San Diego Lawyer - Insurance Bad Faith

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Insurance bad faith is a legal term of art that describes a tort claim that an insured person may have against an insurance company for its bad acts. Under the law of most jurisdictions in the United States, insurance companies owe a duty of good faith and fair dealing to the persons they insure. This duty is often referred to as the "implied covenant of good faith and fair dealing" which automatically exists by operation of law in every insurance contract. If an insurance company violates that covenant, the insured person (or "policyholder") may sue the company on a tort claim in addition to a standard breach of contract claim.

The contract-tort distinction is significant because as a matter of public policy, punitive or exemplary damages are unavailable for contract claims, but are available for tort claims. The end result is that a plaintiff in an insurance bad faith case may be able to recover an amount larger than the original face value of the policy, if the insurance company's conduct was particularly egregious.

Generally speaking, bad faith does not exist without some kind of contractual relationship between the victim and the insurance carrier. In California, bad faith is only recognized in what is referred to as a "first-party" situation. Therefore, if the insurance carrier that you are having the dispute with is your own carrier, you may have a claim. You cannot sue a third-party tortfeasors carrier if you feel that are not offering you sufficient compensation.

Thus, you can have a first-party bad faith claim against your homeowners insurance, your uninsured motorist policy, your health insurance carrier, etc. To obtain punitive damages, you would need to show by clear and convincing evidence that your insurance carrier acted with malice and oppression to the point of being despicable.

If you believe you have a potential insurance bad faith claim, call Gordon A. Glenn, Esq. at (619) 285-8191 for a free consultation.