When you hire an insurance company, you sign a contract with them that states that they will act in “good faith” toward you. In some instances, insurance companies do not fulfill their promises to the insured, unjustly withholding benefits and laying the foundation for bad faith lawsuits. This is what is called acting in “bad faith”:

• Failing to thoroughly investigate a claim
• Delaying payment
• Denying benefits to a claim unjustly
• Refusing to settle a case
• Failure to reimburse you in entirety
• Consumer Communications Bureau (Hotline)
   

The California Department of Insurance operates a statewide toll-free consumer hotline at 800-927-HELP (4357), which provides callers with immediate access to current information on insurance issues. The hotline is staffed by knowledgeable insurance professionals who can answer questions, give direction and provide assistance to consumers who are experiencing insurance-related problems or concerns. By calling the hotline, a consumer or their insurance lawyer can ask questions on insurance claims and underwriting practices as well as check the license status of his/her insurance company, agent or broker.

After listening to and discussing a consumer’s concerns over the phone, a hotline officer may decide to send the consumer a Request for Assistance (RFA) form to be completed and returned to the department. The RFA provides the necessary information to open a complaint investigation, which will be handled by officers in the Claims Services Bureau or the Rating and Underwriting Services Bureau, depending on the subject matter involved. Within 10 working days, the consumer will receive an acknowledgment from the officer who will be handling the file.

Claims Services Bureau
The Claims Services Bureau is responsible for investigating, evaluating and resolving all consumer claims complaints regarding claims handling practices.

Rating and Underwriting Services Bureau
The Rating and Underwriting Services Bureau is responsible for investigating, evaluating and resolving all consumer rate and underwriting complaints.

Consumer Education
Along with assisting consumers with specific insurance concerns, the California Department of Insurance publishes free brochures to help consumers become aware of their rights and to aid them in making informed insurance decisions. These publications can be requested by calling toll-free 800-927-HELP (4357). Also, as part of the department’s mission to protect consumers, the Education and Outreach Program provides speakers who can travel off-site to participate in public events, such as town hall meetings, business and community fairs and professional association events.

The failure to defend a policyholder in a lawsuit is a form of insurance bad faith. Insurance companies acting in bad faith typically do not uphold the following:

If you are the policyholder and were sued for an accident that occurred on your property, then your insurance company has the duty to defend you.

If you were sued for causing a car accident that resulted in injuries, your insurance company is obligated to defend you.

Most insurance policyholders are shocked when they receive a denial of benefits letter from their insurance company saying that the company has denied payment on a claim or canceled the policy. The policyholder, who has faithfully made payments for years, understandably feels he or she has been treated unfairly by the insurance company. Here are some reasons for underpaid claims or claim denials:

• The claim made was not covered by the policy because of an exclusion or because it is the wrong type of policy.
• The claim was poorly presented, so the insurance company wrongly decided that the claim was not covered.
• An insurance adjustor failed to review the evidence in good faith, and the adjustor had already decided to deny the policy.

When you make a claim on any type of insurance policy, the insurance company may cancel you, and you may not agree with them. For some people, this has been enough to hire a lawyer for insurance claims representation. Even if you have been a faithful customer for many years, the company may decide to rescind or cancel the policy.

After you make a claim for insurance benefits, insurance company representatives review your initial application for coverage, searching for any hint of a “misrepresentation” that they could use against you, permitting them to cancel your policy or raise your rates so high that you will want to cancel your policy. This is also a form of bad faith in insurance claims.

There are many reasons why people are denied insurance coverage, and they may include the following:

• You are turned down for a health insurance policy because you take certain medication or have pre-existing conditions.
• You can’t get automobile insurance because you can’t afford it.
• Your house is located in a flood or earthquake designated zone.

ERISA (the Employee Retirement Income Security Act) is a federal law that governs almost all employer-provided benefit plans. ERISA is sometimes used to refer to the full body of laws regulating employee benefit plans, which are found mainly in the Internal Revenue Code and ERISA itself. ERISA does not require that an employer provide health insurance or pension benefits to its employees or retirees, but it regulates the operation of a health or pension benefit plan if an employer chooses to establish one