California Unfair Insurance Practice Laws
California Insurance Code Section 790.03.
The following are hereby defined as unfair methods of
competition and unfair and deceptive acts or practices in the
business of insurance.
- (a) Making, issuing, circulating, or causing to be made, issued or
circulated, any estimate, illustration, circular or statement
misrepresenting the terms of any policy issued or to be issued or the
benefits or advantages promised thereby or the dividends or share of
the surplus to be received thereon, or making any false or
misleading statement as to the dividends or share of surplus
previously paid on similar policies, or making any misleading
representation or any misrepresentation as to the financial condition
of any insurer, or as to the legal reserve system upon which any
life insurer operates, or using any name or title of any policy or
class of policies misrepresenting the true nature thereof, or making
any misrepresentation to any policyholder insured in any company for
the purpose of inducing or tending to induce such policyholder to
lapse, forfeit, or surrender his or her insurance.
- (b) Making or disseminating or causing to be made or disseminated
before the public in this state, in any newspaper or other
publication, or any advertising device, or by public outcry or
proclamation, or in any other manner or means whatsoever, any
statement containing any assertion, representation or statement with
respect to the business of insurance or with respect to any person in
the conduct of his or her insurance business, which is untrue,
deceptive, or misleading, and which is known, or which by the
exercise of reasonable care should be known, to be untrue, deceptive,
- (c) Entering into any agreement to commit, or by any concerted
action committing, any act of boycott, coercion or intimidation
resulting in or tending to result in unreasonable restraint of, or
monopoly in, the business of insurance.
- (d) Filing with any supervisory or other public official, or
making, publishing, disseminating, circulating, or delivering to any
person, or placing before the public, or causing directly or
indirectly, to be made, published, disseminated, circulated,
delivered to any person, or placed before the public any false
statement of financial condition of an insurer with intent to
- (e) Making any false entry in any book, report, or statement of
any insurer with intent to deceive any agent or examiner lawfully
appointed to examine into its condition or into any of its affairs,
or any public official to whom the insurer is required by law to
report, or who has authority by law to examine into its condition or
into any of its affairs, or, with like intent, willfully omitting to
make a true entry of any material fact pertaining to the business of
the insurer in any book, report, or statement of the insurer.
- (f) Making or permitting any unfair discrimination between
individuals of the same class and equal expectation of life in the
rates charged for any contract of life insurance or of life annuity
or in the dividends or other benefits payable thereon, or in any
other of the terms and conditions of the contract.
This subdivision shall be interpreted, for any contract of
ordinary life insurance or individual life annuity applied for and
issued on or after January 1, 1981, to require differentials based
upon the sex of the individual insured or annuitant in the rates or
dividends or benefits, or any combination thereof. This requirement
is satisfied if those differentials are substantially supported by
valid pertinent data segregated by sex, including, but not
necessarily limited to, mortality data segregated by sex.
However, for any contract of ordinary life insurance or individual
life annuity applied for and issued on or after January 1, 1981, but
before the compliance date, in lieu of those differentials based on
data segregated by sex, rates, or dividends or benefits, or any
combination thereof, for ordinary life insurance or individual life
annuity on a female life may be calculated as follows: (a) according
to an age not less than three years nor more than six years younger
than the actual age of the female insured or female annuitant, in the
case of a contract of ordinary life insurance with a face value
greater than five thousand dollars ($5,000) or a contract of
individual life annuity; and (b) according to an age not more than
six years younger than the actual age of the female insured, in the
case of a contract of ordinary life insurance with a face value of
five thousand dollars ($5,000) or less. "Compliance date" as used in
this paragraph shall mean the date or dates established as the
operative date or dates by future amendments to this code directing
and authorizing life insurers to use a mortality table containing
mortality data segregated by sex for the calculation of adjusted
premiums and present values for nonforfeiture benefits and valuation
reserves as specified in Sections 10163.5 and 10489.2 or successor
Notwithstanding the provisions of this subdivision, sex based
differentials in rates or dividends or benefits, or any combination
thereof, shall not be required for (1) any contract of life insurance
or life annuity issued pursuant to arrangements which may be
considered terms, conditions, or privileges of employment as these
terms are used in Title VII of the Civil Rights Act of 1964 (Public
Law 88-352), as amended, and (2) tax sheltered annuities for
employees of public schools or of tax exempt organizations described
in Section 501(c)(3) of the Internal Revenue Code.
- (g) Making or disseminating, or causing to be made or
disseminated, before the public in this state, in any newspaper or
other publication, or any other advertising device, or by public
outcry or proclamation, or in any other manner or means whatever,
whether directly or by implication, any statement that a named
insurer, or named insurers, are members of the California Insurance
Guarantee Association, or insured against insolvency as defined in
Section 119.5. This subdivision shall not be interpreted to prohibit
any activity of the California Insurance Guarantee Association or
the commissioner authorized, directly or by implication, by Article
14.2 (commencing with Section 1063).
- (h) Knowingly committing or performing with such frequency as to
indicate a general business practice any of the following unfair
claims settlement practices:
- (1) Misrepresenting to claimants pertinent facts or insurance
policy provisions relating to any coverages at issue.
- (2) Failing to acknowledge and act reasonably promptly upon
communications with respect to claims arising under insurance
- (3) Failing to adopt and implement reasonable standards for the
prompt investigation and processing of claims arising under insurance
- (4) Failing to affirm or deny coverage of claims within a
reasonable time after proof of loss requirements have been completed
and submitted by the insured.
- (5) Not attempting in good faith to effectuate prompt, fair, and
equitable settlements of claims in which liability has become
- (6) Compelling insureds to institute litigation to recover amounts
due under an insurance policy by offering substantially less than
the amounts ultimately recovered in actions brought by the insureds,
when the insureds have made claims for amounts reasonably similar to
the amounts ultimately recovered.
- (7) Attempting to settle a claim by an insured for less than the
amount to which a reasonable man would have believed he was entitled
by reference to written or printed advertising material accompanying
or made part of an application.
- (8) Attempting to settle claims on the basis of an application
which was altered without notice to, or knowledge or consent of, the
insured, his or her representative, agent, or broker.
- (9) Failing, after payment of a claim, to inform insureds or
beneficiaries, upon request by them, of the coverage under which
payment has been made.
- (10) Making known to insureds or claimants a practice of the
insurer of appealing from arbitration awards in favor of insureds or
claimants for the purpose of compelling them to accept settlements or
compromises less than the amount awarded in arbitration.
- (11) Delaying the investigation or payment of claims by requiring
an insured, claimant, or the physician of either, to submit a
preliminary claim report, and then requiring the subsequent
submission of formal proof of loss forms, both of which submissions
contain substantially the same information.
- (12) Failing to settle claims promptly, where liability has become
apparent, under one portion of the insurance policy coverage in
order to influence settlements under other portions of the insurance
- (13) Failing to provide promptly a reasonable explanation of the
basis relied on in the insurance policy, in relation to the facts or
applicable law, for the denial of a claim or for the offer of a
- (14) Directly advising a claimant not to obtain the services of an
- (15) Misleading a claimant as to the applicable statute of
- (16) Delaying the payment or provision of hospital, medical, or
surgical benefits for services provided with respect to acquired
immune deficiency syndrome or AIDS-related complex for more than 60
days after the insurer has received a claim for those benefits, where
the delay in claim payment is for the purpose of investigating
whether the condition preexisted the coverage. However, this 60-day
period shall not include any time during which the insurer is
awaiting a response for relevant medical information from a health
California Code of Regulations, TITLE 10. Investment
Chapter 5. Insurance Commissioner
Subchapter 7.5. Fair Claims Settlement Practices Regulations
§2695.7. Standards for Prompt, Fair and Equitable Settlements.
- (a) No insurer shall discriminate in its claims settlement practices based upon the claimant's race, gender, income, religion, language, sexual orientation, ancestry, national origin, or physical disability, or upon the territory of the property or person insured.
- (b) Upon receiving proof of claim, every insurer, except as specified in subsection 2695.7(b)(4) below, shall
immediately, but in no event more than forty (40) calendar days later, accept or deny the claim, in whole or in part.
- (1) Where an insurer denies or rejects a first party claim in whole or in part, it shall do so in writing and shall provide to the claimant a statement listing all bases for such rejection or denial and the factual and legal bases for each reason given for such rejection or denial which is then within the insurer's knowledge. Where an insurer's denial of a first party claim, in whole or in part, is based on a specific policy provision, condition or exclusion, the written denial shall include reference thereto and provide an explanation of the application of the provision, condition or exclusion to the claim. Every insurer that denies or rejects a third party claim in whole or in part, or disputes liability or damages shall do so in writing.
- (2) Subject to the provisions of subsection 2695.7(k), nothing contained in subsection 2695.7(b)(1) shall require an insurer to disclose any information that could reasonably be expected to alert a claimant to the fact that the subject claim is being investigated as a suspected fraudulent claim.
- (3) Written notification pursuant to this subsection shall include a statement that, if the claimant believes the claim has been wrongfully denied or rejected, he or she may have the matter reviewed by the California Department of Insurance, and shall include the address and telephone number of the unit of the Department which reviews claims practices.
- (4) The time frame in subsection 2695.7(b) shall not apply to claims arising from policies of disability insurance
subject to Section 10123.13 of the Insurance Code
[i.e. only those that cover hospital, medical, or surgical expenses,
but NOTE: disability INCOME insurance IS subject to the requirements of IC 2695.7(b).
DOI has been giving INCORRECT information about this to inquirers!],
life insurance subject to Section 10172.5 of the Insurance Code, or mortgage guaranty insurance subject to Section 12640.09(a) of the Insurance Code, and shall not apply to automobile repair bills arising from policies of automobile collision and comprehensive insurance subject to Section 560 of the Insurance Code.
- (1) If more time is required than is allotted in subsection 2695.7(b) to determine whether a claim should be accepted and/or denied in whole or in part, then, every insurer shall provide the claimant, within the time frame specified in subsection 2695.7(b), with written notice of the need for additional time. This written notice shall specify any additional information the insurer requires in order to make a determination and state any continuing reasons for the insurer's inability to make a determination. Thereafter, the written notice shall be provided every thirty (30) calendar days until a determination is made or notice of legal action is served. If the determination cannot be made until some future event occurs, then the insurer shall comply with this continuing notice requirement by advising the claimant of the situation and providing an estimate as to when the determination can be made.
- (2) Subject to the provisions of subsection 2695.7(k), nothing contained in subsection 2695.7(c)(1) shall require an insurer to disclose any information that could reasonably be expected to alert a claimant to the fact that the claim is being investigated as a possible suspected fraudulent claim.
- (d) No insurer shall persist in seeking information not reasonably required for or material to the resolution of a claim dispute.
- (e) No insurer shall delay or deny settlement of a first party claim on the basis that responsibility for payment should be assumed by others, except as may otherwise be provided by policy provisions, statutes or regulations, including those pertaining to coordination of benefits.
- (f) Except where a claim has been settled by payment, every insurer shall provide written notice of any statute of limitation or other time period requirement upon which the insurer may rely to deny a timely claim. Such notice shall be given to the claimant not less than sixty (60) days prior to the expiration date; except, if notice of claim is first received by the insurer within that sixty days, then notice of the expiration date must be given to the claimant immediately. With respect to a first party claimant in a matter involving an uninsured motorist, this notice shall be given at least thirty (30) days prior to the expiration date; except, if notice of claim is first received by the insurer within that thirty days, then notice of the expiration date must be given to the claimant immediately. This subsection shall not apply to a claimant represented by counsel on the claim matter.
- (g) No insurer shall attempt to settle a claim by making a settlement offer that is unreasonably low. The Commissioner shall consider any admissible evidence offered regarding the following factors in determining whether or not a settlement offer is unreasonably low;
- (1) the extent to which the insurer considered evidence submitted by the claimant to support the value of the claim;
- (2) the extent to which the insurer considered evidence made known to it or reasonably available;
- (3) the extent to which the insurer considered the advice of its claims adjuster as to the amount of damages;
- (4) the extent to which the insurer considered the advice of its counsel that there was a substantial likelihood of recovery in excess of policy limits;
- (5) the procedures used by the insurer in determining the dollar amount of property damage;
- (6) the extent to which the insurer considered the probable liability of the insured and the likely jury verdict or other final determination of the matter;
- (7) any other credible evidence presented to the Commissioner that demonstrates that the final amount offered in settlement of the claim by the insurer is below the amount that a reasonable person with knowledge of the facts and circumstances would have offered in settlement of the claim.
- (h) Upon acceptance of the claim and, when necessary, upon receipt of a properly executed release, every insurer, except as specified in subsection 2695.7(h)(1) and (2) below, shall immediately, but in no event more than thirty (30) calendar days later, tender payment of the amount of the claim which has been determined and is not disputed by the insurer. In claims where multiple coverage is involved, payments which are not in dispute and where the payee is known shall be tendered immediately, but in no event in more than thirty (30) calendar days, if payment would terminate the insurer's known liability under that individual coverage, unless impairment of the insured's interests would result. This subsection shall not apply where the policy provides for a waiting period after acceptance of claim and before payment of benefits.
- (1) Subsection 2695.7(h) shall not apply to claims arising from policies of disability insurance subject to Section 10123.13 of the Insurance Code, of life insurance subject to Section 10172.5 of the Insurance Code, of mortgage guaranty insurance subject to Section 12640.09(a) of the Insurance Code, or of fire insurance subject to Section 2057 of the Insurance Code, and shall not apply to automobile repair bills arising from policies of automobile collision and comprehensive insurance subject to Section 560 of the Insurance Code.
- (2) Any insurer issuing a title insurance policy shall either tender payment pursuant to subsection 2695.7(h) or take action to resolve the problem which gave rise to the claim immediately upon, but in no event more than thirty (30) calendar days after, acceptance of the claim.
- (i) No insurer shall inform a claimant that his or her rights may be impaired if a form or release is not completed within a specified time period unless the information is given for the purpose of notifying the claimant of any applicable statute of limitations or policy provision or the time limitation within which claims are required to be brought against state or local entities.
- (j) No insurer shall request or require an insured to submit to a polygraph examination unless authorized under the applicable insurance contract and state law.
- (k) Subject to the provisions of subsection 2695.7(c), where there is a reasonable basis, supported by specific information available for review by the California Department of Insurance, for the belief that the claimant has submitted or caused to be submitted to an insurer a suspected false or fraudulent claim as specified in California Insurance Code Sections 1871.1(a) and 1871.4(a), the number of calendar days specified in subsection 2695.7(b) shall be:
- (1) increased to eighty (80) calendar days; or,
- (2) suspended until otherwise ordered by the Commissioner, provided the insurer has complied with California Insurance Code Section 1872.4 and the insurer can demonstrate to the Commissioner that it has made a diligent attempt to determine whether the subject claim is false or fraudulent within the eighty day period specified by subsection 2695.7(k)(1).
- (l) No insurer shall deny a claim based upon information obtained in a telephone conversation or personal interview with any source unless the telephone conversation or personal interview is documented in the claim file pursuant to the provisions of Section 2695.3.
- (m) No insurer shall make a payment to a provider, pursuant to a policy provision to pay medical benefits, and thereafter seek recovery or set-off from the insured on the basis that the amount was excessive and/or the services were unnecessary, except in the event of a proven false or fraudulent claim, subject to the provisions of Section 10123.145 of the California Insurance Code.
- (n) Every insurer requesting a medical examination for the purpose of determining liability under a policy provision to pay medical benefits shall do so only when the insurer has a good faith belief that such an examination is necessary to enable the insurer to determine the reasonableness and/or necessity of any medical treatment.
- (o) No insurer shall require that a claimant withdraw, rescind or refrain from submitting any complaint to the California Department of Insurance regarding the handling of a claim or any other matter complained of as a condition precedent to the settlement of any claim.