When Insurance Conduct Crosses the Line: Understanding Bad Faith in Serious Injury Cases

Intro

Insurance companies are entitled to investigate claims and challenge liability. What they are not entitled to do is place their own financial interests above their insured’s rights or deny legitimate claims through unreasonable conduct. When an insurer’s actions move from ordinary claim handling into unfair delay, denial, or obstruction, California law recognizes that conduct as insurance bad faith. Presidio Law Firm LLP represents clients in serious injury and catastrophic loss matters where insurance conduct itself becomes part of the dispute. Understanding where that legal line exists is critical for injured individuals navigating complex claims.

The Duty Insurance Companies Owe Under California Law

Under California law, insurers owe their insureds a duty of good faith and fair dealing. This duty requires insurers to give at least equal consideration to the interests of their insureds as to their own financial interests. It applies not only to whether a claim is ultimately paid, but to how the claim is handled along the way.

Bad faith is not limited to outright denial. It can arise from delay, inadequate investigation, misrepresentation of coverage, or tactics designed to wear claimants down. The focus is on whether the insurer acted reasonably under the circumstances.

What Separates Legitimate Disputes From Bad Faith

Not every denied or disputed claim constitutes bad faith. Insurers are permitted to challenge claims where there is a genuine dispute regarding coverage, liability, or damages. However, that dispute must be grounded in a reasonable investigation and supported by facts.

Bad faith arises when an insurer:

• Fails to conduct a fair and thorough investigation
• Ignores or selectively interprets evidence
• Delays resolution without justification
• Misstates policy terms or coverage obligations
• Uses procedural tactics to avoid paying valid claims

The analysis turns on conduct, not outcomes.

Unreasonable Delay as a Form of Bad Faith

Delay is one of the most common and most damaging forms of insurance bad faith. In serious injury cases, delays can deprive injured individuals of funds needed for medical care, rehabilitation, or basic living expenses.

Insurers may delay by repeatedly requesting information they already possess, failing to respond to communications, or postponing coverage decisions without explanation. When delay serves no legitimate investigative purpose, it may constitute bad faith even if the claim is eventually paid.

Inadequate or Biased Claim Investigations

Insurance companies are required to conduct prompt and fair investigations. Problems arise when investigations are superficial, one-sided, or designed to support a predetermined outcome.

Examples include relying solely on internal reviewers, ignoring treating physicians, or failing to consider evidence favorable to the insured. In catastrophic injury cases, insurers may minimize injuries by focusing on early medical records while disregarding later, more complete evaluations.

An investigation that seeks justification rather than truth is a red flag.

Misrepresentation of Coverage or Policy Terms

Bad faith can also occur when insurers misstate policy language or suggest that coverage is narrower than it actually is. This may involve overstating exclusions, minimizing policy limits, or implying that certain damages are unavailable when they are, in fact, covered.

Policyholders are not expected to be coverage experts. Insurers have a duty to communicate honestly and clearly about what a policy provides.

Lowball Offers and Coercive Settlement Practices

In serious injury cases, insurers sometimes offer settlements that bear little relation to the actual harm suffered. These offers are often paired with time pressure or warnings about delays if the offer is rejected.

While negotiation itself is not bad faith, offers that ignore known medical facts, future care needs, or undisputed liability may cross the line. Using financial pressure to force acceptance of an inadequate settlement can expose insurers to additional liability.

Bad Faith in the Context of Catastrophic Injury

Bad faith issues frequently arise in cases involving traumatic brain injury, spinal cord injury, severe burns, amputations, and other catastrophic harm. These cases are expensive, long-term, and difficult to quantify early, which makes them targets for aggressive claim-handling tactics.

Insurers may attempt to resolve these claims before the injury stabilizes, argue that future care is speculative, or minimize loss of earning capacity. When these tactics are unreasonable, bad faith exposure increases.

Why Bad Faith Matters Beyond the Underlying Claim

A bad faith claim is separate from the underlying injury claim. When proven, it may allow recovery of damages beyond policy limits, including compensation for emotional distress and, in some cases, punitive damages.

More importantly, bad faith claims shift leverage. Insurers that once controlled the process may find themselves defending their own conduct rather than evaluating the injury alone.

Timing and Strategy Considerations

Not every case requires immediate pursuit of bad faith claims. In many situations, careful handling of the underlying claim is the first priority. However, recognizing bad faith early allows counsel to preserve evidence, document unreasonable conduct, and avoid actions that inadvertently excuse improper behavior.

Strategic evaluation—not reflexive escalation—is essential.

Why Experienced Legal Guidance Matters

Insurance bad faith claims require a different skill set than ordinary injury cases. They involve detailed policy analysis, claim-handling records, and an understanding of regulatory and judicial standards governing insurer conduct.

Experienced counsel can distinguish between aggressive but permissible tactics and conduct that violates legal obligations, allowing clients to respond appropriately rather than reactively.

Closing

Insurance companies are entitled to protect themselves, but they are not permitted to do so at the expense of fairness or honesty. Presidio Law Firm LLP helps injured individuals identify when insurance conduct crosses the line and pursues accountability where claims are handled unreasonably. If an insurer’s actions are compounding the harm caused by a serious injury, understanding your rights may be the first step toward restoring balance.