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Insurance · Bad faith
Insurance bad faith lawyers for policyholders and businesses
Insurance bad faith is an insurer’s unreasonable failure to honor its policy, such as denying a covered claim without a proper investigation or delaying payment without cause. Fernald & Zaffos represents policyholders and businesses in bad faith cases in California and Nevada. Depending on the facts, an insurer that acts in bad faith can owe more than the policy benefits.
Leads this practice
Brandon C. Fernald · Founding Partner
Founded the firm in 2009 after seven years at Norton Rose Fulbright. Admitted in California, Nevada, North Carolina and Illinois.
What bad faith looks like
Every insurance policy carries an implied duty of good faith and fair dealing. An insurer that unreasonably denies a claim, drags out an investigation, misreads policy language, lowballs a covered loss or fails to defend its insured may be liable for more than the policy benefits. Bad faith can look like:
- A denial that ignores the policy language or the facts of the loss
- Unreasonable delay in investigating, communicating or paying
- Refusing to defend or settle a claim when the policy requires it
- Pressure to accept less than the claim is worth
- A one-sided or inadequate investigation
The law in California
California courts recognize a tort claim when an insurer unreasonably withholds benefits due under the policy (Gruenberg v. Aetna Insurance Co. (1973) 9 Cal.3d 566). A mistaken denial alone is not bad faith. The question is whether the insurer acted unreasonably or without proper cause, and a genuine dispute over coverage can be a defense.
The Insurance Code lists unfair claims settlement practices in section 790.03(h), and the Fair Claims Settlement Practices Regulations set deadlines for handling claims. Policyholders cannot sue under section 790.03(h) directly (Moradi-Shalal v. Fireman’s Fund (1988) 46 Cal.3d 287), but a violation can be evidence that the insurer acted unreasonably.
Remedies
Depending on the facts, remedies can include the policy benefits, the attorney’s fees incurred to recover those benefits (Brandt v. Superior Court (1985) 37 Cal.3d 813), and in some cases consequential damages, emotional distress damages and punitive damages. Punitive damages require clear and convincing proof of oppression, fraud or malice (Civ. Code § 3294).
The law in Nevada
Nevada also recognizes a bad faith claim when an insurer denies or delays a claim without a reasonable basis and knows or recklessly disregards that it has none. Nevada’s unfair claims practices statute, NRS 686A.310, lists prohibited practices, and unlike California it allows the insured to sue the insurer for damages caused by them.
California and Nevada
Different rules on suing over claims practices
California policyholders cannot sue directly under Insurance Code section 790.03(h). Nevada policyholders can bring a claim under NRS 686A.310.
How we handle a bad faith case
- Review. We read the policy, every endorsement, the denial or reservation-of-rights letter and the claim correspondence.
- Demand. Many disputes resolve once the insurer sees a documented position from counsel.
- Suit. If the insurer will not pay, we file for breach of contract and bad faith and take the case through discovery and, when needed, trial.
Common questions
Don’t see yours? Call (323) 410-0300.
What is insurance bad faith?
It is an insurer’s unreasonable failure to honor its obligations under the policy, such as denying a covered claim without a proper investigation, delaying payment without cause or refusing to defend when the policy requires it.
Is every denied claim bad faith?
No. An insurer can deny a claim it reasonably believes is not covered. Bad faith requires unreasonable conduct, such as ignoring facts, misreading the policy or delaying without cause.
What can I recover in a bad faith case?
Depending on the facts, the policy benefits, the attorney’s fees spent recovering those benefits, and in some cases consequential, emotional distress and punitive damages.
Does bad faith apply to business policies?
Yes. The duty of good faith applies to commercial property, liability, business interruption and other business policies as well as personal policies.
How long do I have to file a bad faith lawsuit?
It depends on the claim and the policy. Tort claims for bad faith and contract claims on the policy have different limitation periods, and many property policies require suit within one year. Get advice early.
Do you represent insurers?
No. In insurance coverage and bad faith disputes we represent policyholders and businesses. We also defend insurance brokers and agencies in claims brought by their clients.
Related
Practice page
Answering a denial or a low offer before a lawsuit.
Guide
The duty, the remedies and the claims practices rules.
Practice page
Commercial property and lost income after a covered loss.
The information on this page is general and is not legal advice. Contacting the firm does not create an attorney-client relationship. Prior results do not guarantee a similar outcome.