Insurance Bad Faith
You paid for protection.
They owe good faith.
A commitment
to the truth.
An insurance policy is a promise to be there when something goes wrong. When an insurer delays, denies, or refuses to defend without a reasonable basis, it may be breaking that promise.
The LOCD represents policyholders, and only policyholders, in insurance bad faith matters in Utah and California. We do not represent insurance companies. Cassandra Dawn brings personal attention, careful preparation, and trial experience to each matter.
Insurer and insured
More than an
ordinary
contract.
You pay premiums in exchange for a promise. The law recognizes that the insurer holds most of the power in that relationship, and it imposes duties to match.
In a first-party relationship, the insurer agrees to pay your own claims for losses you suffer, such as damage to your home or car, medical expenses, or a disability. The insurer must investigate diligently, evaluate the claim fairly, and act promptly and reasonably in paying or rejecting it.
Utah treats first-party duties as contractual rather than fiduciary. Even so, the Utah Supreme Court has recognized that an insured who has suffered a loss and is pressed financially is at a marked disadvantage, and that the temptation for an insurer to delay while pressures build is great.
The fiduciary relationship
A fiduciary must act in the best interests of the person who depends on it, not in its own interest. In Utah, when a policy obligates the insurer to defend you against a claim by someone else (a third-party relationship), that duty imposes a fiduciary responsibility. The insurer controls the defense and settlement, so it must protect your interests as carefully as its own.
California describes the insurer-insured relationship as a special one, marked by unequal bargaining power and the insured’s dependence on the insurer’s good faith. The resulting duties are “akin to” fiduciary duties, though the insurer is not a true fiduciary like a trustee or attorney.
What good faith requires
01
Investigate
Diligently gather the facts needed to determine whether a claim is valid.
02
Evaluate
Fairly assess the claim, not search for a reason to deny it.
03
Act Promptly
Pay, settle, or reject the claim promptly and reasonably.
04
Defend & Settle
Defend potentially covered claims and protect you from judgments beyond your limits.
The specific duties and remedies depend on the policy, the type of claim, and whether Utah or California law applies.
Kinds of insurance contracts
Every policy
carries a
promise.
Bad faith can arise under almost any kind of insurance. The policy language, and the duties it creates, will shape the claim.
01Auto Insurance
Auto policies may include liability coverage that protects you when someone else is injured, as well as first-party coverages such as collision, medical payments, and uninsured or underinsured motorist coverage that pay for your own losses.
02Trucking & Commercial Auto
Motor carriers must maintain federally mandated minimum levels of financial responsibility. Serious crashes can produce claims that approach or exceed those limits, which makes the insurer’s handling of defense and settlement especially important.
03Homeowners & Property
Fire, water damage, storm, theft, and liability claims often turn on exclusions, valuation disputes, and the adequacy of the insurer’s investigation. Displaced families are especially vulnerable to delay.
04Health & Medical
Denials of treatment, coverage for procedures, or reimbursement can have immediate consequences for a patient’s health. Some health and employer-sponsored plans are governed by federal law, which can change the available remedies, so the type of plan must be identified early.
05Professional & Malpractice Liability
Physicians, attorneys, and other professionals rely on liability insurers to defend claims against them and protect their reputations. Many of these policies are written on a claims-made basis with strict reporting requirements.
06Disability, Life & Commercial Policies
Disability and life benefits are often needed most when the insured or family is least able to fight. Commercial general liability and business property policies raise their own coverage and defense questions.
Required, but not negotiated
Take it or
leave it.
For many people, insurance is not optional, and its terms are not open for discussion.
Insurance is often required by law or by contract. Utah requires every resident owner of a motor vehicle to maintain owner’s or operator’s security, and California requires drivers and owners to be able to establish financial responsibility. Mortgage lenders, landlords, employers, and business partners often require coverage as well.
Contracts of adhesion
Insurance policies are standard-form contracts drafted by the insurer and offered on a take-it-or-leave-it basis. The policyholder has very little power to negotiate terms that typically favor the insurer. The California Supreme Court has observed that the relationship is inherently unbalanced, and that the adhesive nature of insurance contracts places the insurer in a superior bargaining position.
That imbalance is one reason ambiguous policy language is resolved against the insurer.
Harder for some than others
Limited means. Past claims. Fewer choices.
The imbalance grows for people with limited means and for those with past claims. Prior claims and driving or loss history can raise premiums, narrow coverage, or lead to non-renewal, leaving fewer options and less leverage. Those with the least room to absorb a loss are often the ones least able to wait out a delayed or denied claim.
Defining the claim
What bad
faith is.
Bad faith is not simply a disagreement over a claim. It is an insurer’s failure to honor the duties that come with its promise.
Every insurance contract includes an implied covenant of good faith and fair dealing. An insurer breaches that covenant when it fails to deal fairly and in good faith with its insured, such as by refusing, without proper cause, to pay a covered loss. In California, that conduct can give rise to a claim in tort. In Utah, a first-party breach gives rise to a contract claim.
Breach of fiduciary duty and failure to settle
When an insurer controls the defense of a claim against you, it may breach its fiduciary duty by failing to protect your interests, including by refusing a reasonable settlement within your policy limits. An insurer that unwarrantedly refuses a reasonable settlement offer within the limits may be liable for the resulting judgment, including the amount above the policy limits.
Bad faith can take many forms: an inadequate investigation, unreasonable delay, a lowball offer, misrepresenting the policy, demanding unnecessary documentation, denying a claim without a reasonable basis, refusing to defend, or exposing the insured to a judgment that could have been avoided.
Insurance obligations
Defense and
coverage are
not the same.
Many policies make two promises: to pay covered losses, and to defend you when you are sued. The duty to defend is the broader of the two.
A liability insurer must defend claims that create a potential for coverage under the policy, even if the claim is ultimately not covered or no damages are awarded.
Utah likewise recognizes that an insurer’s duty to defend is broader than its duty to indemnify, determined by comparing the policy language with the allegations against the insured.
An insurer generally must provide a defense unless the policyholder has breached the policy in a significant way. Even then, an insurer relying on a breach of a policy condition such as cooperation typically must show that it was substantially prejudiced.
Does the claim create any potential for coverage?
Has the insurer reserved rights, or denied outright?
Who controls the defense, and the settlement?
Your obligations as a policyholder
Know your
duties, too.
The policy imposes obligations on you as well. Insurers rely on them to deny claims, so it is important to understand them, and their limits.
01Onerous Notice Requirements
Policies may require written notice, sometimes by mail to a specific address, and may require that incidents be reported within a short window after the occurrence. Insurers rely on these provisions to deny claims, even when the delay caused them no harm.
02Some Enforceable, Some Avoidable
In Utah, an insurer generally may not deny recovery for a failure to give notice or proof of loss unless the insurer was prejudiced by the failure. California applies a similar notice-prejudice rule.
But the rule has limits. Reporting requirements in claims-made policies, common in professional liability coverage, may be enforced strictly. Whether a notice provision can be enforced against you depends on the policy and the facts.
03Cooperation & Proof of Loss
Policies often require the insured to cooperate in the investigation, provide documents, submit to examinations, and give recorded statements. Understanding these duties, and responding carefully, helps protect the claim.
04Declaratory Judgment Actions
Insurers sometimes file their own lawsuits seeking a court order declaring that they owe no coverage or no defense. Being sued by your own insurer can be intimidating. These actions should be answered promptly, and they may present an opportunity to assert your own claims.
The business of insurance
Follow
the money.
Insurers market themselves as partners and neighbors. But their profits depend on collecting more in premiums than they pay out in claims. California’s Supreme Court has said that insurers must take the public’s interest seriously, “where necessary placing it before their interest in maximizing gains and limiting disbursements.”
The cost calculation
Litigation costs versus
honoring the promise.
When a claim is presented, an insurer may weigh the cost of paying it against the cost of fighting it. If delay, denial, or litigation appears cheaper than paying what the policy promised, the policyholder bears the consequences.
Bad faith law exists to change that calculation, so that breaking the promise is not the less expensive choice.
Divided loyalties
Policyholders on one side.
Investors on the other.
Many insurers are publicly traded companies that answer to shareholders who expect returns. Enormous sums go into advertising: Progressive alone spent a record of nearly $3.5 billion in 2024.
Advertising promises protection, but every dollar paid on a claim is a dollar that does not go to the bottom line.
General observations about the insurance industry do not describe the conduct of any particular insurer. Each claim depends on its facts.
Policyholders only
We represent policyholders.
Never insurers.
Excess of limits
Settlements Beyond Policy Limits
The LOCD has successfully negotiated settlements in excess of policy limits, holding insurers accountable when their handling of a claim exposed the policyholder.
Recovery
Often Six Figures
Recoveries in our bad faith matters have often reached six figures. Every case is different, and results vary with the facts, the policy, and the harm.
Plaintiff-side
No Conflicting Loyalties
Because we do not represent insurance companies, our only loyalty in a bad faith matter is to the policyholder.
Past results do not guarantee a similar outcome. Every matter depends on its facts, evidence, applicable law, and circumstances.
A considered first step
Questions worth asking.
We begin with the policy and the claim file, not a conclusion. A focused first conversation helps identify what deserves closer review.
Is every claim denial bad faith?
No. An insurer may deny a claim that is not covered or that is fairly debatable. Bad faith involves an unreasonable denial, delay, or handling of the claim, or a failure to honor duties such as defense and settlement.
My insurer sued me. What now?
A declaratory judgment action has deadlines like any other lawsuit. Do not ignore it. Have the complaint and your policy reviewed promptly, because your response may preserve important rights and claims.
I reported my claim late. Is it lost?
Not necessarily. Many late-notice defenses require the insurer to show it was actually prejudiced by the delay. The answer depends on the type of policy and the facts, so report as soon as possible and seek advice.
What should I share first?
Start with the name of the insurer, the type of policy, the approximate date of the loss or claim, and a brief description of what happened. Please do not send policies, claim files, or other confidential documents until we have completed a conflict review and given you instructions.
Request a case review
Start with the facts.
We will consider
the way forward.
If your insurer has delayed, denied, or refused to defend a claim, tell us briefly what happened.
We are deliberately selective so each engagement can receive the attention, preparation, and personal commitment it deserves.
Begin with a brief introduction.
Please send only a general overview, not policies or attachments. An inquiry does not create an attorney-client relationship, confirm acceptance, or extend a deadline.