You paid big premiums for insurance, then, when you need the coverage, you submit a claim. Only to have the claim denied for some bogus reason, or because of a clever interpretation – by the carrier – of an ambiguous term of the policy. That’s when we step in.
Bad Faith E&O Insurance Claims Explained
“Breach of a Contract’s Implied Covenant of Good Faith and Fair Dealing.” Why, oh why, must the law use such language? Isn’t it easier to say “Bad Faith?” It is, and we do.
As a California insurance Bad Faith attorney, my staff and I do our best to help you understand this complex area of the law, and seek justice if justice is due.
So, what’s Bad Faith all about?
Bad Faith insurance claims are all about contracts, or rather how one type of contract gets broken. Or how one part of an insurance contract gets broken. Even if that part isn’t in writing.
Can you do that? Can you break a non-written provision of a contract? Sure you can.
All contracts have “express” provisions. Those are the written words. You know, like “I, Sam Seller, agree to sell you, Barry Buyer, 1234 Main Street, and you agree to pay me $250,000 for it within 30 days.” There are also “implied” provisions; the stuff that the law says applies to each and every contract, even if it’s not written into the contract itself. The Big One of those “implied” provisions is the obligation that each party has to act in “good faith.” You can’t set up a contract and then lie and cheat as you perform it. You’ve got to be fair, even if you don’t have to be nice.
Not all contracts are created equal. Insurance contracts, for instance, are treated differently than “normal” contracts. How come? Because insurance contracts are deemed to be of a special nature, and our State’s public policy requires that insurance companies treat insureds better than most contracting parties have to treat each other. That’s good for you — and not so good for the carriers.
Insurance Bad Faith examples
Specifically, let’s talk about an E&O contract.
Like all contracts, and E&O contract has an Implied Covenant provision, like the one that says each party will act “in good faith.”
So, what’s that really mean?
In the insurance context, it refers, primarily, to how the carrier has to perform and honor three distinct provisions:
- The Duty to Defend
- The Duty to Settle
- The Duty to avoid unfair Policy Rescission
When a carrier fails to do these things, the carrier may have breached that Implied Covenant of good faith — and have acted in “Bad Faith.” That’s why those kinds of breaches of contract are called a “Bad Faith claim.”
It is important to remember that insurance contracts are not treated like regular contracts. Because of the “quasi-public” nature of an insurance contract, the damages from a breach of an insurance contract are treated like tort damages.
(Goodness, another ‘legal’ term… OK. A “tort” is not the kind of torte made of chocolate. The legal kind of “tort” is a “personal injury” claim, like defamation, or negligence, or breach of fiduciary duty. You can think of the law as broken down into three main categories: criminal law, contract law and tort law.)
California Law and E & O Insurance Bad Faith Claims
The difference is critical, for two reasons. First, the statute of limitations on a tort claim is two years, but on a written contract, four years. Second, tort claims allow for punitive damages, but written contract claims don’t. So, the breach of the Implied Covenant of an insurance contract can be treated like a tort for damages purposes but like a contract for statute of limitations purposes. That’s the best of both worlds.
If you’ve had an E&O insurance carrier 1) Breach the Duty to Defend; 2) Breach the Duty to Settle; or 3) engage in unfair Policy Rescission, you could have a Bad Faith insurance claim.
So don’t wait! Call me, or one of the California Bad Faith E&O Insurance attorneys at Hanson Law Firm immediately, or email us through the contact form to the right of the page.