What Is a Bad Faith Insurance Claim?

If you were hurt in an accident in Orange County or anywhere else in California—and you’ve filed an insurance claim—you’re probably expecting the insurance company to handle your claim fairly. After all, you’ve either paid premiums for years or you’re dealing with the insurer of the person who caused the harm. But not all insurance companies play fair. Some go out of their way to delay, underpay, or outright deny legitimate claims. In California, that’s called “bad faith,” and it’s against the law.

Understanding what bad faith means and how the law protects you can make all the difference when you’re recovering from an injury. Below, personal injury lawyers at Law Offices of Samer Habbas & Associates explain how bad faith insurance works in California, what laws apply, what types of behavior cross the line, and what your rights are if it happens to you.

What the Law Says About Insurance Company Duties

Every insurance contract in California comes with something called the “implied covenant of good faith and fair dealing.” That’s a legal term, but it simply means your insurance company has a legal duty to handle your claim honestly and reasonably. Insurance companies can be held liable when they act unfairly toward the people they insure.

What Counts as Bad Faith?

Bad faith happens when an insurance company unreasonably delays or denies your claim, or when it fails to investigate or settle a claim properly. It’s not enough that the company disagrees with you or makes a mistake. The denial or delay has to be unreasonable or done without good cause.

For example, if your insurer ignores key medical records showing that you were badly hurt and then refuses to pay your medical bills without explaining why, that may be bad faith. If they take months to respond to your claim while your bills pile up, and they give no real reason for the delay, that could be bad faith, too.

First-Party vs. Third-Party Bad Faith in California

California recognizes both first-party and third-party bad faith. First-party bad faith happens when your own insurance company doesn’t handle your claim fairly. This can happen in cases involving medical payments, uninsured or underinsured motorist coverage, or property damage.

In California, a third-party claim allows the victim to seek compensation from the at-fault party’s insurance. However, the insurer owes no duty of good faith to the victim. The victim generally cannot sue for bad faith unless the insured assigns them that right after a judgment or settlement.

How California Law Defines Bad Faith

One of the key laws that addresses insurance company conduct is California Insurance Code § 790.03. It lists several types of unfair practices, including:

Not acting promptly when a claim is filed
Failing to fairly investigate a claim before denying it
Misrepresenting policy facts or coverage
Delaying payment without a reasonable explanation

How to File a Bad Faith Insurance Claim

First, carefully review the terms of your insurance policy to confirm coverage and identify the obligations owed by your insurer.
Next, maintain detailed records of all communications with the insurance company, including written correspondence, call logs, and notes from verbal discussions.
Submit a formal complaint outlining the insurer’s unreasonable conduct, such as undue delay or unjustified denial.
If the insurer fails to rectify its actions, consult with Orange County bad faith attorneys who are well-versed in holding insurers accountable.

At this stage, legal action may be necessary to assert your rights. A bad faith insurance lawyer near you can help you file suit and seek full compensation under California law.

How You Prove Bad Faith in California

To bring a successful bad faith insurance claim in California, you’ll need to show two main things:

First, that there was a valid insurance policy in place and that your claim was covered under that policy. Second, the insurer acted unreasonably—either by denying your claim without a good reason, failing to investigate it properly, or dragging its feet for too long without explanation.

For example, according to Judicial Council of California Civil Jury Instructions No. 2332, to prove a first-party insurance bad faith claim for failure to investigate, a plaintiff must show the insurer denied coverage unreasonably by not fully and fairly investigating a valid claim, causing harm and breaching the duty of good faith.

Judicial Council of California Civil Jury Instructions No. 2333 outlines a first-party bad faith claim where an insurer fails to reasonably inform an insured of rights or obligations under a policy. The plaintiff must prove loss, denial, existence of rights, insurer’s failure to inform, harm suffered, and that the failure caused the harm.

What You Can Recover in a Bad Faith Case

When an insurance company is found to have acted in bad faith, the law allows you to recover more than just the money you were originally owed. You may be entitled to damages for the financial harm caused by the delay or denial, such as out-of-pocket medical costs or lost income. If the insurer’s actions caused you emotional distress, you may also be compensated for that.

If their actions were especially outrageous—like knowingly lying to you about your coverage—you may be entitled to punitive damages under Civil Code § 3294.

Time Limits for Filing a Bad Faith Claim

Like most legal matters, bad faith claims in California are subject to time limits. These deadlines are known as statutes of limitations.

If you’re suing for breach of contract (meaning the insurer violated the terms of the policy), you usually have four years from the date of the breach to file your claim.

If you’re suing for bad faith as a tort (which includes emotional distress or punitive damages), the deadline is shorter—you have two years from the date you knew, or reasonably should have known, that the insurer acted unfairly.

Why Working with a California Insurance Bad Faith Attorney is Critical

Bad faith insurance cases are legally complex and often stacked in favor of big insurance companies with deep legal teams. That’s why working with a lawyer who focuses specifically on insurance bad faith law is essential. A California bad faith insurance attorney understands the subtle tactics insurers use to delay or deny claims—and how to fight back. They will know how local courts interpret these laws and what evidence is most persuasive.

Contact California Bad Faith Insurance Lawyers Samer Habbas

At Samer Habbas & Associates, our team of Orange County bad faith insurance attorneys has built a strong reputation for holding insurers accountable and securing meaningful results for policyholders. We understand the tactics insurance companies use to delay, underpay, or deny valid claims—and we know how to counter them effectively.

To speak with someone about your situation and get clear answers about what you can do next, contact Law Offices of Samer Habbas & Associates by calling 949-727-9300 or contacting us online for a free consultation with an Irvine insurance bad faith lawyer. Get Samer on your side and let us help you recover the compensation you rightfully deserve.