When your insurance company refuses to pay a valid claim, delays your benefits without justification, or denies coverage based on unreasonable interpretations of the policy, it commits insurance bad faith. California Insurance Code 790.03 enumerates specific unfair claims practices that violate state law and breach the insurer's duty of good faith and fair dealing. For policyholders who have paid premiums faithfully, only to face stonewalling or denial when disaster strikes, understanding this statute is the first step toward holding the carrier accountable and recovering the full value of your claim.
California Insurance Code Section 790.03 is part of the Unfair Insurance Practices Act and lists seventeen categories of conduct that constitute unfair claims settlement practices. These include misrepresenting pertinent facts or policy provisions, failing to acknowledge and act reasonably promptly upon communications with respect to claims, failing to adopt and implement reasonable standards for the prompt investigation of claims, refusing to pay claims without conducting a reasonable investigation, and not attempting in good faith to effectuate prompt, fair, and equitable settlements when liability is reasonably clear. The statute also prohibits compelling insureds to institute litigation by offering substantially less than amounts ultimately recovered in suits, attempting to settle claims for less than the amount a reasonable person would believe was owed, and failing to provide a reasonable explanation for denial or compromise of a claim. Violations of Section 790.03 are not merely technical missteps. They form the basis for tort claims for breach of the covenant of good faith and fair dealing, an implied term in every insurance contract in California under the landmark case Comunale v. Traders & General Ins. Co., 50 Cal.2d 654 (1958). When an insurer engages in bad faith practices enumerated in Section 790.03, the policyholder may recover not only the policy benefits wrongfully withheld but also consequential damages, emotional distress damages, and in egregious cases, punitive damages designed to punish and deter the insurer's misconduct.
Every insurance contract in California carries an implied covenant of good faith and fair dealing. This covenant requires the insurer to give at least as much consideration to the interests of the insured as it gives to its own interests. Under Egan v. Mutual of Omaha Ins. Co., 24 Cal.3d 809, 818 (1979), an insurer breaches this covenant when it unreasonably refuses to pay policy benefits. The insurer's duty extends to the entire claims process, from investigation through settlement. An insurer must conduct a thorough and objective investigation, must not cherry-pick evidence to support a denial, must interpret policy language in a manner consistent with the insured's reasonable expectations, and must not place its own financial interests ahead of the insured's coverage rights. The standard is one of reasonableness. Even if the insurer's ultimate denial is technically supportable, the bad faith inquiry asks whether the carrier's investigation and decision-making process were reasonable. If the insurer ignored critical evidence, failed to interview key witnesses, relied on biased experts, or delayed the claim without justification, it may be liable for bad faith even if coverage was genuinely disputed. For policyholders navigating this landscape, documentation is critical. Preserve all correspondence with your carrier, document every phone call and conversation, and retain copies of all claim forms, medical records, repair estimates, and other evidence submitted. These records become the evidentiary foundation for proving the insurer acted unreasonably.
In first-party claims, where the insured seeks benefits under their own policy, violations of California Insurance Code 790.03 often take predictable forms. Lowball settlement offers are pervasive. The adjuster offers $10,000.00 (Ten Thousand Dollars) to settle a total loss vehicle claim when the actual cash value is demonstrably $18,000.00 (Eighteen Thousand Dollars), hoping the insured will accept out of desperation. Unreasonable delay is another hallmark. The carrier sits on the claim for months without explanation, ignoring the insured's repeated inquiries and failing to schedule an inspection or appraisal. Inadequate investigation is rampant. The adjuster denies the claim based on a cursory desktop review, never inspecting the property, never interviewing the claimant, and never consulting the policy's actual language. Misrepresentation of policy terms is common. The adjuster tells the insured that flood damage is excluded when the policy in fact provides limited water damage coverage, or tells the insured that their UM/UIM coverage does not apply to hit-and-run accidents when it plainly does under California Insurance Code 11580.2. These practices violate Section 790.03(h), which prohibits knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverages at issue. They also violate subsections addressing failure to conduct reasonable investigations and failure to attempt good faith settlement. For victims of these practices, the remedy is a bad faith lawsuit seeking not only the withheld benefits but also damages for the emotional distress, financial hardship, and disruption caused by the insurer's misconduct. Our firm has represented numerous clients against carriers who violated Section 790.03, and we have recovered policy limits plus substantial compensatory and punitive damages.
In the third-party liability context, the insurer's bad faith can expose its own insured to personal liability exceeding policy limits. When a claimant makes a reasonable settlement demand within the insured's policy limits and the insurer refuses to accept, choosing instead to roll the dice at trial, the insurer may be liable for any excess judgment. Under Comunale and its progeny, the insurer owes its insured a duty to accept reasonable settlement offers to protect the insured from personal exposure. If the insurer rejects a $100,000.00 (One Hundred Thousand Dollars) policy limits demand and the jury returns a verdict of $500,000.00 (Five Hundred Thousand Dollars), the insurer may be liable for the entire $500,000.00 (Five Hundred Thousand Dollars), not just the $100,000.00 (One Hundred Thousand Dollars) policy, because it breached its duty to settle. This duty arises when the claim against the insured is such that a reasonable insurer would accept the settlement offer to protect its insured from excess exposure. The analysis focuses on the strength of the claimant's case, the severity of the injuries, the credibility of witnesses, and the likelihood of a verdict exceeding the policy limits. Insurers who play hardball, gambling with their insured's financial future to save claims dollars, violate the covenant of good faith and fair dealing and commit bad faith as a matter of law. The insured can then assign their bad faith claim to the judgment creditor, who steps into the insured's shoes to pursue the insurer for the full judgment. These cases often settle for policy limits plus substantial additional compensation once the insurer realizes its exposure. If you are a judgment creditor holding an unsatisfied judgment because the defendant's insurer refused a reasonable settlement demand, you have rights under California law to pursue the insurer directly.
California law allows multiple categories of damages in insurance bad faith cases. Contract damages include the full amount of benefits owed under the policy, plus interest from the date the benefits should have been paid. Tort damages for breach of the covenant of good faith and fair dealing include consequential economic losses such as lost wages, medical expenses not covered due to the delay, increased repair costs, and foreclosure or bankruptcy precipitated by the insurer's refusal to pay. Emotional distress damages are recoverable for the anxiety, frustration, and mental suffering caused by the insurer's conduct, particularly when the insured faced eviction, foreclosure, or inability to pay for medical treatment. Under Civil Code Section 3294, punitive damages may be awarded when the insurer's conduct involved fraud, oppression, or malice. Oppression means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights. Malice means conduct intended to cause injury or despicable conduct carried on with a willful and conscious disregard of the rights or safety of others. The punitive damages analysis focuses on the insurer's net worth, the reprehensibility of its conduct, and the need to deter similar conduct in the future. Punitive awards in bad faith cases have ranged from several times compensatory damages to tens of millions of dollars in cases involving systematic claim denials or egregious stonewalling. Additionally, prevailing plaintiffs in bad faith cases may recover their attorney's fees and costs under the common fund doctrine or under principles of equity, particularly when the insurer's conduct forced the insured to hire counsel to obtain benefits that should have been paid promptly. The Brandt fee, calculated as a reasonable percentage of the benefits recovered, compensates the policyholder's attorney for forcing the insurer to do what it should have done in the first place. For more information on how we handle these cases, visit our insurance bad faith practice page.
California Insurance Code Section 790.03 is part of the Unfair Insurance Practices Act and lists seventeen categories of conduct that constitute unfair claims settlement practices. These include misrepresenting policy terms, failing to investigate claims reasonably, refusing to pay without reasonable basis, and delaying settlement without justification. Violations support tort claims for breach of the implied covenant of good faith and fair dealing.
To prove bad faith, you must show that benefits were due under the policy and that the insurer unreasonably withheld or delayed those benefits. Evidence includes the insurer's investigation file, correspondence, claim notes, and expert testimony that the insurer's conduct violated industry standards. You do not need to prove the insurer acted with malice; unreasonableness alone suffices for breach of the covenant of good faith and fair dealing.
Yes. Under California Civil Code Section 3294, punitive damages are available when the insurer's conduct involved fraud, oppression, or malice. Oppression means despicable conduct that subjects you to cruel and unjust hardship in conscious disregard of your rights. Courts have awarded punitive damages in cases involving systematic claim denials, forged documents, and deliberate misrepresentations. The amount depends on the insurer's net worth and the reprehensibility of the conduct.
The statute of limitations for a tort claim for breach of the implied covenant of good faith and fair dealing is two years from the date you knew or should have known of the breach. This typically runs from the date of denial or the date you discovered the insurer's unreasonable conduct. The contract claim for benefits owed has a four-year statute under California Code of Civil Procedure Section 337. Consult an attorney promptly to preserve your rights.
Yes. Insurance companies have teams of lawyers and adjusters trained to minimize payouts. An experienced bad faith attorney levels the playing field, conducts an independent investigation, retains experts, and holds the carrier accountable under California Insurance Code 790.03 and the duty of good faith and fair dealing. Most bad faith attorneys work on contingency, meaning you pay nothing unless you recover. Given the potential for compensatory and punitive damages, hiring counsel early maximizes your recovery.
If your insurance claim has been denied, delayed, or undervalued, you have rights under California law. Nazaryan Law, APC has extensive experience holding carriers accountable for violations of California Insurance Code 790.03 and breaches of the duty of good faith and fair dealing. We represent policyholders throughout the San Fernando Valley, Los Angeles County, and California statewide. Contact us today at (818) 900-1888 for a free consultation. We work on contingency, so you pay nothing unless we recover compensation for you.
Nazaryan Law Car Accident & Injury Lawyers
601 S Brand Blvd, Suite 301, San Fernando, CA 91340
Phone: (818) 900-1888
Artin has a strong track record of securing substantial compensation for clients in motor vehicle accidents, catastrophic injuries, and complex homeowner insurance claims.
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