The law in California is generally favorable to insurance policyholders when an insurance company unreasonably denies paying a legitimate claim.

There are many reasons for this:

  • When a consumer purchases an insurance policy there is no bargaining over the terms of the policy. Most of us try to get a policy with a premium that we find acceptable, but we do not know what we are buying other than a type of insurance coverage, i.e., automobile insurance, health, life, homeowners, etc.
  • Most often we only learn about what we really purchased after we make a claim. Then and only then do we learn that certain perils we thought were covered are not or that there was a defect in our application or that we failed to fulfill an obligation under the policy that we were unaware of and so on.
  • What we are purchasing when we buy an insurance policy is the insurance company’s promise – the promise to promptly and reasonably investigate and pay on a valid claim. We expect that when we present a claim under the policy that the insurance company is obligated to pay it fully and promptly. Insurance policies are purchased by consumers based on trust that the insurance company will be fair and honest. A trust that is all too often breached.
  • The relationship between an insurance company and the average insured is inherently unbalanced. The insurance company almost always has greater resources than the average insured, and all of the power to dictate what will be provided in the policy.

The obligations of the policyholder and the insurance company are described in the insurance policy contract, and are modified or supplemented by California statutes, case law holdings and regulations. Most people do not read their own policies, and even when they do, they still do not know what most provisions in policies mean. Lawyers for policyholders and insurance companies argue all the time about what certain policy language means. Often, it is up to the California courts to decide what the policy means, and what the obligations of the parties are in case holdings – which we refer to as case law. (See our Resources page for helpful links)

To analyze whether an insurance company has improperly denied a claim, a person must first start with an analysis of the policy language, and the applicable facts.

Such analysis involves answering the questions like the following:

  • Was the policy in force at the time of the loss?
  • Is the person making the claim an insured under the policy?
  • Is the claim a covered loss under the policy?
  • Has the time to file a law suit expired based on the applicable statute of limitations or a shortened time based on the policy language?
  • Is there a condition that has not been fulfilled by the insured as required by the policy, such as giving proper notice?
  • Is there an exclusion that applies?
  • Is there an exception to the exclusion that applies?

An analysis of a complicated insurance claim cannot be made just by reviewing the policy language and the applicable facts. For the analysis to be thorough and as accurate as possible, it must be done in conjunction with a careful consideration of applicable California case law holdings, as well as the applicable statutes and regulations.

The determination of whether an insurance company has a duty to pay a claim under a policy of insurance is generally a question of law to be decided by a judge. In a difficult coverage dispute, case law holdings of cases with comparable facts indicate how the courts have analyzed and decided comparable coverage issues. Without a careful analysis of these case law holdings, it is impossible to make a reasonable and thorough evaluation of the merits of a claim that was denied.

For example, in a denial of medical benefits under a heath insurance policy based on incorrect medical history information in the application, there must be an analysis of the application process and how the courts have dealt with that issue. Was the application filled out by the applicant or the insurance company’s agent? Was the applicant given a chance to read the application before it was signed, or did the agent place the application in front of the applicant and direct the applicant to sign without reading it? Was the application filled out by a broker? The case law generally imputes the conduct of the agent to the insurance company, but not the conduct of a broker. The courts typically are inclined to rule against an insurance company that declines coverage because of a failure to include pertinent medical history in an application where: (a) the application was taken and filled out by an agent, and the agent does not read all of – or improperly reads – the questions to the applicant; (b) the agent is careless or intentionally fails to include all of the applicant’s prior medical history; (c) the insured informs the agent of pertinent medical history information, but the agent’s response to the insured is that the insurer would not be interested in such information. These are just some examples.

When a consumer policyholder or a small business has suffered a loss that they believe was covered under an insurance policy, the results can be devastating. A small business can be forced into bankruptcy.

A small business that finds itself in a lawsuit, and where the insurance company refuses to defend, can be forced to incur large legal bills and a liability judgment – which can cause the business to close its doors.

A family that has lost a father or mother who was a provider for the family, and when life insurance benefits are denied, can suffer severe financial and emotional hardship.

An insurance company that refuses to honor its promises to get a family back into their home, where the home is uninhabitable because of fire or water damage, can wreak havoc on all of the family members, to say the least.

Society as a whole has an interest in ensuring that insurance companies fulfill their promises so that families and individuals are protected, and continue to be productive.

Insurance coverage and bad faith cases should be litigated by attorneys who are thoroughly familiar with this type of litigation, and who have extensive experience in insurance coverage analysis. Many times, in difficult coverage cases, the experience of the attorneys make the difference.

For more information on insurance law in California, check out our Resources page.

Jeanette L. Viau and Gary Kwasniewski are experienced insurance lawyers. They are the founders of the Viau & Kwasniewski law firm in Los Angeles serving all of Southern California. If you have had an insurance claim denied, be sure to consult with insurance lawyers who have the expertise to properly analyze your claim and lawyers that can competently litigate insurance cases. You can contact the lawyers at Viau & Kwasniewski at (213) 842-8164, or by e-mail at All of our contact information can be found at our website at

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