California Civil Jury Instructions (CACI) (2017)

2332. Bad Faith (First Party)—Failure to Properly Investigate Claim

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2332.Bad Faith (First Party)—Failure to Properly Investigate
Claim—Essential Factual Elements
[Name of plaintiff] claims that [name of defendant] acted unreasonably,
that is, without proper cause, by failing to conduct a proper
investigation of [his/her/its] claim. To establish this claim, [name of
plaintiff] must prove all of the following:
1. That [name of plaintiff] suffered a loss covered under an
insurance policy issued by [name of defendant];
2. That [name of plaintiff] properly presented a claim to [name of
defendant] to be compensated for the loss;
3. That [name of defendant], failed to conduct a full, fair, prompt,
and thorough investigation of all of the bases of [name of
plaintiff]’s claim;
4. That [name of plaintiff] was harmed; and
5. That [name of defendant]’s failure to properly investigate the
claim was a substantial factor in causing [name of plaintiff]’s
harm.
When investigating [name of plaintiff]’s claim, [name of defendant] had a
duty to diligently search for and consider evidence that supported
coverage of the claimed loss.
New September 2003; Revised December 2005, December 2007, April 2008,
December 2015, June 2016
Directions for Use
This instruction sets forth a claim for breach of the implied covenant of good faith
and fair dealing based on the insurer’s failure or refusal to conduct a proper
investigation of the plaintiff’s claim. The claim alleges that the insurer acted
unreasonably, that is, without proper cause, by failing to properly investigate the
claim. (See Rappaport-Scott v. Interinsurance Exch. of the Auto. Club (2007) 146
Cal.App.4th 831, 837 [53 Cal.Rptr.3d 245].)
The instructions in this series assume that the plaintiff is the insured and the
defendant is the insurer. The party designations may be changed if appropriate to
the facts of the case.
For instructions regarding general breach of contract issues, refer to the Contracts
series (CACI No. 300 et seq.).
Sources and Authority
• “[A]n insurer may breach the covenant of good faith and fair dealing when it
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fails to properly investigate its insured’s claim.” (Egan v. Mutual of Omaha
Insurance Co. (1979) 24 Cal.3d 809, 817 [169 Cal.Rptr. 691, 620 P.2d 141].)
• “To fulfill its implied obligation, an insurer must give at least as much
consideration to the interests of the insured as it gives to its own interests.
When the insurer unreasonably and in bad faith withholds payment of the claim
of its insured, it is subject to liability in tort. And an insurer cannot reasonably
and in good faith deny payments to its insured without fully investigating the
grounds for its denial.” (Frommoethelydo v. Fire Insurance Exchange (1986) 42
Cal.3d 208, 214–215 [228 Cal.Rptr. 160, 721 P.2d 41], internal citation
omitted.)
• “To protect [an insured’s] interests it is essential that an insurer fully inquire
into possible bases that might support the insured’s claim. Although we
recognize that distinguishing fraudulent from legitimate claims may occasionally
be difficult for insurers, . . . an insurer cannot reasonably and in good faith
deny payments to its insured without thoroughly investigating the foundation for
its denial.” (Egan, supra, 24 Cal.3d at p. 819.)
• “When investigating a claim, an insurance company has a duty to diligently
search for evidence which supports its insured’s claim. If it seeks to discover
only the evidence that defeats the claim it holds its own interest above that of
the insured.” (Mariscal v. Old Republic Life Ins. Co. (1996) 42 Cal.App.4th
1617, 1620 [50 Cal.Rptr.2d 224].)
• “While we agree with the trial court . . . that the insurer’s interpretation of the
language of its policy which led to its original denial of [the insured]’s claim
was reasonable, it does not follow that [the insurer]’s resulting claim denial can
be justified in the absence of a full, fair and thorough investigation of all of the
bases of the claim that was presented.” (Jordan v. Allstate Ins. Co. (2007) 148
Cal.App.4th 1062, 1066 [56 Cal.Rptr.3d 312], original italics.)
• “An unreasonable failure to investigate amounting to . . . unfair dealing may
be found when an insurer fails to consider, or seek to discover, evidence
relevant to the issues of liability and damages. . . . [¶] The insurer’s willingness
to reconsider its denial of coverage and to continue an investigation into a claim
has been held to weigh in favor of its good faith.” (Shade Foods, Inc. v.
Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 880
[93 Cal.Rptr.2d 364], internal citation omitted.)
• “[The insurer], of course, was not obliged to accept [the doctor]’s opinion
without scrutiny or investigation. To the extent it had good faith doubts, the
insurer would have been within its rights to investigate the basis for [plaintiff]’s
claim by asking [the doctor] to reexamine or further explain his findings, having
a physician review all the submitted medical records and offer an opinion, or, if
necessary, having its insured examined by other physicians (as it later did).
What it could not do, consistent with the implied covenant of good faith and
fair dealing, was ignore [the doctor]’s conclusions without any attempt at
adequate investigation, and reach contrary conclusions lacking any discernable
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medical foundation.” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713,
722 [68 Cal.Rptr.3d 746, 171 P.3d 1082], original italics.)
• “[W]hether an insurer breached its duty to investigate [is] a question of fact to
be determined by the particular circumstances of each case.” (Paulfrey v. Blue
Chip Stamps (1983) 150 Cal.App.3d 187, 196 [197 Cal.Rptr. 501].)
• “[L]iability in tort arises only if the conduct was unreasonable, that is, without
proper cause.” (Rappaport-Scott, supra, 146 Cal.App.4th at p. 837.)
• “[W]ithout actual presentation of a claim by the insured in compliance with
claims procedures contained in the policy, there is no duty imposed on the
insurer to investigate the claim.” (California Shoppers, Inc. v. Royal Globe
Insurance Co. (1985) 175 Cal.App.3d 1, 57 [221 Cal.Rptr. 171].)
• “It would seem reasonable that any responsibility to investigate on an insurer’s
part would not arise unless and until the threshold issue as to whether a claim
was filed, or a good faith effort to comply with claims procedure was made, has
been determined. In no event could an insured fail to keep his/her part of the
bargain in the first instance, and thereafter seek recovery for breach of a duty to
pay seeking punitive damages based on an insurer’s failure to investigate a
nonclaim.” (Paulfrey, supra, 150 Cal.App.3d at pp. 199–200.)
Secondary Sources
2 Witkin, Summary of California Law (10th ed. 2005) Insurance, § 245
Croskey et al., California Practice Guide: Insurance Litigation, Chapter 12C-D, Bad
Faith—First Party Cases—Application—Matters Held “Unreasonable”
¶¶ 12:848–12:904 (The Rutter Group)
1 California Liability Insurance Practice: Claims & Litigation (Cont.Ed.Bar)
Investigating the Claim, §§ 9.2, 9.14–9.22
2 California Insurance Law & Practice, Ch. 13, Claims Handling and the Duty of
Good Faith, § 13.04[1]–[3] (Matthew Bender)
2 California Uninsured Motorist Law, Ch. 24, Bad Faith in Uninsured Motorist
Law, § 24.11 (Matthew Bender)
26 California Forms of Pleading and Practice, Ch. 308, Insurance, § 308.24
(Matthew Bender)
12 California Points and Authorities, Ch. 120, Insurance, §§ 120.153, 120.184
(Matthew Bender)
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