Most claim disputes are disagreements about value. A bad faith claim is different in kind: it argues that the way the insurer handled the claim was itself wrongful, separately from whether the underlying loss was covered.
That distinction matters because the consequences are not capped by the policy limit. Margossian Law represents California policyholders where an insurer has unreasonably denied, delayed, or failed to properly investigate a claim.
The Duty Every California Policy Carries
Every insurance contract in California includes an implied covenant of good faith and fair dealing. In practice, that obliges an insurer to give at least as much consideration to the policyholder’s interests as it gives to its own.
Breaching that covenant is a tort, not merely a breach of contract, which is why the exposure can exceed the benefits withheld. The core question is not whether the insurer was ultimately wrong about coverage, but whether its position was unreasonable, or reached without proper grounds.
Conduct That Commonly Supports a Claim
- Denying a claim without conducting a reasonable investigation first
- Ignoring or failing to seek evidence that would support coverage, while pursuing evidence that would defeat it
- Unreasonable delay in acknowledging, investigating, or paying
- Misrepresenting policy provisions or the facts of the claim
- Offering substantially less than the claim is worth, with no reasonable basis
- Failing to explain, in writing, the policy or legal basis for a denial
- Failing to settle a third-party claim within policy limits where liability is clear, exposing the insured to an excess judgment
A Genuine Dispute Is Not Bad Faith
This is the defense in nearly every case, and it is a real one. Where an insurer’s position rests on a legitimate disagreement about coverage, or on a reasonable interpretation of ambiguous facts, it is generally not liable for bad faith even if a court later decides it was wrong.
What defeats that defense is usually the quality of the investigation rather than the conclusion. An insurer that reached a defensible answer without doing the work to get there (never inspecting, never testing, never asking the obvious question) has a much weaker genuine-dispute argument than one that investigated thoroughly and disagreed.
What a Bad Faith Claim Can Recover
- The policy benefits that were wrongly withheld
- Consequential losses caused by the failure to pay: further deterioration of the property, financing costs, lost rental income
- Emotional distress, where the conduct caused it
- Attorney’s fees incurred to obtain the policy benefits, in the circumstances California allows
- Punitive damages, where the insurer’s conduct meets the demanding standard for them
Building the Record While the Claim Is Still Open
Bad faith claims often focus on the insurer’s conduct during the claim, including its communications, investigation, and basis for the decisions it made.
Communications
Written exchanges can show what was requested, explained, promised, or left unanswered.
Timing
The sequence of inspections, responses, requests, and decisions can become important to understanding how the claim was handled.
Coverage Decisions
Denials, reductions, and other coverage positions should be tied to the policy language and the facts of the loss.
Estimates and Valuations
Different estimates and changing valuations can help show how the amount of the loss was evaluated over time.
Scope of the Investigation
What the insurer inspected, considered, or failed to address may become important when its handling of the claim is challenged.