Insurance Bad Faith Denial Demand Letter

📋 What is Insurance Bad Faith?

Insurance bad faith occurs when an insurance company unreasonably denies, delays, or underpays a valid claim. In California, insurers owe their policyholders a duty of good faith and fair dealing. When they breach this duty, you may be entitled to significant damages beyond just the policy benefits.

When to Use This Guide

Use this guide if your insurance company has:

❌ Denied Valid Claim

Refused to pay benefits you are entitled to under your policy

🕑 Unreasonable Delays

Failed to promptly investigate or pay your claim

💲 Lowball Offer

Offered far less than your claim is actually worth

🚫 Failed to Investigate

Did not adequately investigate before denying

👍 What You Can Recover in Bad Faith Cases

Policy benefits - The full amount owed under your policy
Consequential damages - Financial harm caused by the denial
Emotional distress - Mental anguish from the insurer's conduct
Brandt fees - Attorney fees incurred to obtain policy benefits
Punitive damages - Additional damages to punish egregious conduct

Common Bad Faith Tactics

📜 Unreasonable Policy Interpretation

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Reading policy language in ways that defeat coverage when a reasonable interpretation would provide it. Courts interpret ambiguous policy language in favor of coverage.

🕑 Delay Tactics

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Dragging out investigations, requesting unnecessary documents repeatedly, or failing to respond to communications in a timely manner. California law requires prompt handling of claims.

💲 Lowball Settlement Offers

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Making settlement offers far below the claim's actual value, hoping you'll accept out of desperation or lack of knowledge about your claim's true worth.

🔍 Inadequate Investigation

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Denying claims without conducting a proper, thorough investigation of the facts. Insurers must investigate before denying - not look for reasons to deny.

⚠ Time is Critical

California has a 2-year statute of limitations for bad faith claims. Some policies contain shorter contractual limitation periods. Do not delay - act quickly to preserve your rights.

⚖ Legal Basis

California provides strong protections for insurance policyholders. These statutes and cases support your bad faith claim.

Key California Statutes

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California Insurance Code 790.03(h)

Defines unfair claims settlement practices. Insurers cannot misrepresent policy provisions, fail to acknowledge claims promptly, refuse to pay without reasonable investigation, or attempt to settle for less than a reasonable person would believe they are entitled.

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California Civil Code 3294

Allows punitive damages when the insurer's conduct involves oppression, fraud, or malice. Punitive damages punish the insurer and deter similar future conduct.

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Brandt v. Superior Court (1985)

Landmark case establishing that policyholders can recover attorney fees incurred to obtain benefits due under an insurance policy. These "Brandt fees" are recoverable as damages.

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Gruenberg v. Aetna Ins. Co. (1973)

Foundational case recognizing the tort of insurance bad faith. Breach of the implied covenant of good faith gives rise to an action in tort with damages beyond policy limits.

Elements You Must Prove

Valid insurance policy - You had a policy in effect
Covered claim - Your claim was covered under the policy terms
Breach of duty - The insurer unreasonably denied, delayed, or underpaid
Causation - The insurer's conduct caused you harm
Damages - You suffered actual damages as a result

💡 The "Genuine Dispute" Defense

Insurers often claim there was a "genuine dispute" about coverage. This defense fails when the insurer failed to investigate, used unreasonable policy interpretation, ignored evidence of coverage, or denied based on pretext.

✅ Evidence Checklist

Gather these documents before sending your demand letter. Click to check off items as you collect them.

📄 Policy Documents

✓ Complete insurance policy (all pages, endorsements, exclusions)
✓ Premium payment records proving policy was in force
✓ Policy renewal notices and any amendments

📩 Claim Documentation

✓ Initial claim submission and supporting documents
✓ Denial letter with stated reasons
✓ All correspondence (letters, emails, faxes)
✓ Phone call log (dates, times, names, summaries)

📷 Loss Evidence

✓ Proof of loss (photos, receipts, appraisals)
✓ Repair estimates and contractor quotes
✓ Expert reports and professional assessments

📈 Consequential Damages

✓ Financial records showing hardship from denial
✓ Lost income documentation
✓ Out-of-pocket expenses incurred

🔒 Preserve All Evidence

Keep originals of all documents. Make copies before submitting anything. Document phone calls in writing with follow-up emails. This paper trail proves bad faith.

💰 Calculate Your Damages

In bad faith cases, you can recover much more than just the policy benefits. Here's what you may be entitled to.

Category	Description
Contract Damages	The policy benefits you were wrongfully denied
Consequential Damages	Financial losses caused by denial (foreclosure, repossession, bankruptcy)
Emotional Distress	Mental anguish, anxiety, depression from insurer's conduct
Brandt Fees	Attorney fees to recover policy benefits (unique to California)
Punitive Damages	Additional damages to punish egregious conduct (can be substantial)

💰 Brandt Fees - A California Advantage

Under Brandt v. Superior Court, you can recover the attorney fees you pay to obtain your policy benefits. This is unique to California and makes it financially viable to fight back against bad faith insurers.

📊 Sample Damages Calculation

Example: Denied Homeowner's Claim

Policy benefits wrongfully denied $150,000

Rental costs during delay $24,000

Lost wages dealing with claim $8,000

Emotional distress $50,000

Brandt fees (attorney fees) $75,000

Punitive damages (3x compensatory) $921,000

POTENTIAL TOTAL RECOVERY $1,228,000

💡 Every Case is Different

The example above shows potential in a strong case. Your actual recovery depends on your facts, evidence strength, and egregiousness of the insurer's conduct.

📝 Sample Language

Copy and customize these paragraphs for your demand letter.

Opening Paragraph

I am writing to formally demand payment of my insurance claim and to notify you that your handling of this claim constitutes bad faith under California law. Your denial of my claim, dated [DENIAL DATE], under policy number [POLICY NUMBER], was unreasonable and without merit.

Claim Background

I hold a valid insurance policy with [INSURANCE COMPANY], policy number [POLICY NUMBER], which has been in continuous effect since [POLICY START DATE]. On [DATE OF LOSS], I suffered a covered loss when [DESCRIPTION OF LOSS]. I promptly reported this claim on [CLAIM DATE] and have fully cooperated with your investigation.

Bad Faith Allegations

Your handling of my claim violates California Insurance Code Section 790.03(h) and constitutes bad faith. Specifically, you have: (1) failed to conduct a reasonable investigation before denying my claim; (2) misrepresented the terms of my policy to justify denial; (3) failed to affirm or deny coverage within a reasonable time; and (4) offered to settle my claim for far less than what a reasonable person would believe they are entitled to under the policy.

Legal Basis

Under California law, insurers owe their policyholders an implied covenant of good faith and fair dealing. See Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566. Your breach of this duty exposes you to liability for all damages I have suffered, including the policy benefits, consequential damages, emotional distress, and attorney fees incurred to obtain these benefits under Brandt v. Superior Court (1985) 37 Cal.3d 813. Given the egregious nature of your conduct, I also reserve my right to seek punitive damages under Civil Code Section 3294.

Demand and Deadline

I hereby demand that you immediately pay the full value of my claim in the amount of $[POLICY BENEFITS AMOUNT], plus $[CONSEQUENTIAL DAMAGES] in consequential damages I have suffered as a result of your wrongful denial. Payment must be received within [30 DAYS] of the date of this letter. If I do not receive full payment by this deadline, I will file a lawsuit seeking the full amount owed plus emotional distress damages, Brandt attorney fees, and punitive damages.

🚀 Next Steps

What to do after sending your demand letter.

Expected Timeline

Days 1-5

Insurance company receives and logs your letter

Days 5-15

Letter is reviewed by claims department and/or legal

Days 15-30

Response with payment, counteroffer, or continued denial

If They Don't Pay

Consult a Bad Faith Attorney
Many work on contingency (no fee unless you win). Under Brandt, your attorney fees may be recoverable as damages.
File a CDI Complaint
File with the California Department of Insurance at insurance.ca.gov. Creates a regulatory record.
File a Lawsuit
Bad faith cases are filed in Superior Court. You can seek policy benefits, consequential damages, emotional distress, Brandt fees, and punitive damages.

Need Legal Help?

Bad faith cases are complex. Get a 30-minute strategy call with an attorney to evaluate your case and discuss next steps.

Book Consultation - $125

California Resources

CA Dept. of Insurance: insurance.ca.gov - File complaints, verify licenses
CDI Consumer Hotline: 1-800-927-4357
State Bar Lawyer Referral: calbar.ca.gov
California Insurance Code: leginfo.legislature.ca.gov