When it comes to insurance claim practices handled in bad faith, the Golden State is an unfortunate leader. In August 2025, the Sixth Appellate District Court of California published a decision in an insurance dispute that reaffirmed one of many bad faith strategies commonly applied by insurers. Bad faith happens when insurance companies unreasonably fail to uphold basic duties owed to their policyholders, thus breaching the good faith and fair dealing provisions of insurance contracts.
The case mentioned above involved a Santa Cruz homeowner filing three lawsuits against Chicago Title, a major provider of title insurance policies. The court found that the insurance company acted in bad faith by failing to investigate all the possible options to provide coverage. The three lawsuits at the heart of Bartel v. Chicago Title Insurance Company showed that the insurer was proactive in denying coverage. Instead of investigating whether Bartel's claims were reasonable, Chicago Title issued blanket denials. The appellate judges found various avenues the insurer could have taken to enact coverage and process the claims accordingly.
Although the Bartel case involved title insurance, bad faith permeates all lines of insurance in California. Even the state-sponsored Fair Access to Insurance Requirements (FAIR) plan, which is designed to provide homeowners with basic wildfire insurance coverage, has been taken to court over bad faith claims. When it comes to auto insurance, California suffers from more bad faith cases and coverage denials than all other states.
Understanding Policy Limits and Bad Faith Claims
Policy limits are part of standard insurance contracts. Essentially, they define the maximum monetary amount that your insurance company is obligated to pay for covered losses.
Let's set an example of a San Diego driver whose auto insurance policy features a $100,000 bodily injury liability limit. The driver runs a red light and strikes a pedestrian. California follows the "fault-based" doctrine of assigning responsibility in road traffic accidents, so this is an easy determination, particularly if the driver gets an infraction for failing to stop at a red light. The pedestrian is clearly the victim, and she suffered a shattered hip. For our example, we'll say that the pedestrian's medical bills were slightly over $100,000.
The pedestrian has the right to demand the full policy limit of $100,000. At first sight, her claim should only involve filing paperwork along with copies of her medical bills. Including treatment records would be reasonable but not necessary. The insurer should adhere to the Duty to Settle doctrine, which is standard for all auto insurance policies in California.
Saving money by keeping payouts under policy limits is a bread-and-butter practice in the insurance industry. In our example, the pedestrian is not going to court; she is simply filing a claim for the sum of her medical bills. Insurers always try to settle for less, and they will resort to bad faith practices in their quest to stay below policy limits.
Lowballing Accident Victims
When liability is clear and damages approximate policy limits, insurers will try to save as much as possible. Breaching the Duty to Settle doctrine through lowballing is common. For our example, the insurance company will try to save $10,000 from the $100,000 claim.
The insurer knows the claim is worth at least $100,000 based on the medical bills the pedestrian filed with her claim. To save $10,000, the insurance company will lowball with a $90,000 settlement offer, hoping that the pedestrian is desperate for quick cash and will accept the offer without consulting a personal injury attorney first. Lowballing is a violation of the California Insurance Code, specifically section 790.03, and it happens often.
Railroading Accident Victims
This is an even more egregious tactic, which often follows a refusal of lowball settlement offers. Our example should not be contested because the driver was ticketed and paid the corresponding fine. Insurance companies operate in peculiar ways, so they may resort to railroading as they attempt to keep payouts under the policy limit.
Railroading may involve tacitly misrepresenting facts or "reaching." In our example, the pedestrian victim has not filed a lawsuit, so the insurer will attempt tactics that would not fly in the courtroom. For instance, the insurer might claim the pedestrian was struck in the middle of the street instead of on the crosswalk (jaywalking). This is an example of reaching for comparative fault.
The insurer may also extend the railroading by requesting additional documents beyond medical bills. Although the primary claim value is established by the injury, the insurer may insinuate that the victim received treatment corresponding to pre-existing conditions. This is a common delay tactic filed just before the 15-day deadline in California. Other railroading tactics may include requests to interview witnesses even if no lawsuit has been filed. By prolonging the process, insurers hope to pressure victims into accepting their lowball offers.
Protecting Against Bad Faith Tactics
Insurance companies are in the business of making money through collecting premium payments and keeping institutional shareholders happy. Their self-interests float above the potential embarrassment of getting called out for bad faith practices.
In our example, the insurer applies lowballing and railroading to save $10,000; it is not a significant amount until you multiply it by dozens or hundreds of claims. In other words, insurance companies will act in bad faith if it keeps them solvent. With this in mind, the best way victims can protect against bad faith tactics is by seeking counsel from a personal injury attorney soon after the accident.
Personal injury law firms are protective shields between California victims and insurance companies. They understand how the law applies to insurers, and they are familiar with lowballing, railroading, and other bad faith tactics. When you retain an attorney to help you with the claims process, insurers pay attention, thus minimizing their likelihood of engaging in bad faith practices to keep settlements below the policy limit.
