Settlements with insurance companies are controlled by several legal factors. These are: the terms of the particular insurance policy at issue, case law that controls in this area and California State Insurance Statutes. Generally, these laws detail what constitutes unfair treatment and set standards for how insurance carriers should treat claims and claimants.
Fair Claims Act Standards
California Code of Regulations Title 10, Chapter 5, Subchapter 7.5 Article1 section 2695 sets forth the standards for prompt, fair, and equitable settlements. According to the California Code it is unlawful for an insurer to discriminate in its claim settlement practices against a claimant’s age, race, income, religion, sexual orientation, ancestry, national origin, or physical disability.
With a few exceptions, insurance carriers have 40 calendar days to accept, or deny a claim, in whole or in part. The amounts of the acceptance, or the denial, should be clearly documented. Denials or rejections of claims must be in writing and list the factual and legal basis for the adverse decision. However, there is no requirement to disclose that a claim is denied because it is suspected to be fraudulent, or that a fraud investigation is underway. Finally, all written denials must include a provision that explains that claimants have the right to have the decision denying the claim reviewed by the California Department of Insurance.
Pursuant to California Code section 2695.7, if the parties agree to a settlement, the insurance carrier must tender payment within 30 days, or otherwise take action to perform its claim obligation.
Examples of Unfair Claims
It is an unfair practice for insurance carriers to misrepresent to claimants important facts, or insurance policy provisions; mislead a claimant about the applicable statute of limitations or applicable laws that affect the right of an insured to bring a claim; threatening to appeal an arbitration decision prior to the actual arbitration; dissuading a claimant from hiring an attorney; failing to settle claims promptly under one portion of the contract in order to influence a settlement under a different portion of the contract; attempting to settle a claim by an insured on the basis of an application that was altered; failing to advise claimants after payment of the policy coverage limits; and failing to act in good faith in order to effectuate prompt, fair and equitable settlement. This is not an exclusive group, and there are several other examples.
Finally, California insurance law states no insurer is permitted to use conversations from a telephone interview or a personal conversation as the basis for the denial or rejection of a claim unless it was properly recorded and documented in the file.
If you are in the process of attempting to settle a claim with an insurance carrier and feel that you are being mistreated, or treated unfairly, please do not hesitate to schedule a no cost, no obligation consultation with one of the attorneys at the Brod Law Firm.