When an insurer sits on a covered claim, lowballs benefits you paid premiums to receive, or plays games with the investigation, people often ask whether that is “bad faith.” In California, the answer is more precise than a slogan. Bad faith is not every claim denial and not every slow file. It is unreasonable claims handling that deprives an insured of policy benefits—or, in the liability setting, mishandles the defense and settlement of a claim against the insured in a way that leaves the insured exposed.

This guide explains what California law actually looks at, how first-party claims differ from liability claims, and what Ins. Code § 790.03 does—and does not—do for private litigants. For a practice overview, see our insurance bad faith page.

What “bad faith” means under California common law

Every insurance policy in California carries an implied covenant of good faith and fair dealing. The California Supreme Court has long held that neither party may do anything that injures the other’s right to receive the benefits of the agreement. See Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658.

That covenant has two familiar faces:

First-party claims (your own policy benefits—uninsured motorist, medical payments, property, disability, and similar coverages). The insurer must not unreasonably withhold payments due under the policy. Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566 made clear that this duty is part of the same good-faith obligation applied in third-party settlement cases.

Liability / third-party claims (someone else is suing you, and your liability carrier is defending or should be settling). The insurer must give the insured’s interests at least as much consideration as its own and, in an appropriate case, accept a reasonable settlement within policy limits. Comunale and Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425 are the foundational cases.

Bad faith is about unreasonableness and proper cause, not about promising payment of every disputed dollar. A genuine coverage dispute, after a fair investigation, is not automatically bad faith. A stonewall, a delayed investigation designed to pressure a release, or a settlement strategy that protects the carrier’s surplus while exposing the insured, can be.

Ins. Code § 790.03: regulatory standards, not a private lawsuit ticket

Insurance Code section 790.03 lists unfair methods of competition and unfair and deceptive acts in the business of insurance. Subdivision (h) catalogs unfair claims settlement practices, including:

  • Misrepresenting facts or policy provisions relating to coverages at issue
  • Failing to acknowledge and act reasonably promptly on claim communications
  • Failing to adopt reasonable standards for prompt investigation and processing
  • Failing to affirm or deny coverage within a reasonable time after proof of loss
  • Not attempting in good faith to effectuate prompt, fair, and equitable settlements when liability has become reasonably clear
  • Compelling insureds to litigate by offering substantially less than amounts ultimately recovered
  • Failing to provide a prompt, reasonable explanation for a denial or compromise offer
  • Misleading a claimant as to the applicable statute of limitations

Those standards matter. The California Department of Insurance can enforce them. What they do not create, after Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287, is a private right of action for claimants to sue under section 790.03 itself. Zhang v. Superior Court (2013) 57 Cal.4th 364 reaffirmed that private UIPA actions are barred, while leaving room for claims grounded in other statutes or the common law when the facts support them independently of section 790.03.

In plain terms: section 790.03 describes conduct the Legislature calls unfair. Your lawsuit, if you have one, usually travels through the policy, the implied covenant, and related tort or statutory theories—not through a free-standing “§ 790.03 lawsuit.”

Delays, denials, and lowballing: when they may cross the line

Unreasonable delay. Policies and fair-claims regulations expect prompt acknowledgment, investigation, and decision-making. Delay becomes a problem when it is without proper cause—when the file sits while medical bills pile up, when the carrier repeatedly asks for the same records, or when coverage is quietly left unresolved after proof of loss is complete. Section 790.03(h)(2)–(4) and (11) speak to these patterns as regulatory unfair practices; common-law bad faith asks whether the delay was unreasonable under the circumstances.

Coverage denials. A denial is not bad faith merely because you disagree. It can become bad faith when the carrier denies without investigating material facts, misrepresents the policy language, or ignores coverage that a reasonable reading of the policy would support. First-party cases often turn on whether benefits were withheld without proper cause. See Gruenberg.

Lowball offers. Offering far less than a claim’s reasonable value—especially after liability or coverage is clear—can pressure people into taking less than their policy provides. Section 790.03(h)(5)–(6) addresses good-faith settlement efforts and offers that force insureds into litigation. Again, the private claim is ordinarily framed through the implied covenant, not as a direct section 790.03 cause of action.

Tough negotiation alone is not bad faith. Carriers may evaluate claims; they may not treat covered benefits as optional when the facts and the contract call for payment or a reasonable settlement.

First-party vs. liability: who can sue whom

First-party bad faith is typically brought by the insured (or a proper assignee) against their own insurer for mishandling benefits owed under the contract.

Liability bad faith historically focuses on the relationship between the liability insurer and its insured—especially the duty to settle within limits when that is the reasonable course. After Moradi-Shalal, an injured third party generally cannot sue the at-fault driver’s insurer for “third-party bad faith” under section 790.03. The injured person’s claim is ordinarily against the insured (or through assignment / judgment creditor theories in specific settings), not a free-standing bad-faith suit against the other driver’s carrier under the UIPA.

That distinction frustrates many injury clients, and it is important to say it plainly: frustration with the other driver’s insurance adjuster is common; a private bad-faith cause of action against that adjuster’s company is usually not available the way it once was under Royal Globe. Your own first-party coverages (UM/UIM, med-pay, and similar) are a different story.

How bad faith issues show up after a crash or injury

After a serious collision or other injury event, bad-faith issues often appear in three places:

  1. Your own UM/UIM claim when the at-fault driver has little or no coverage and your carrier undervalues or delays payment.
  2. Your liability carrier’s handling if you are sued and the company refuses a reasonable within-limits settlement that later exposes you to excess judgment risk.
  3. Property, rental, or medical payments where covered benefits are stalled without a legitimate investigation reason.

The underlying injury claim against a careless driver or other tortfeasor still runs on its own track under ordinary negligence rules and time limits such as Code of Civil Procedure section 335.1. Bad faith and the tort claim are related but not identical clocks—policy terms and claim-specific rules can matter.

Practical steps if you suspect bad faith

  • Keep a written timeline of every call, letter, and portal message with the insurer.
  • Save the policy declarations, endorsements, and every denial or reservation-of-rights letter.
  • Respond to legitimate document requests; note when the carrier asks for the same material twice.
  • Do not give a recorded statement to your own carrier without understanding how it may be used—especially on UM/UIM files.
  • Avoid signing broad releases until you understand what coverages remain open.
  • Watch public-entity claim deadlines—they can be far shorter than the ordinary two-year suit period.

Advo Law, APC evaluates insurance disputes alongside injury claims when that fits the file, statewide on contingency, from offices in Glendale and La Cañada Flintridge.

Contact Advo Law

If an insurer is delaying, denying, or lowballing covered benefits after an injury, talk with a lawyer before the file goes cold.

Advo Law, APC
Glendale: 111 E. Broadway, Suite 210, Glendale, CA 91205
La Cañada Flintridge: 1433 Foothill Blvd., Suite 207, La Cañada Flintridge, CA 91011
Phone: (800) 808-4613
Contact us · Glendale personal injury · Insurance bad faith

Contingency fee representation. Serving clients throughout California.

Attorney advertising. This article is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. Laws and case holdings can change; consult counsel about your specific situation.