/* Here is the full text of the California Unfair Insurance

Practices Act (Insurance Code, Division 1, Article 6.5 Unfair

Practices) concerning "bad faith", the failure to properly handle

claims. Many states including Colorado, Florida, Idaho, Indiana,

Maryland, New Jersey, Oklahoma, Tennessee as examples, follow

this basic model. These statutes provide a weapon for the policy

holder against a company not properly handling claims. The exact

way that these rights are enforced changes from state to state.

In general, the statute will allow the insurance department and

in some case, the policyholder the right to call the bad faith to

the attention of the insurance company, and then to

administratively proceed or proceed in court. */

Section 790.03 Prohibited acts

The following are hereby defined as unfair methods of competition

and unfair and deceptive acts or practices in the business of

insurance.....

(h) Knowingly committing or performing with such frequency as to

indicate a general business practice any of the following unfair

claims settlement practices:

/* Most states' bad faith laws require that the company have

committed the wrong several times. However, many state laws also

provide that if the standards which are listed are not followed

in even on case, the policy holder may have special remedies.*/

(1) Misrepresenting to claimants pertinent facts or

insurance policy provisions relating to any coverages at issue.

(2) Failing to acknowledge and act reasonably promptly upon

communications with respect to claims arising under insurance

policies.

(3) Failing to adopt and implement reasonable standards for

the prompt investigation and processing of claims arising out of

insurance policies.

/* This is the key to most cases. The insuror is too slow in

paying clearly held claims. It requires first that the insuror

set a standard and then that the insuror follow through on it. */

(4) Failing to affirm or deny coverage of claims within a

reasonable time after proof of loss requirements have been

completed and submitted by the insured.

(5) Not attempting in good faith to effectuate prompt, fair,

and equitable settlements of claims in which liability has become

reasonably clear.

/* Many of the statutes also provide that the insuror must pay

the claims as if it were only concerned for the rights of the

insured, not it own pocket book. */

(6) Compelling insureds to institute litigation to recover

amounts dues under an insurance policy by offering substantially

less than the amounts ultimately recovered in actions brought by

the insureds, when the insureds have made claims for amounts

reasonably similar to the amounts ultimately recovered.

(7) Attempting to settle a claim by an insured for less than

the amount which a reasonable man would have believed he was

entitled by reference to written or printed advertising material

accompanying or made part of an application.

(8) Attempting to settle claims on the basis of an

application which was altered without notice to, or knowledge or

consent of, the insured his or her representative, agent or

broker.

(9) Failing, after payment of a claim, to inform insureds or

beneficiaries, upon request by them, of the coverage under which

payment has been made.

(10) Making known to insureds or claimants a practice of the

insurer of appealing from arbitration awards in favor of insureds

or claimants for the purpose of compelling them to accept

settlements or compromises less than the amount awarded in

arbitration.

(11) Delaying the investigation or payment of claims by

requiring an insured, claimant, or the physician of either, to

submit a preliminary claim report, and then requiring the

subsequent submission of formal proof of loss forms, both of

which submissions contain substantially the same information.

(12) Failing to settle claims promptly, where liability has

become apparent, under one portion of the insurance policy

coverage in order to influence settlements, under other portions

of the insurance policy coverage.

/* This can come into play in automobile accidents. The typical

automobile insurance policy insures for medical payments, bodily

injury and comprehensive (collision) coverage. Therefore the

company must for example, pay for the collision damage even

though the medical payments liability is in dispute.*/

(13) Failing to provide promptly a reasonable explanation of

the basis relied on in the insurance policy, in relation to facts

or applicable law, for the denial of a claim or for the offer of

a compromise settlement.

/* Therefore, this gives the insured the right to demand that the

company explain why it is offering a specific amount.*/

(14) Directly advising a claimant not to obtain the services

of an attorney.

(15) Misleading a claimant as to the applicable statute of

limitations.

(16) Delaying the payment of provision of hospital, medical,

or surgical benefits for services provides with respect to

acquire immune deficiency syndrome or AIDS-related complex for

more than 60 days after the insurer has received a claim for

those benefits, where the delay in claim payment is for the

purpose of investigation whether the condition preexisted the

coverage. However, this 60-day period shall not include any time

during which the insurer is awaiting a response for relevant

medical information from a health care provider.