Insurance Code - The Insurance Unfair Practices Act
The California Insurance Code contains a subsection (790.03(h)), called the Unfair Practices Act. It defines a variety of actions that are considered unfair practices by an insurer. While there is no right to sue directly under this statute, a policyholder can use the statute in a lawsuit to establish the minimum standards with which an insurance company must comply.
While not an exhaustive list of all of the types of conduct that would constitute insurance bad faith, the following specific prohibited acts are listed in the California Insurance Code:
- Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverage at issue
- Failing to acknowledge and act reasonably prompt upon communications with respect to claims arising under insurance policies
- Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies
- Failing to affirm or deny coverage of claims within a reasonable time after proof-of-loss requirements have been completed and submitted by the insured
- Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear
- Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered
- Attempting to settle a claim by an insured for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application
- Attempting to settle claims on the basis of an application that was altered without notice to, or knowledge or consent of, the insured, his or her representative, agent, or broker
- Failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made
- Making known to insureds or claimants a practice by the insurer of appealing arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration
- Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report and then requiring the subsequent submission of formal proof-of-loss forms, both of which contain substantially the same information
- Failing to settle claims promptly when liability has become apparent under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage
- Failing to promptly provide a reasonable explanation of the basis relied on in the insurance policy in relation to the facts or applicable law for the denial of a claim or for the offer of a compromise settlement
- Directly advising a claimant not to obtain the services of an attorney
- Misleading a claimant as to the applicable statute of limitations
- Delaying the payment or provision of hospital, medical, or surgical benefits for services provided with respect to acquired immune deficiency syndrome or AIDS-related complex for more than 60 days after the insurer has received a claim for those benefits, where the delay in claim payment is for the purpose of investigating whether the condition preexisted the coverage. However, this 60-day period shall not include any time during which the insurer is awaiting a response for relevant medical information from a health care provider.
For more information on the California Insurance Code, please see the official California Legislative Information website.
Knowledge Is Power
Armed with information about what constitutes unfair practices and the regulations under which insurers must operate in California, policyholders have recourse to hold insurers accountable for their actions. The insurance lawyers at Pillsbury & Levinson, LLP, can help. Contact our San Francisco law office to schedule a consultation with an experienced insurance attorney who can review your claim.