If You've Been a Victim of Fire or Water Damage
One of the principal doctrines of contract law is implied covenant of good faith and fair dealing. This is especially important during the insurance claim
cprocess. It’s a more common issue in the insurance industry for a company to not follow good faith and fair dealing when it comes to insurance coverage for claims. However, there are rules and laws that insurance carriers must adhere to in order to ensure good faith practices.
In the Judicial Council of California Civil Jury Instructions, it explains the implied covenant of good faith as follows:
“In every insurance policy there is an implied obligation of good faith and fair dealing that neither the insurance company nor the insured will do anything to injure the right of the other party to receive the benefits of the agreement.
To fulfill its implied obligation of good faith and fair dealing, an insurance company must give at least as much consideration to the interests of the insured as it gives to its own interests.
To breach the implied obligation of good faith and fair dealing, an insurance company must unreasonably act or fail to act in a manner that deprives the insured of the benefits of the policy. To act unreasonably is not a mere failure to exercise reasonable care. It means that the insurer must act or fail to act without proper cause. However, it is not necessary for the insurer to intend to deprive the insured of the benefits of the policy.”
It is important to note that a breach of the implied covenant of good faith and fair dealing does not require an intent of the insurer to deprive the insured of the benefits. A reasonable standard is applied that is based on the laws that insurers must follow. “ ‘[T]he covenant of good faith can be breached for objectively unreasonable conduct, regardless of the actor’s motive.’ . . . [A]n insured plaintiff need only show, for example, that the insurer unreasonably refused to pay benefits or failed to accept a reasonable settlement offer; there is no requirement to establish subjective bad faith.” (Bosetti v. United States Life Ins. Co. in the City of New York (2009) 175 Cal.App.4th 1208, 1236 [96 Cal.Rptr.3d 744], original italics, internal citations omitted.)
Case law has also been important to define what is considered a breach of the covenant of good faith and fair dealing. In Major v. Western Home Ins. Co., the Court held, “[T]o establish the insurer’s ‘bad faith’ liability, the insured must show that the insurer has (1) withheld benefits due under the policy, and (2) that such withholding was ‘unreasonable’ or ‘without proper cause.’ The actionable withholding of benefits may consist of the denial of benefits due; paying less than due; and/or unreasonably delaying payments due.” (Id. (2009) 169 Cal.App.4th 1197, 1209 [87 Cal.Rptr.3d 556], internal citations omitted.)
CGFFD – foundational principle of contract law and is Especially important for insurance claims.
Insurers have a tremendous advantage:
1. Resources – premiums & attorneys
2. Time – denying claims, paying less than what’s owed in the insurance claim, and even untimely payment of benefits – they make money on the interest.
In a nutshell, the CGFFD says insurance policy cannot do anything to injure the rights of the policyholder to receive the benefits of the agreement. The standard for an insurer is “what would a reasonable insurer would do” – it is not a subjective analysis. An unreasonable Insurer can be in breach of CGFFD if they withhold benefits due in the claim, pay less than what’s owed for the settlement, or unreasonably delay payments.
This is Eric Townsend with the F & F Attorneys and I hope you found this article beneficial. Should you find yourself in a situation where you believe your insurer is not doing you right and you need some legal advice, please feel free to give me a call. Get a property insurance lawyer now and don’t let the insurance industry take advantage of your claim. We and the law are on your side to fight for the insurance coverage you paid for.