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Understanding the legal standards for prompt, fair and equitable settlements

On Behalf of | Nov 2, 2022 | Insurance Law

When you purchase insurance products in California, your aim is to protect yourself, your family, and your property from unexpected events. Unfortunately, insurance companies are for-profit businesses who want to make money. This can sometimes lead to stalling and other unethical practices that are intended to avoid making large payouts to customers.

When does legal maneuvering transition into unlawful practices that harm rather than help the insured? That question is answered in California Code § 2695.7, which outlines the legal standards for prompt, fair, and equitable settlements.

Purpose of California § 2695.7

An overview of the breakdown of state insurance law under § 2695.7, in addition to mission statements from the California Department of Insurance, demonstrates a commitment to consumer protection. They set a standard of behavior that is geared toward assuring fairness and prompt resolution.

Types of unfair practices in insurance law

Under this statute, lawmakers in California sought to provide an overview for ethical behavior by insurance companies. They also provide possible remedies for relief from these unscrupulous activities on behalf of consumers. This includes deadlines, reporting requirements about contact with claimants, and legal consequences for failure to comply.

Much as there are certain criteria that must be met in cases of negligence, claimants in cases against insurance companies must prove that the insurer and/or an associated entity or person engaged in behavior that violates § 2695.7 by:

  • Misrepresenting or altering facts, including documentation
  • Failing to act, respond, or reach settlement in a timely manner
  • Creating unreasonable requirements for filing or settling a claim
  • Failing to exercise due diligence

Consumer laws, which includes unfair practices from insurance companies, are intended to protect residents of California from suffering further harm from corporations and other business entities. When you understand the laws that are put in place to hold such entities in check, you’ll be in a better position to advocate for yourself and those you care about.