Guide to Protect Your Rights after an Accident in Los Angeles and California-Your Insurance Claim Rights under California Law

KNOW THE LAW FOR INJURY ACCIDENTS:  Insurance Code § 790.03(h), Fair Claims Settlement Regulations, Prompt Investigation, Fair Settlement and California Supreme Court Cases

Table of Contents

1. Why California Insurance Claim Laws and Rules Matter After an Accident
2. The Critical Difference Between First-Party and Third-Party Claims
3. Insurance Code § 790.03(h): California’s Unfair Claims Settlement Standards
4. The Important Limitation: § 790.03(h) Does Not Itself Create a Private Lawsuit
5. California Fair Claims Settlement Practices Regulations
6. The 15-Day Communication and Acknowledgment Rules
7. The 40-Day Claim Decision Rule
8. The Duty to Conduct a Thorough, Fair and Objective Investigation
9. The Prohibition Against Unreasonably Low Settlement Offers
10. Written Explanations for Denials and Disputed Claims
11. Continuing Notices When the Insurer Needs More Time
12. California Supreme Court Cases Supporting Insurance Claimants
13. Egan v. Mutual of Omaha Insurance Co.
14. Comunale v. Traders & General Insurance Co.
15. Crisci v. Security Insurance Co.
16. Johansen v. California State Automobile Association
17. Neal v. Farmers Insurance Exchange
18. Moradi-Shalal v. Fireman’s Fund Insurance Companies
19. Zhang v. Superior Court
20. How to Protect Yourself When Making a California Injury Claim
21. What to Document When an Insurer Delays or Lowballs a Claim
22. California Insurance Claim Rights: Quick Reference Table
23. Frequently Asked Questions
24. Sources and Authorities

There are websites with general, sometimes worthless, information designed only to obtain new injury accident clients but this Guide is different:  Here you will find specific laws, regulations and Supreme Court cases that regulate injury claims against California insurance companies. Understanding these points can help protect your rights against unfair tactics by some insurance companies and their adjusters. To make this complex subject a bit easier to navigate we have divided it into 24 separate sections.  Please let us know if you find our Guide to Protect Your Rights Against an Insurance Company after an Accident in Los Angeles and California helpful.  And if you are in a hurry you may call us now at 1-866 INJURY 2 (1-866-465-8792) or click here to contact us now.  Here are 24 key points to better understanding your rights after an injury accident and how to protect yourself:

1. Why California Insurance Claim Laws and Rules Matter After an Accident

After a California automobile accident, motorcycle collision, truck crash, pedestrian accident or other injury-causing event, the insurance company becomes one of the most important participants in the claim. An adjuster may ask for records, investigate liability, evaluate medical care and treatment, request a recorded statement, make a settlement offer or dispute some portion of the claim.

California law establishes detailed standards governing many aspects of insurance claim handling. The California Insurance Code identifies unfair claims settlement practices, while the Fair Claims Settlement Practices Regulations contain specific rules concerning communications, investigations, claim decisions and settlement practices.

These rules can be especially useful when an insurer appears to be delaying a claim, ignoring evidence, repeatedly requesting unnecessary information, denying a claim without a sufficient investigation or making a settlement offer that does not reasonably reflect the evidence and damages sustained by the injured claimant.

2. The Critical Difference Between First-Party and Third-Party Claims

First-Party Claims

A first-party claim is generally a claim by an insured against the insured’s own insurance company. Examples include uninsured motorist (UM), underinsured motorist (UIM), collision and certain medical-payments claims.  California recognizes common-law duties of good faith and fair dealing by the insurer towards its own insureds in appropriate first-party disputes. 

Therefore, first party claimants may seek recovery of their injury and property damages from their insurer and if their insurer violates its duties under the policy of insurance and or California law,  then the insured also may bring a second, separate action against its insurer for violating its duties to its own insured—often called actions for bad faith and or for violating the implied duty of good faith and fair dealing in insurance policies (aka insurance contracts). 

Third-Party Claims

A third-party claimant is generally an injured person seeking compensation from someone else, from the person responsible for an accident, and NOT from his or her own insurer. For example, if Driver A negligently injures Driver B (e.g., rear ends Driver B), Driver B is ordinarily a third-party claimant against Driver A’s liability insurance.

This distinction is essential. A regulation or statute may establish standards for insurer conduct, but generally the insurance company owes a higher duty of good faith and fair dealing with its own insured than with a third party.  

As a result, first party insureds may have separate rights against their own insurance company for unfair practices, sometimes called acting in bad faith.  But third party claimants, who have no policy of insurance (i.e., no contract) directly with the responsible party’s insurer, now have no direct statutory or contractual bad-faith action against the opposing insurer. 

However, in the late 1980s pursuant to the Royal Globe case, third parties could sue insurers for bad faith, but in Moradi-Shalal v. Fireman’s Fund Insurance Companies, 46 Cal.3d 287, 304-305 (1988), the California Supreme Court held that third parties had no right to a private cause of action to sue insurers for violating the Insurance Code, particularly Section 790.03(h).  

As a result, some insurers who had started handling cases more fairly to comply with the Royal Globe case to deter private suits against them then reverted to their old ways.  In fact, one adjuster incredulously told a member of our firm shortly after the Moradi-Shalal decision that he no longer had to comply with California Insurance Code 790.03(h), when that case did not state any such thing.  It stated there was no “private cause of action”; it never stated the government could not enforce the Insurance Code against insurers who violated it.  But, unfortunately, as a practical matter, without private attorneys filing suit against insurers who acted in “bad faith”,  some insurers ignored their duties pursuant to the Insurance Code.

Thus, in third party cases, pursuant to the California Supreme Court, it is the California Department of Insurance with the responsibility to enforce the law against insurers.  Generally there is no longer any private cause of action against the insurer in third party cases, compared to first party cases where there remains a private cause of action against your own insurance company for unlawful and bad faith actions. 

3. Insurance Code § 790.03(h): California’s Unfair Claims Settlement Standards

California Insurance Code § 790.03 defines specified conduct as unfair methods of competition and unfair or deceptive acts or practices in the insurance business. Subdivision (h) addresses unfair claims settlement practices when the insurer knowingly commits the stated conduct with such frequency as to indicate a general business practice.  See:

“Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.” Cal. Ins. Code § 790.03(h)(2).

“Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.” Cal. Ins. Code § 790.03(h)(3).

“Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.” Cal. Ins. Code § 790.03(h)(5).

“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 compromise settlement.” Cal. Ins. Code § 790.03(h)(13).

Section 790.03(h) also addresses misrepresentation of pertinent facts or policy provisions, failure to affirm or deny coverage within a reasonable time after applicable proof-of-loss requirements, compelling insureds to litigate by offering substantially less than amounts ultimately recovered in qualifying circumstances, and other specified practices.

4. The Important Limitation: § 790.03(h) Does Not Itself Create a Private Lawsuit

In Moradi-Shalal v. Fireman’s Fund Insurance Companies, 46 Cal.3d 287, 304-305 (1988), the California Supreme Court overruled the former Royal Globe private-action rule in third party cases. An alleged violation of § 790.03(h) does not, standing alone, create a private civil cause of action for damages.   “Private” here means a private lawyer is not permitted to file suit to enforce the Insurance Code.  Rather, it can only be enforced by the government.  The Supreme court held that “Neither section 790.03 nor section 790.09 was intended to create a private civil cause of action”  Moradi-Shalal v. Fireman’s Fund Insurance Companies (1988) 46 Cal.3d 287, 304.

Note:  The decision did not make insurance companies immune from regulation or from all other legal claims. The Court recognized administrative enforcement and preserved independently existing common-law and other legal theories when their elements are satisfied. This distinction is central to understanding California insurance law.

5. California Fair Claims Settlement Practices Regulations

The California Department of Insurance identifies the Fair Claims Settlement Practices Regulations in Title 10, Chapter 5, Subchapter 7.5 of the California Code of Regulations. Among the principal provisions for injury and automobile claims are §§ 2695.5, 2695.7 and 2695.8.

These regulations are more specific than the broad statutory language of § 790.03(h). They address claim communications, investigation, claim decisions, settlement offers, payments and automobile-insurance practices.

6. The 15-Day Communication and Acknowledgment Rules

California Code of Regulations, title 10, § 2695.5 establishes duties when an insurer receives communications concerning a claim. In general, when a claimant’s communication reasonably suggests that a response is expected, the insurer must provide a complete response based on the facts then known within 15 calendar days.

The regulation also addresses acknowledgment of claims, provision of necessary forms and instructions, and commencement of investigation. Exceptions and special rules apply, so the precise claim type and circumstances should be examined.

7. The 40-Day Claim Decision Rule

California Code of Regulations, title 10, § 2695.7(b) generally requires an insurer, after receiving proof of claim, to accept or deny a claim in whole or in part immediately, but in no event more than 40 calendar days later, subject to specified exceptions.

“Upon receiving proof of claim, every insurer … shall immediately, but in no event more than forty (40) calendar days later, accept or deny the claim, in whole or in part.” Cal. Code Regs., tit. 10, § 2695.7(b).

The regulation contains different rules for certain types of claims and circumstances. Therefore, the 40-day provision should not be treated as a universal deadline without examining the claim.

8. The Duty to Conduct a Thorough, Fair and Objective Investigation

One of the most important California claims-handling provisions is § 2695.7(d).

“Every insurer shall conduct and diligently pursue a thorough, fair and objective investigation of every claim to which it is reasonably possible to obtain evidence.” Cal. Code Regs., tit. 10, § 2695.7(d).

The practical point is important: an insurer is expected to investigate the claim rather than merely search for reasons to minimize or reject it. Relevant evidence may include accident reports, photographs, video, witness statements, vehicle damage, medical records, diagnostic studies, wage-loss documentation, expert opinions and other evidence reasonably related to liability and damages.

9. The Prohibition Against Unreasonably Low Settlement Offers

“No insurer shall attempt to settle a claim by making a settlement offer that is unreasonably low.” Cal. Code Regs., tit. 10, § 2695.7(g).

Whether an offer is unreasonably low depends on the facts, evidence and circumstances.  A low offer is not automatically unreasonably low and, therefore, unlawful. But the regulation provides an important starting point and benchmark when evaluating whether an insurer has fairly considered the evidence presented or violated California insurance regulations. 

10. Written Explanations for Denials and Disputed Claims

Section 2695.7 requires written comunication of certain denials and disputes. For first-party claims, a denial in whole or in part generally must identify the bases for the denial and the factual and legal bases then within the insurer’s knowledge. The regulation also contains requirements concerning third-party claims and disputed liability or damages.

A claimant should preserve every written denial, reservation, coverage position and settlement explanation. These documents may become important evidence concerning what the insurer knew, what it did and why it acted as it did.   Cal. Code Regs., tit. 10, § 2695.7

11. Continuing Notices When the Insurer Needs More Time

Section 2695.7(c) addresses situations in which the insurer cannot make a determination within the applicable period. The insurer generally must provide a written explanation for the additional time and identify the information needed or the continuing reasons for the delay. Continuing notices are generally required at 30-day intervals until a determination is made or legal action is served, subject to the regulation’s detailed requirements and exceptions.

An unexplained, indefinite ‘investigation’ is therefore not the same thing as a documented claim investigation conducted under California’s regulatory standards. Cal. Code Regs., tit. 10, § 2695.7(c)

12. California Supreme Court Cases Supporting Insurance Claimants

California Supreme Court decisions provide the common-law framework and case authorities that operate alongside the Insurance Code and Fair Claims Regulations in supporting injured insurance claimants. The applicable cases must be reviewed and used carefully because some are very complex and some concern first-party claims, some concern liability-insurance settlement duties owed to insureds, some concern third party claims with duties owed to claimants who are not insured under the policy they are making claims against with those claimants’ rights limited by the Moradi-Shalal case that terminated third-party statutory actions under Insurance Code § 790.03.

13. Egan v. Mutual of Omaha Insurance Co.

Egan v. Mutual of Omaha Insurance Co. (1979) 24 Cal.3d 809, 817-819, 169 Cal.Rptr. 691, 620 P.2d 809, is one of the strongest California Supreme Court authorities concerning an insurer’s investigation of its own insured’s claim.   “An insurer may breach the covenant of good faith and fair dealing when it fails to properly investigate its insured’s claim.” Emphasis supplied. Egan v. Mutual of Omaha Insurance Co. (1979) 24 Cal.3d 809, 818.

“An insurer cannot reasonably and in good faith deny payments to its insured without thoroughly investigating the foundation for its denial.” Egan v. Mutual of Omaha Insurance Co. (1979) 24 Cal.3d 809, 818-819.

The Court affirmed the principle that an insurer’s investigative conduct itself can support a breach of the implied covenant of good faith and fair dealing when the insurer fails to properly investigate an insured’s claim.

14. Comunale v. Traders & General Insurance Co.

Comunale v. Traders & General Insurance Co. (1958) 50 Cal.2d 654, 658-660, 328 P.2d 198, is a foundational California Supreme Court decision concerning the implied covenant of good faith and fair dealing and an insurer’s settlement duties.

“There is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement” Comunale v. Traders & General Insurance Co. (1958) 50 Cal.2d 654, 658.

The Court held that an insurer’s obligations include consideration of a reasonable settlement within policy limits when the circumstances create a substantial likelihood of a judgment exceeding those limits.

15. Crisci v. Security Insurance Co.

Crisci v. Security Insurance Co. (1967) 66 Cal.2d 425, 429-430, 58 Cal.Rptr. 13, 426 P.2d 173, reinforced the insurer’s obligation to consider the insured’s interests in settlement decisions. The case is important because the insurer’s settlement decision (e.g., whether to settle within the policy limits but does not) can expose the insured to liability beyond the policy limits when a trial results in a verdict for an amount in excess of the insured’s insurance coverage.  As a result, the insurer would be responsible for the limit of the policy, but the insured would be liable for the entire excess.   As a result of Crisci and its progeny, the insurer who exposed its insured to the risk of an excess judgment may be responsible for the full judgment, not just the limit of the policy. 

The case is best understood as protection for insureds against responsibility for excess judgments, rather than giving every injured third-party claimant a direct bad-faith action against an opposing insurer.  In fact, in such circumstances, there are procedures for the third party judgment creditor to get an assignment from the insured to collect the excess judgment from the insurer as opposed to trying to collect it from the insured whom the excess judgment is against. 

16. Johansen v. California State Automobile Association

Johansen v. California State Automobile Association Inter-Insurance Bureau (1975) 15 Cal.3d 9, 15-16, 123 Cal.Rptr. 288, 538 P.2d 744, involved an automobile accident, a settlement offer from the third party claimant within policy limits, and an insurer’s decision not to settle within the insurance coverage limits.   As a result, the insurer left its insured to take the risk of an excess judgment.  The Johansen court held “The insurer, when determining whether to settle a claim, must give at least as much consideration to the welfare of its insured as it gives to its own interests.” Johansen v. California State Automobile Association Inter-Insurance Bureau (1975) 15 Cal.3d 9, 16.

When the insurer breaches this obligation, the insurer may be responsible for the excess judgment.  The Court’s discussion is noteworthy because the action was based on rights of the insured that had been assigned to the injured third party plaintiff.  Thus, it was an assignment of rights from the insured to the third party claimant, and not a direct third-party statutory bad-faith action under § 790.03 which the Moradi-Shalal court terminated.

17. Neal v. Farmers Insurance Exchange

Neal v. Farmers Insurance Exchange (1978) 21 Cal.3d 910, 920-922, 148 Cal.Rptr. 389, 582 P.2d 980, is a leading California Supreme Court decision involving uninsured motorist (UM) benefits and the insurer’s handling of its own insured’s claim.                                          

“When an insurer fails to deal fairly and in good faith with its insured by refusing, without proper cause, to compensate its insured for a loss covered by the policy, such conduct may give rise to a cause of action in tort for breach of an implied covenant of good faith and fair dealing.” Neal v. Farmers Insurance Exchange (1978) 21 Cal.3d 910, 921.

Uninsured motorist (UM) and underinsured motorist (UIM) claims are first party claims.

For California accident victims pursuing UM or UIM coverage benefits, Neal is particularly important because it concerns first-party automobile insurance rather than an ordinary third-party claim against the other driver’s insurer.

18. Moradi-Shalal v. Fireman’s Fund Insurance Companies

Moradi-Shalal v. Fireman’s Fund Insurance Companies (1988) 46 Cal.3d 287, 304-305, 250 Cal.Rptr. 116, 758 P.2d 58, established the limitation on § 790.03 claims.

“Neither section 790.03 nor section 790.09 was intended to create a private civil cause of action” Moradi-Shalal v. Fireman’s Fund Insurance Companies (1988) 46 Cal.3d 287, 304.

So what happened is that the Moradi-Shalal Court shocking overruled Royal Globe Insurance Co. v. Superior Court (1979) 23 Cal.3d 880, which had provided a private action by injured plaintiffs against the responsible party’s insurer for violating the California Insurance Code, holding that no private action could be brought under § 790.03(h) based solely on that code section. The Moradi-Shalal Court nevertheless recognized administrative enforcement of the Insurance Code and did not eliminate independent common-law theories that otherwise exist.

19. Zhang v. Superior Court

Zhang v. Superior Court (2013) 57 Cal.4th 364, 373-374, 159 Cal.Rptr.3d 672, 304 P.3d 163, is important because the Supreme Court revisited the relationship between § 790.03 and common-law bad faith in a first-party insurance dispute.

Zhang confirms that § 790.03 itself does not create a private cause of action, while also recognizing that Moradi-Shalal does not eliminate independent common-law remedies. The case should therefore be used to explain—not blur—the distinction between a statutory violation and an independently actionable insurance bad-faith claim.

20. How to Protect Yourself When Making a California Injury Claim

There are several important things to do to protect yourself when making an injury claim, including the following:

• Keep every communication, including all letters, emails, text messages and claim-portal communications.
• Create a dated chronology of every claim communication and document submitted.
• Preserve the traffic collision report (aka police report), all photographs, videos, witness information and vehicle-damage evidence.
• Keep all medical records, bills, reports including diagnostic reports and treatment recommendations.
• Document lost wages and all other economic losses, save all paystubs, W2 tax reports, all documents, etc.
• Do not assume any adjuster’s statement of California law is correct.
• Do not sign any release until you understand it, including exactly what claims and damages it releases.
• Determine all coverages, including whether the other party has any umbrella or excess coverages, any employment related coverages, any bonds, and whether you (or any resident relative) have UM/UIM coverage in addition to the other driver’s liability coverages.
• Identify and confirm with all adjusters and parties all potentially applicable policies and coverage limits.
• Calendar every applicable statute of limitation and claim deadlines independently of any insurer’s representations, with early warning dates to properly and timely prepare.   Double check all dates with an experienced personal injury lawyer. 

21. What to Document When an Insurer Delays or Lowballs a Claim

A strong claim file should allow a lawyer to reconstruct exactly what the insurer knew and when it knew it. Keep a simple but complete timeline showing the date the claim was reported, documents supplied, requests made by the adjuster, responses provided, liability positions, medical information, settlement offers and demands, denials and explanations for delay, denials, etc.

The objective is not to manufacture an insurance-bad-faith claim. It is to try to settle fairly but if the insurer unfairly refuses to make a fair and equitable settlement offer then to preserve accurate evidence so that the insurer’s conduct can be evaluated under correct legal standards.

22. California Insurance Claim Rights: Quick Reference Table

23. Frequently Asked Questions – FAQs

24. Sources and Authorities

Primary authorities should be used for publication and verification. The principal sources for this guide are the California Legislature’s official Insurance Code, the California Department of Insurance’s Fair Claims Settlement Practices Regulations, and reported California Supreme Court opinions.  See:

California Insurance Code § 790.03(h).

California Code of Regulations, title 10, §§ 2695.5, 2695.7 and 2695.8.

Egan v. Mutual of Omaha Insurance Co. (1979) 24 Cal.3d 809, 817-820, 169 Cal.Rptr. 691, 620 P.2d 809.

Comunale v. Traders & General Insurance Co. (1958) 50 Cal.2d 654, 658-661, 328 P.2d 198.

Crisci v. Security Insurance Co. (1967) 66 Cal.2d 425, 429-434, 58 Cal.Rptr. 13, 426 P.2d 173.

Johansen v. California State Automobile Association Inter-Insurance Bureau (1975) 15 Cal.3d 9, 15-17, 123 Cal.Rptr. 288, 538 P.2d 744.

Neal v. Farmers Insurance Exchange (1978) 21 Cal.3d 910, 920-927, 148 Cal.Rptr. 389, 582 P.2d 980.

Moradi-Shalal v. Fireman’s Fund Insurance Companies (1988) 46 Cal.3d 287, 304-312, 250 Cal.Rptr. 116, 758 P.2d 58.

Zhang v. Superior Court (2013) 57 Cal.4th 364, 373-380, 159 Cal.Rptr.3d 672, 304 P.3d 163.

About the Law Offices of Gary K. Walch, A Law Corporation

The Law Offices of Gary K. Walch, A Law Corporation, represents California clients in personal injury and wrongful death matters, including car and other motor vehicle collisions, serious injuries and uninsured/underinsured motorist (UM/UIM) claims.   The firm has been handling injury accidents for over 50 years!  It has been winning more than 98% of its cases, winning millions of dollars for its clients.  It is not a billboard or TV advertising firm – each client is a person with a name, not merely a number.  It is family owned, trying to treat its clients just like family!

The firm’s website is WalchLaw.com, which provides much free information, including extensive Guides and shorter pages and articles about how to handle injury accident claims, but is not intended nor should it be used as specific advice for any specific case.  Rather, it is only general information, and rules and procedures change so you are advised to consult with a lawyer about any particular case or matter.

WalchLaw provides FREE consultations on injury accident claims; and there is NO fee unless and until we recover for you, subject to the firm’s written fee agreement.   You may contact the firm now for your FREE consultation and or case evaluation.

Disclaimer: This Guide is, as are all pages, articles and contents of this web and related blog sites,  general legal information, not legal advice for any particular person, case or matter.  California statutes, codes, regulations, case law and other authorities can change and do change, and the application of any authority depends upon the circumstances, including all facts, legal authorities, insurance companies and policies, types of claim, parties and applicable deadlines.  We are required to add that past results are no guarantee or prediction of expected results on any other claim, case or matter.