Insurance Bad Faith in California: When Your Own Insurer Becomes the Defendant
You paid premiums for years and never filed anything. Then you were hurt, you opened a claim, and the company you had been paying started acting like the other side. Calls go unreturned. Records you already sent are requested again. An offer arrives with a number on it and no explanation of where the number came from.
Most people assume that is simply how insurers are, and that the only answer is to argue harder. California recognizes a separate cause of action against an insurer that handles a claim unreasonably, with its own damages, its own recoverable attorney fees, and punitive damages. Your insurer stops being the payer and becomes the defendant.
Quick answer: Every insurance policy in California carries an implied covenant of good faith and fair dealing, and an insurer that unreasonably withholds benefits due under the policy commits the tort of bad faith. Insurance Code section 790.03(h) lists the practices California considers unfair claims handling, including unreasonable delay, failure to investigate, and offers not supported by the facts. Under Brandt v. Superior Court (1985) 37 Cal.3d 813, the attorney fees you incur to obtain the policy benefits are themselves recoverable as damages, and Civil Code section 3294 allows punitive damages where the insurer's conduct rises to malice, oppression, or fraud.
Ordinary Friction Compared to Actual Bad Faith
Not every frustrating claim is a bad faith claim. The line is reasonableness.
- The adjuster requests medical records and bills. Conduct that may be bad faith: The same records are demanded repeatedly while the file does not move, month after month.
- The insurer values your claim lower than you do. Conduct that may be bad faith: An offer has no stated basis and does not change after significant new records arrive.
- The insurer takes weeks to evaluate a completed demand. Conduct that may be bad faith: Months of silence, unreturned calls, and a file passed between adjusters with no evaluation performed.
- A reservation of rights letter raising a coverage question. Conduct that may be bad faith: A denial that misstates a policy provision, or quotes no provision at all.
- A request that a physician examine you. Conduct that may be bad faith: A denial resting on a paper review by a doctor who never examined you, ignoring your treating physicians.
- A genuine disagreement about how a policy term applies. Conduct that may be bad faith: A refusal to investigate obvious information that would have supported the claim.
What the Implied Covenant Actually Requires
Stripped of the language, the rule is this: an insurer must give at least as much consideration to your interests as to its own. That is a higher obligation than parties to an ordinary contract owe each other, because insurance is not an ordinary contract. You buy peace of mind, at a moment when you have no leverage, on a form you did not draft. Courts have long recognized that imbalance, which is why breaching this contract can be a tort with tort damages attached.
The word doing the work is unreasonable. An insurer that pays too little is not automatically in bad faith. One that pays too little with no reasoned basis, or that never bothered to learn what the claim was worth, is a different matter.
First Party and Third Party Bad Faith
These are two different claims, and people confuse them constantly.
First party bad faith is a claim against your own insurer for benefits owed to you: uninsured or underinsured motorist coverage, medical payments coverage, or a disability or health policy. Your insurer owes you the covenant directly, and if it unreasonably refuses to pay what the policy provides, you can sue it.
Third party bad faith involves a liability insurer defending someone else. If a driver hits you, that driver's insurer owes the covenant to the driver, not to you. You cannot sue the other side's carrier for handling your claim badly, however badly it is handled.
That is why the tactics described in our post on dealing with insurance adjusters are answered through the underlying case rather than through a bad faith action.
The Statute, and the Thing People Get Wrong About It
Insurance Code section 790.03(h) is the closest thing California has to a checklist of bad claims handling. It names misrepresenting policy provisions, failing to act promptly on communications, failing to adopt reasonable standards for prompt investigation, failing to attempt a fair settlement once liability is reasonably clear, and compelling insureds to sue by offering substantially less than what is ultimately recovered.
Here is what almost every article gets wrong. You cannot sue directly under that statute. California courts held it creates no private right of action, and the Insurance Commissioner enforces it. What it provides is a benchmark: courts and juries look to those listed practices as evidence of what is unreasonable in a common law bad faith case. Anyone telling you that you have a claim under section 790.03(h) is describing something that does not exist.
The Three Kinds of Conduct That Actually Support a Claim
Unreasonable delay
Delay is the most common and the most deniable. An insurer that never denies your claim and never pays it has, in practice, denied it, because you cannot appeal silence. What proves it is the file: dated correspondence, a log of unanswered calls, and a demand package establishing when the insurer had everything it needed.
Failure to investigate
Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809 addressed this directly. An insurer cannot decide a claim by gathering only the evidence that defeats it. The duty runs the other way: it must fully inquire into the possible bases supporting the claim, including contacting treating physicians.
Offers with no basis
A lowball offer is not bad faith by itself. It becomes evidence of bad faith when the insurer cannot explain it, when it ignores documented treatment and wage loss, or when the number does not move after records arrive that plainly change the picture. Knowing how claims are valued, which we cover in what your California personal injury case is worth, is what separates an aggressive evaluation from an unsupported one.
The Genuine Dispute Rule, and Why Most Claims Are Not Bad Faith
This is the honest part. California protects insurers that are simply wrong.
Where an insurer denies or limits a claim based on a genuine dispute about coverage or the facts, and that position is reasonable, there is no bad faith even if a court later decides it was mistaken. Being wrong is not the tort.
So most disagreements about the value of an injury claim are not bad faith. A carrier that reviews your records, retains a doctor, states its reasoning, and offers a number you find too low has done something you can litigate, not something you can sue it for separately. Bad faith lives at the edges: no investigation, no explanation, no movement, or a denial resting on something the policy does not say.
Two Recoveries Almost Nobody Knows About
In an ordinary case each side pays its own lawyer, and compensation is the ceiling. Bad faith differs on both counts.
Brandt fees
Brandt v. Superior Court (1985) 37 Cal.3d 813 held that when an insurer's breach forces you to hire an attorney to obtain benefits the policy already owed you, those fees are an element of your damages. They are compensation for a loss the insurer caused, not a fee award.
Two limits matter. The recoverable portion covers fees attributable to obtaining the policy benefits, not fees spent prosecuting the bad faith case itself. And the amount must be proved, by evidence at trial or by stipulation.
The effect on negotiation is real. Once a carrier understands that the fee incurred to pry loose the benefits is coming back at it as damages, the arithmetic of delay changes.
Punitive damages against an insurer
Civil Code section 3294 permits punitive damages where the defendant is guilty of oppression, fraud, or malice, proved by clear and convincing evidence. Bad faith conduct can meet that standard, and Egan is among the decisions establishing that an insurer is not immune from it.
Against a company there is an added requirement. The conduct must have been committed, authorized, or ratified by an officer, director, or managing agent, or the company must have hired the wrongdoer with advance knowledge of unfitness. That is why bad faith litigation reaches for claims manuals, performance metrics, and supervisor sign offs. It is not curiosity. It is an element of the claim.
Building the Record Before You Need It
These cases are won by people who documented an ordinary claim carefully, before they knew they had one.
- Put everything in writing, including emailed summaries of phone calls back to the adjuster
- Send a complete demand package and keep proof of what went out and when
- Ask in writing for the basis of any offer or denial and the policy language relied on
- Keep every reservation of rights letter and every denial letter
- Note each unreturned call and each change of adjuster with dates
A carrier asked in writing to explain itself, that did not, looks very different to a jury than one that was never asked.
When You Do Not Need a Bad Faith Lawyer
Most claim frustration is not a case, and pursuing one is a poor use of your money.
If the insurer responded, explained its position, made an offer grounded in the records, and simply values your injury lower than you do, that is a valuation fight. Push it through the underlying claim, through arbitration if your policy provides for it, or through the lawsuit. Adding a bad faith theory to a valuation disagreement usually weakens both.
Consider a bad faith claim when benefits are clearly owed and unpaid, when months pass with no evaluation, when a denial cites language the policy does not contain, or when the insurer never investigated. Those are the files where a California personal injury attorney should be reading the claim file itself and not just your medical records.
Frequently Asked Questions
Can I sue the other driver's insurance company for bad faith?
No. That insurer owes the covenant to its own insured, not to you. Your remedy runs through the claim against the driver.
Is a low settlement offer bad faith?
Not by itself. It becomes evidence of bad faith when the insurer cannot articulate a basis for it, ignores documented treatment and wage loss, or will not reconsider after receiving records that change the analysis.
What are Brandt fees?
Under Brandt v. Superior Court (1985) 37 Cal.3d 813, they are the attorney fees you reasonably incurred to obtain policy benefits the insurer wrongly withheld, recoverable as damages. They do not cover fees for litigating the bad faith claim itself.
How long can an insurer take before delay becomes bad faith?
There is no fixed number of days. What matters is whether the insurer had what it needed to decide and failed to act within a reasonable time, which is why a dated, complete demand package is so valuable.
Can I get punitive damages against my insurer?
Sometimes. Civil Code section 3294 requires clear and convincing evidence of oppression, fraud, or malice, and against a company the conduct must have been authorized or ratified by an officer, director, or managing agent.
Does filing a complaint with the Department of Insurance help?
It can prompt a response and it creates a record, but it does not produce compensation. The Insurance Commissioner enforces Insurance Code section 790.03(h). Your money comes from the common law claim.
Your Own Insurer Refusing to Pay? Geller Legal Can Help.
Bad faith is proved out of the claim file, not out of your memory of how the calls felt. What decides these cases is adjuster notes, internal evaluations, supervisor approvals, and the dates on which the carrier had everything it needed and still did nothing. That material is obtainable in litigation and invisible before it, which is why so many valid claims are abandoned by people who were told the delay was normal.
Geller Legal | Personal Injury Attorneys handles these cases with the detail they demand. We document the demand and the silence that follows, force the carrier to state its position in writing, and pursue Brandt fees and punitive damages where the file supports them rather than treating a stalled claim as something to wait out.
We serve injured clients throughout California, with offices in Walnut Creek, Oakland, and Los Angeles. If your own uninsured motorist or medical payments claim has sat unevaluated for months, that is worth a conversation now, while the record is still being made.
Contact Geller Legal for a free, confidential consultation with Attorney Michael Geller.