California guide for policyholders facing unreasonable claim delays
40 Days
Max Time to Accept/Deny
10%
Interest on Delayed Payments
2 Years
Statute of Limitations
When to Use This Guide
Use this guide if your insurance company is unreasonably delaying payment of your claim:
Claim pending over 40 days - Insurer has not accepted or denied your claim after receiving proof of loss
Excessive documentation requests - Repeated requests for information already provided
Promised payments not received - Verbal or written promises to pay that are not honored
Stalling tactics - Insurer keeps "investigating" with no end in sight
Ignored communications - Calls and emails go unanswered for weeks
Unreasonable investigation - Investigation far exceeds what is necessary for your claim
What You Can Recover
Full policy benefits - The amount your policy covers for your loss
Interest on delayed payments - 10% per year or contract rate (CCR 2695.7(h))
Consequential damages - Additional losses caused by the delay
Emotional distress - Anxiety and stress caused by bad faith handling
Punitive damages - For oppressive, fraudulent, or malicious conduct
Attorney fees - Brandt fees to obtain policy benefits
Critical: California 40-Day Rule
Under California Insurance Code and regulations, insurers must:
Acknowledge claims within 15 days of receiving notice
Accept or deny within 40 days of receiving proof of claim
Pay immediately once liability is reasonably clear
Violations of these deadlines are evidence of bad faith and unfair claims practices!
Legal Basis
California statutes and regulations supporting your delayed payment claim
Key California Insurance Code Sections
Cal. Ins. Code 790.03(h)
The Unfair Claims Settlement Practices Act. Prohibits insurers from engaging in unfair claims practices, including failing to attempt in good faith to effectuate prompt, fair, and equitable settlement when liability is reasonably clear.
Cal. Ins. Code 790.03(h)(3)
Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims is an unfair claims practice.
Cal. Ins. Code 790.03(h)(5)
Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear constitutes bad faith.
Fair Claims Settlement Practices Regulations
CCR Title 10, Section 2695.7(b)
Insurers must accept or deny claims within 40 calendar days after receiving proof of claim. This is the key deadline for California insurance claims.
CCR Title 10, Section 2695.7(h)
When payment is delayed, insurers owe interest at the rate in the policy, or 10% per annum (whichever is greater), from the date payment was due.
CCR Title 10, Section 2695.5(e)
Insurers must acknowledge receipt of claims within 15 calendar days and provide necessary forms and instructions.
Key California Case Law
Egan v. Mutual of Omaha (1979) 24 Cal.3d 809
Landmark case establishing that insurers owe a duty of good faith and fair dealing. Unreasonable delay in paying claims constitutes bad faith and gives rise to tort liability.
Brandt v. Superior Court (1985) 37 Cal.3d 813
Attorney fees incurred to obtain policy benefits are recoverable as "Brandt fees" when the insurer has acted in bad faith.
Civil Code 3294
Provides for punitive damages when defendant is guilty of oppression, fraud, or malice. Applicable to egregious insurance bad faith.
Elements to Prove
Valid policy and covered claim - You have insurance and the loss is covered
Proper claim submission - You submitted required documentation
Unreasonable delay - Insurer exceeded 40-day deadline or engaged in delay tactics
No legitimate basis for delay - Insurer cannot justify the delay
Document Everything
Keep a log of all communications with your insurer. Note dates, times, who you spoke with, and what was said. Save all letters, emails, and text messages. This documentation will be critical evidence if your case goes to litigation.
Evidence Checklist
Documents to gather before sending your demand letter
Essential Documents
✓
Insurance policy - Complete copy of your policy including declarations page
✓
Proof of claim submission - Date-stamped copy of your claim form or written notice
✓
Proof of loss documents - All documentation you submitted to support your claim
✓
Communication log - Dates and summaries of all calls, emails, letters with insurer
✓
Written correspondence - All letters and emails from the insurance company
✓
Timeline - Document showing when you filed, what you submitted, and when
Supporting Evidence
✓
Acknowledgment letter - Insurer's acknowledgment of your claim (should be within 15 days)
✓
Information requests - All requests for additional documentation from insurer
✓
Your responses - Proof you provided requested information promptly
✓
Phone call records - Phone bills showing calls to insurance company
✓
Promises documentation - Any written promises about payment timing
✓
Consequential damages proof - Evidence of additional losses caused by delay
Calculate the 40-Day Deadline
The 40-day clock starts when the insurer receives your proof of claim - not when the loss occurred. Mark this date clearly and count forward 40 calendar days. If the insurer has not accepted or denied by day 41, they are in violation of California regulations.
Calculating Your Damages
How to calculate the full amount you're owed under California law
Components of Your Claim
Category
How to Calculate
Policy Benefits
The covered amount under your policy for your loss
Interest on Delayed Payment
10% per year (or contract rate) from date payment was due
Consequential Damages
Additional losses caused by the delay (e.g., rental costs, lost business)
Emotional Distress
Anxiety, stress, and suffering caused by bad faith handling
Attorney Fees (Brandt)
Legal fees incurred to obtain policy benefits
Punitive Damages
Available for oppressive, fraudulent, or malicious conduct
Total interest: Daily interest x Days overdue = Interest owed
Example: $50,000 claim x 10% / 365 = $13.70/day
If 60 days late: $13.70 x 60 = $822 in interest
Sample Calculation
Example: Homeowner's Claim Delayed 90 Days
Policy benefits (roof damage)$35,000.00
Interest (10% annual, 90 days late)$863.01
Temporary housing costs (consequential)$4,500.00
Emotional distress (estimate)$10,000.00
MINIMUM DEMAND$50,363.01
Punitive Damages Can Be Substantial
In egregious cases of bad faith, California courts have awarded punitive damages that far exceed the policy benefits. In Egan v. Mutual of Omaha, the court upheld punitive damages of $5 million on a $15,000 claim. While such awards are rare, they demonstrate that insurers face significant risk when they act in bad faith.
Sample Language
Copy and customize these paragraphs for your demand letter
Opening Paragraph
I am writing to formally demand immediate payment of my insurance claim that has been unreasonably delayed in violation of California Insurance Code Section 790.03(h) and the Fair Claims Settlement Practices Regulations. As of [TODAY'S DATE], my claim has been pending for [NUMBER] days, far exceeding the 40-day deadline for accepting or denying claims under CCR Title 10, Section 2695.7(b).
Claim Background
On [DATE OF LOSS], I suffered a covered loss involving [DESCRIPTION OF LOSS]. I promptly notified [INSURANCE COMPANY] of my claim on [DATE] under Policy Number [POLICY NUMBER]. On [DATE], I submitted complete proof of loss documentation including [LIST OF DOCUMENTS]. Despite providing all reasonably requested documentation, my claim remains unpaid.
Legal Basis - 40-Day Violation
Under California Code of Regulations, Title 10, Section 2695.7(b), insurers must accept or deny claims within 40 calendar days after receiving proof of claim. I submitted my proof of claim on [DATE], making the deadline [DATE + 40 DAYS]. As of today, [NUMBER] days have elapsed, and you have neither accepted nor denied my claim. This delay violates California insurance regulations and constitutes an unfair claims practice under Insurance Code Section 790.03(h).
Bad Faith Warning
Under Egan v. Mutual of Omaha (1979) 24 Cal.3d 809, insurers owe a duty of good faith and fair dealing to their policyholders. Your unreasonable delay in paying my claim constitutes a breach of this duty, exposing you to liability for consequential damages, emotional distress, attorney fees under Brandt v. Superior Court (1985), and punitive damages under Civil Code Section 3294 for your oppressive and malicious conduct.
I reserve the right to seek emotional distress damages, punitive damages, and attorney fees in litigation.
Closing / Deadline
Payment must be received within 14 days of the date of this letter. If I do not receive full payment by this deadline, I will pursue all available legal remedies, including filing a complaint with the California Department of Insurance, filing a bad faith lawsuit seeking compensatory damages, consequential damages, emotional distress damages, and punitive damages, and seeking recovery of attorney fees under Brandt v. Superior Court.
Next Steps
What to do after sending your demand letter
Expected Timeline
Day 1-3: Insurance company receives and reviews your letter
Day 3-7: Claims manager escalates to supervisor or legal department
Day 7-14: Response with payment or settlement offer
If They Pay
Make sure the payment includes:
Full policy benefits for your claim
Interest on delayed payment (10% per year from due date)
Any consequential damages you documented
Get payment via certified check or direct deposit. Keep records of everything.
If They Don't Pay or Continue to Delay
File a Complaint with California Department of Insurance (CDI)
The CDI has regulatory authority over insurers in California. They can investigate your complaint and impose penalties on the insurer. File online at insurance.ca.gov. This is free and creates a regulatory record.
Small Claims Court
For claims up to $12,500, small claims court is fast and inexpensive ($30-100 filing fee). No lawyers allowed. Good for straightforward delayed payment claims where you just want policy benefits.
Bad Faith Lawsuit (Superior Court)
For larger claims or when you want punitive damages, file in Superior Court. Many insurance bad faith attorneys work on contingency because Brandt fees allow recovery of attorney fees from the insurer.
Statute of Limitations
The statute of limitations for insurance bad faith claims in California is 2 years from when the bad faith conduct occurred. For breach of contract claims, it is 4 years. Do not wait too long to take action, as your claims may become time-barred.
Need Help With Your Insurance Claim?
Insurance bad faith attorneys often take delayed payment cases on contingency because California law allows recovery of attorney fees (Brandt fees) from insurers who act in bad faith. A lawyer can help maximize your recovery and handle the complex litigation process.