attorney.
Punitive damages. Where the insurer's conduct was malicious, fraudulent, or oppressive, a jury can award punitive damages under Cal. Civ. Code §3294. These are designed to punish the insurer and deter similar conduct. The amount is not capped by a formula, though courts and statutes impose outer limits based on constitutional due process.
A successful bad faith lawsuit in California can recover not only the original claim amount but also consequential damages, attorney fees, and in egregious cases punitive damages.
It is important to be clear: not every bad faith case produces punitive damages, and not every delay leads to a six-figure judgment. The facts of your case determine what is recoverable. An attorney can give you a realistic picture based on your specific situation.
Steps to Take If You Suspect Bad Faith
If you think your insurer is crossing the line, here is what to do.
1. Do not sign anything yet. Insurers sometimes present a release or a settlement agreement alongside a payment. Once you sign, you typically give up the right to pursue further claims, including a bad faith claim. Read every document before you sign, and have an attorney review it if you have any doubt.
2. Send everything in writing. From this point forward, communicate with your insurer in writing as much as possible. If you must call, follow up with an email summarizing the call. Written records are your protection.
3. Request your claim file. Under California law, you have the right to request a copy of your claim file from your insurer. The file includes adjuster notes, internal communications, and the basis for decisions made on your claim. What is in that file can be revealing.
4. File a complaint with the California Department of Insurance (CDI). The CDI regulates insurers and investigates unfair claims practices. A formal complaint creates a regulatory record and may prompt the insurer to take your claim more seriously. Filing a complaint does not, by itself, create a bad faith lawsuit, but it is part of a documented pattern of your efforts to resolve the matter.
5. Talk to an attorney. Bad faith law is technical. The difference between a slow claim and an actionable bad faith case often turns on details that require legal analysis. Most personal injury attorneys, including our team at Nordanyan Law, offer free consultations and work on a contingency basis, meaning no fee unless we win.
If you suspect bad faith, document every phone call, save every letter, and contact an attorney before signing any release or accepting any payment.
Call (818) 794-9947 to speak with a California personal injury attorney at no cost. We handle bad faith cases alongside car accident claims and can evaluate your situation the same day.
FAQ
What counts as bad faith by an insurance company in California?
California Insurance Code §790.03(h) lists specific prohibited practices, including failing to investigate promptly, denying a claim without a reasonable basis, misrepresenting policy terms, and offering unreasonably low settlements without explanation. Beyond the statute, any conduct that is unreasonable given the facts and law of your claim, and that causes you harm, can support a bad faith tort claim.
Can I sue my insurance company for bad faith in California?
Yes. California recognizes bad faith as both a breach of contract and a tort. If your own insurer (first-party) treats you unfairly, you can sue for the original claim amount, consequential damages, attorney fees, and potentially punitive damages. Third-party bad faith, against the at-fault driver's insurer, follows a different path described above.
What is the difference between first-party and third-party bad faith?
First-party bad faith is a dispute with your own insurer under your own policy. Third-party bad faith involves the at-fault driver's liability insurer mishandling the injured person's claim. Because you have no direct contract with the other driver's insurer, the legal route for third-party bad faith typically runs through an excess judgment and an assignment of the at-fault driver's own bad faith claim against their insurer.
How do I prove my insurer acted in bad faith?
You must show that the insurer's conduct was unreasonable given the facts it knew at the time. Evidence includes the claim file, the timeline of communications, denial letters, internal adjuster notes obtained in discovery, and expert testimony about claims-handling standards. Your written log of calls and correspondence is foundational evidence. An attorney can guide you through the discovery process.
Does filing a complaint with the California Department of Insurance help my case?
It creates a regulatory record and can prompt the insurer to reconsider its position. It does not automatically create a bad faith lawsuit, and the CDI cannot award you damages. Think of it as one tool among several, not a substitute for legal action.
What are the time limits for filing a bad faith lawsuit in California?
The statute of limitations for a bad faith insurance claim in California is generally two years from the date you discovered the bad faith conduct, under Cal. Code Civ. Proc. §335.1, which sets a two-year limit for the bad faith tort claim. A breach-of-contract claim on a written insurance policy carries a separate four-year limit under §337, while §339 (two years) governs oral contracts. For the bad faith tort claim, the two-year period is typically the starting point, but the clock and accrual date can be fact-specific. Do not wait. Talk to an attorney as soon as you suspect bad faith.
Can the at-fault driver's insurer commit bad faith against me?
Not in the same direct way your own insurer can, because you have no contract with them. However, if that insurer refuses to settle your claim within the at-fault driver's policy limits when it reasonably should have, and an excess judgment results, the insured driver may have a bad faith claim that can be assigned to you. California courts have recognized this path.
Do I need an attorney to bring a bad faith claim?
You are not legally required to have one, but bad faith litigation is among the most complex areas of insurance law. Insurers have teams of experienced defense lawyers. Without an attorney, you are unlikely to obtain the claim file, conduct meaningful discovery, or present the expert testimony that courts expect in these cases. Given that most bad faith attorneys work on contingency, the practical barrier to representation is low.
If your car accident claim in California has been delayed, denied, or lowballed without a clear reason, the law may give you a path to more than what the insurer originally offered. Call Nordanyan Law at (818) 794-9947 for a free consultation with a California personal injury attorney. No fee unless we win.
Reviewed by Minas Nordanyan, CA Bar No. 296806. This article is for general informational purposes and does not constitute legal advice for your specific situation.