📋 Overview: Delayed Insurance Payments

California law requires insurance companies to promptly investigate and pay valid claims. When insurers unreasonably delay payment, they violate California regulations and may be liable for bad faith damages. Under California Code of Regulations Section 2695.7, insurers must accept or deny claims within 40 days of receiving proof of claim - this is known as the "40-day rule."

When to Use This Guide

Use this guide if your California insurer has:

🕑 Exceeded 40 Days

Failed to accept or deny your claim within 40 days of receiving proof of claim

🔄 Repeated Delays

Requested unnecessary documentation or repeatedly delayed without valid reason

🔒 No Communication

Failed to acknowledge your claim or respond to inquiries within required timeframes

💰 Withheld Payment

Acknowledged coverage but delayed issuing payment without justification

California's Strict Timing Requirements

🕑 15-Day Acknowledgment Rule

▼

Under Cal. Code Regs. Section 2695.5(e), insurers must acknowledge receipt of a claim within 15 calendar days. This acknowledgment must inform you of the procedure to follow for filing a claim and provide necessary forms and instructions.

Violation: If your insurer takes longer than 15 days to even acknowledge your claim, document this delay as evidence of unfair claims practices.

📅 40-Day Decision Rule

▼

Under Cal. Code Regs. Section 2695.7(b), insurers must accept or deny a claim within 40 calendar days after receiving proof of claim. If more time is needed, the insurer must provide written notice explaining why and must continue to provide status updates every 30 days.

Violation: Failure to make a decision within 40 days, or failure to provide proper written explanations for extensions, constitutes an unfair claims practice.

💰 30-Day Payment Rule

▼

Under Cal. Code Regs. Section 2695.7(h), once an insurer accepts a claim, payment must be made within 30 calendar days of the settlement agreement. For first-party claims, this means prompt payment once the amount is determined.

Violation: Delaying payment after coverage is confirmed and the amount is agreed upon violates California regulations and may constitute bad faith.

📝 21-Day Response Rule

▼

Under Cal. Code Regs. Section 2695.5(b), insurers must respond to all communications from claimants within 15 calendar days. If a definitive response cannot be provided, a written explanation must be sent within 15 days, with a final response within 21 days.

Violation: Ignoring your emails, letters, or phone calls, or failing to respond within these timeframes, is a violation that supports a delayed payment claim.

💡 First-Party vs. Third-Party Claims

These timing rules apply to both first-party claims (claims under your own policy) and third-party claims (claims by injured parties against your policy). However, the remedies may differ:

  • First-party claims: You can pursue bad faith damages directly against your insurer
  • Third-party claims: Delays in paying injured parties may expose you to excess liability and support an assignment of bad faith claims

⚠ Document Everything

Keep detailed records of all communications with your insurer, including dates, times, and content of phone calls. Save all emails and letters. Create a timeline showing when you submitted your claim, when you provided documentation, and how long it has been since each milestone. This documentation is critical evidence for a delayed payment claim.

💰 Damages & Penalties

California law provides multiple avenues for recovery when an insurer unreasonably delays payment. Beyond the benefits owed, you may be entitled to substantial additional damages.

Damage Type Description
Withheld Benefits The full amount of policy benefits that should have been paid promptly. This is the baseline recovery in any delayed payment case.
Prejudgment Interest 10% per annum under Civil Code 3289 on amounts wrongfully withheld. Calculated from the date payment should have been made until judgment.
Consequential Damages Economic losses caused by the delay - late fees, foreclosure costs, credit damage, lost business income, cost of alternative arrangements, etc.
Emotional Distress Anxiety, stress, and mental anguish caused by financial hardship resulting from the delay. No physical injury required in first-party bad faith.
Brandt Fees Attorney fees incurred to compel payment of policy benefits, recoverable as damages under Brandt v. Superior Court.
Punitive Damages Available under Civil Code 3294 if the delay was willful, oppressive, or demonstrated conscious disregard for policyholder rights. No statutory cap.

Calculating Your Penalty Interest

📊 Prejudgment Interest Calculator

Example: Auto Claim Delayed 180 Days

Claim amount owed $25,000
Days delayed beyond 40-day deadline 180 days
Daily interest rate (10% / 365) 0.0274%
Prejudgment interest ($25,000 x 0.0274% x 180) $1,233
TOTAL WITH INTEREST $26,233

Full Damages Example

📊 Sample Total Damages Calculation

Example: Homeowners Claim Delayed 8 Months

Withheld policy benefits $85,000
Prejudgment interest (10% x 8 months) $5,667
Alternative housing costs during delay $12,000
Credit damage and increased loan costs $3,500
Emotional distress damages $35,000
Brandt attorney fees $28,000
Compensatory subtotal $169,167
Punitive damages (if willful delay proven) $250,000+
POTENTIAL TOTAL RECOVERY $419,167+

⚠ When Punitive Damages Apply

Punitive damages require proof by clear and convincing evidence that the insurer acted with malice, oppression, or fraud. Patterns that may support punitive damages include:

  • Systematic delays as a business practice to discourage claims
  • Ignoring internal guidelines requiring prompt payment
  • Delaying payment to pressure lower settlements
  • Repeated violations despite prior complaints or regulatory action
  • Management-level decisions to delay valid claims

✅ Evidence Checklist

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

📅 Timeline Documentation

  • ✓ Date of loss/incident
  • ✓ Date you first reported the claim
  • ✓ Date you submitted proof of claim
  • ✓ Date insurer acknowledged claim (if at all)
  • ✓ Dates of all follow-up communications
  • ✓ Current date (showing elapsed time)

📩 Communications Record

  • ✓ All emails with insurer (sent and received)
  • ✓ All letters received (acknowledgment, requests, denials)
  • ✓ Phone call log (dates, times, who you spoke with)
  • ✓ Notes from phone conversations
  • ✓ Copies of letters you sent (with proof of mailing)

📄 Policy Documents

  • ✓ Complete insurance policy
  • ✓ Declarations page showing coverage limits
  • ✓ All endorsements and amendments
  • ✓ Premium payment receipts

🔍 Claim Documentation

  • ✓ Initial claim report/notice of loss
  • ✓ Proof of loss form submitted
  • ✓ All documentation you provided (receipts, estimates, photos)
  • ✓ Claim number and adjuster name

💰 Damages Evidence

  • ✓ Bills incurred due to delay (housing, repairs, etc.)
  • ✓ Late fees or penalties incurred
  • ✓ Credit reports showing damage
  • ✓ Lost income documentation
  • ✓ Medical records (stress, anxiety from delay)

📈 Violation Evidence

  • ✓ Calendar calculation showing days elapsed
  • ✓ Evidence of missing 15-day acknowledgment
  • ✓ Evidence of exceeding 40-day rule
  • ✓ Absence of required written explanations for delays

🔒 Request Your Complete Claim File

Under California law, you have the right to a copy of your claim file. Send a written request demanding all documents related to your claim, including:

  • Internal adjuster notes and evaluations
  • All communications (internal and external)
  • Claims handling guidelines and manuals
  • Supervisor review notes
  • Any recorded statements

The claim file may reveal internal decisions to delay your claim and support your bad faith case.

📝 Sample Language

Copy and customize these paragraphs for your California delayed payment demand letter. Select the sections that apply to your specific situation.

First-Party Claims (Your Own Policy)

First-Party: Homeowners/Property Damage
On [DATE OF LOSS], my property at [ADDRESS] sustained damage covered under my homeowners policy, Policy No. [POLICY NUMBER]. I promptly reported this claim on [DATE] and submitted all requested documentation, including repair estimates and photographs, by [DATE PROOF SUBMITTED]. As of today, [DAYS ELAPSED] days have passed since I provided proof of my claim, yet [INSURANCE COMPANY] has neither accepted nor denied my claim, nor provided the written explanation required under California Code of Regulations Section 2695.7(b) for any extension beyond 40 days. This unexplained delay violates California's Fair Claims Settlement Practices Regulations and constitutes bad faith under California law.
First-Party: Auto Collision/Comprehensive
On [DATE OF ACCIDENT], my vehicle was damaged in an incident covered under the [collision/comprehensive] coverage of my auto policy, Policy No. [POLICY NUMBER]. I immediately reported this claim, Claim No. [CLAIM NUMBER], and provided all documentation requested by your adjuster, including the police report, repair estimates totaling $[AMOUNT], and photos of the damage. Despite the clear coverage and documented damages, [DAYS] days have now passed without payment or a valid coverage determination. California Code of Regulations Section 2695.7 requires a decision within 40 days. Your company's failure to pay my claim or provide any legitimate reason for delay constitutes an unfair claims practice under California Insurance Code Section 790.03.
First-Party: Medical Bills/Health Insurance
I am writing regarding the unreasonable delay in processing my health insurance claim for medical services rendered on [DATE OF SERVICE]. The claim for treatment by [PROVIDER NAME], in the amount of $[AMOUNT], Claim No. [CLAIM NUMBER], was submitted on [SUBMISSION DATE]. It is now [DAYS ELAPSED] days later, and your company has failed to process this claim. Meanwhile, I have received collection notices from the provider, damaging my credit and causing significant stress. California Insurance Code Section 10112 and the Fair Claims Settlement Practices Regulations require prompt payment of valid health claims. Your delay has caused me to incur late fees of $[AMOUNT] and emotional distress. I demand immediate payment of this claim plus all consequential damages.
First-Party: Disability Insurance
I became disabled and unable to work on [DATE OF DISABILITY] due to [CONDITION/INJURY]. I timely filed a claim under my disability insurance policy, Policy No. [POLICY NUMBER], on [CLAIM DATE], and provided all requested medical documentation from my treating physicians. Despite providing complete proof of my disability, [INSURANCE COMPANY] has delayed payment for [MONTHS/WEEKS], causing me severe financial hardship. I have been unable to pay my [mortgage/rent/bills], and have incurred [late fees/foreclosure proceedings/credit damage]. California Insurance Code Section 10112 specifically requires disability insurers to pay valid claims promptly. Your unreasonable delay constitutes bad faith and entitles me to consequential damages, emotional distress damages, and punitive damages.

Third-Party Claims

Third-Party: Personal Injury Claim
I am writing regarding the unreasonable delay in paying my personal injury claim, Claim No. [CLAIM NUMBER], arising from the [DATE] accident caused by your insured, [INSURED NAME]. Liability has been clear since your insured's admission and the police report, and I have provided complete documentation of my medical expenses ($[AMOUNT]), lost wages ($[AMOUNT]), and other damages. Despite liability being reasonably clear, [DAYS] days have passed since I submitted my demand with full documentation, and your company has failed to make a reasonable settlement offer or pay the claim. This delay violates California Insurance Code Section 790.03(h)(5), which prohibits "not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear." I demand immediate payment of my documented damages.
Third-Party: Property Damage Claim
This letter concerns the delayed payment of my property damage claim, Claim No. [CLAIM NUMBER]. Your insured, [INSURED NAME], caused damage to my property on [DATE]. Your adjuster confirmed liability and agreed to the repair estimate of $[AMOUNT] on [DATE OF AGREEMENT]. Despite this agreement, payment has not been issued, and it has now been [DAYS] days. California Code of Regulations Section 2695.7(h) requires payment within 30 days of reaching a settlement agreement. Your failure to pay has forced me to [pay out of pocket / delay necessary repairs / incur rental costs], causing damages of $[AMOUNT]. I demand immediate payment of the agreed amount plus all consequential damages caused by this delay.

Legal Demand Language

Legal Basis Paragraph
Your company's delay violates multiple provisions of California law. California Code of Regulations Section 2695.7(b) requires insurers to accept or deny claims within 40 calendar days of receiving proof of claim. Your company has exceeded this deadline by [DAYS] days without providing the written explanation required for any extension. Additionally, California Insurance Code Section 790.03(h) prohibits insurers from "not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear." These violations constitute evidence of bad faith under Gruenberg v. Aetna Insurance Co. (1973) 9 Cal.3d 566, entitling me to consequential damages, emotional distress damages, Brandt attorney fees under Brandt v. Superior Court (1985) 37 Cal.3d 813, and potentially punitive damages under Civil Code Section 3294.
Demand and Deadline
I hereby demand payment of the following amounts within [15/30 DAYS] of the date of this letter:

1. Policy benefits owed: $[AMOUNT]
2. Prejudgment interest at 10% per annum: $[AMOUNT]
3. Consequential damages: $[AMOUNT]
4. Emotional distress damages: $[AMOUNT]

TOTAL DEMAND: $[TOTAL]

If payment is not received by [DEADLINE DATE], I will file a lawsuit in California Superior Court for breach of contract, bad faith, and violation of the Fair Claims Settlement Practices Regulations. I will seek all damages described above plus Brandt attorney fees, punitive damages, and court costs.
Department of Insurance Reference
Please be advised that I am simultaneously filing a complaint with the California Department of Insurance regarding your company's violation of the Fair Claims Settlement Practices Regulations (Title 10, California Code of Regulations, Section 2695.1 et seq.). The Department has authority to investigate unfair claims practices and impose penalties on insurers who violate these regulations. A copy of this demand letter will accompany my complaint. I encourage you to resolve this matter promptly to avoid further regulatory scrutiny.

📄 Full Sample Demand Letter

Below is a complete, ready-to-use demand letter for delayed insurance payment. Replace all bracketed placeholders with your specific information.

Complete Delayed Payment Demand Letter

[YOUR NAME] [YOUR ADDRESS] [CITY, STATE ZIP] [YOUR EMAIL] [YOUR PHONE] [DATE] VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED and EMAIL to: [CLAIMS EMAIL] [INSURANCE COMPANY NAME] Claims Department [INSURANCE COMPANY ADDRESS] [CITY, STATE ZIP] Re: DEMAND FOR IMMEDIATE PAYMENT - DELAYED CLAIM Policy No.: [POLICY NUMBER] Claim No.: [CLAIM NUMBER] Date of Loss: [DATE OF LOSS] Insured: [YOUR NAME / INSURED NAME] Dear Claims Manager: I am writing to formally demand immediate payment of my insurance claim, which has been unreasonably delayed in violation of California law. As detailed below, [INSURANCE COMPANY NAME] has violated the Fair Claims Settlement Practices Regulations and breached its duty of good faith and fair dealing. BACKGROUND AND TIMELINE On [DATE OF LOSS], I suffered a covered loss when [BRIEF DESCRIPTION OF LOSS - e.g., "my home sustained water damage from a burst pipe" or "my vehicle was damaged in a collision"]. I reported this claim to your company on [DATE CLAIM REPORTED] and was assigned Claim No. [CLAIM NUMBER]. I submitted complete proof of my claim on [DATE PROOF SUBMITTED], including [LIST DOCUMENTS PROVIDED - e.g., "repair estimates, photographs of damage, receipts, and a completed proof of loss form"]. Your adjuster, [ADJUSTER NAME], [inspected the damage / reviewed the documentation] on [DATE]. As of today's date, [CURRENT DATE], a total of [NUMBER] days have passed since I submitted proof of my claim. Despite my [NUMBER] follow-up calls and [NUMBER] written communications, your company has failed to either accept or deny my claim, and has not provided any written explanation for this delay. VIOLATIONS OF CALIFORNIA LAW Your company's conduct violates multiple provisions of California insurance law: 1. California Code of Regulations Section 2695.7(b): Insurers must accept or deny claims within 40 calendar days of receiving proof of claim. You have exceeded this deadline by [NUMBER] days without providing the required written explanation for any extension. 2. California Code of Regulations Section 2695.5(b): Insurers must respond to all communications within 15 calendar days. You have failed to respond to my communications dated [DATES OF UNANSWERED COMMUNICATIONS]. 3. California Insurance Code Section 790.03(h): Your failure to promptly investigate and pay my valid claim constitutes an unfair claims settlement practice. These violations constitute evidence of insurance bad faith under California law. See Gruenberg v. Aetna Insurance Co. (1973) 9 Cal.3d 566; Brehm v. 21st Century Ins. Co. (2008) 166 Cal.App.4th 1225. DAMAGES As a direct result of your unreasonable delay, I have suffered the following damages: Policy Benefits Owed: $[AMOUNT] Prejudgment Interest (10% per annum): $[AMOUNT] [CONSEQUENTIAL DAMAGES - e.g., "Alternative housing costs"]: $[AMOUNT] [ADDITIONAL DAMAGES - e.g., "Late fees incurred"]: $[AMOUNT] [ADDITIONAL DAMAGES - e.g., "Credit damage"]: $[AMOUNT] Emotional Distress: $[AMOUNT] TOTAL CURRENT DAMAGES: $[TOTAL AMOUNT] This demand does not include Brandt attorney fees or punitive damages, which I reserve the right to pursue if this matter proceeds to litigation. DEMAND I hereby demand payment of the total amount of $[TOTAL AMOUNT] within fifteen (15) calendar days of the date of this letter, by [DEADLINE DATE]. CONSEQUENCES OF NON-PAYMENT If I do not receive full payment by the deadline stated above, I will: 1. File a lawsuit in California Superior Court for breach of contract, insurance bad faith, and violation of the Fair Claims Settlement Practices Regulations, seeking all compensatory damages, Brandt attorney fees, and punitive damages under Civil Code Section 3294; 2. File a formal complaint with the California Department of Insurance (insurance.ca.gov) documenting your violations of the Fair Claims Settlement Practices Regulations; 3. Pursue all other remedies available under California law. I urge you to resolve this matter promptly. Continued delay will only increase your company's exposure to damages, including the accrual of additional prejudgment interest and strengthening of my punitive damages claim. Please direct all communications regarding this matter to me at the address above. This letter is written without prejudice to any of my rights, all of which are expressly reserved. Sincerely, _______________________________ [YOUR NAME] Enclosures: - Copy of insurance policy declarations page - Timeline of claim communications - Copies of all documentation submitted - Copies of unanswered correspondence cc: California Department of Insurance (via online complaint)

⚠ Customization Tips

  • Be specific: Replace all placeholders with exact dates, amounts, and details from your claim
  • Calculate damages accurately: Include only damages you can document and prove
  • Send properly: Always send via certified mail with return receipt AND email for documentation
  • Keep copies: Retain copies of everything you send and receive
  • Set realistic deadlines: 15-30 days is standard; shorter for urgent situations

🚀 Next Steps

What to do after sending your demand letter.

Expected Timeline

Days 1-7

Insurer receives demand and assigns to claims management or legal department for review

Days 7-15

Expect contact from insurer - may offer payment, request settlement discussions, or provide explanation

Days 15-30

If deadline passes with no adequate response, prepare to file Department of Insurance complaint and lawsuit

If They Pay

👍 Payment Received

If the insurer pays your claim after receiving your demand:

  • Verify the payment amount includes prejudgment interest for the delay period
  • Do not sign any release that waives your right to bad faith damages unless fully compensated
  • You may still pursue consequential damages and emotional distress caused by the delay
  • Consult an attorney if offered a settlement that requires releasing all claims

If They Don't Pay or Respond Adequately

  1. File a Complaint with the California Department of Insurance

    Visit insurance.ca.gov to file a complaint online. The Department investigates unfair claims practices and can take action against violating insurers. While this does not replace a lawsuit, it creates a regulatory record and may prompt the insurer to act.

  2. Consult an Insurance Bad Faith Attorney

    Many California insurance attorneys offer free consultations and take delay cases on contingency. Given the potential for Brandt fees, prejudgment interest, and punitive damages, strong delay cases are attractive to plaintiffs' attorneys.

  3. File a Lawsuit in California Superior Court

    Bad faith delay cases are filed in Superior Court (unlimited civil if over $25,000). You can pursue both contract claims (policy benefits plus interest) and tort claims (bad faith damages, emotional distress, punitive damages).

  4. Consider Mediation

    Many insurance disputes settle in mediation. A neutral mediator can help bridge the gap between parties. Some policies may require mediation before litigation - check your policy terms.

⚠ Statute of Limitations

  • Contract claims (policy benefits): 4 years from breach (CCP 337)
  • Tort claims (bad faith): 2 years from wrongful act (CCP 339)

The delay itself may be an ongoing breach, but do not wait. The 2-year tort limitation for bad faith damages begins when the delay becomes unreasonable. File your demand and take action promptly.

Need Legal Help?

Insurance delay cases require expertise in California's claims regulations. Get a 30-minute strategy call with an insurance attorney to evaluate your case.

Book Consultation - $125

California Resources