California Civil Jury Instructions (CACI)

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

[Name of defendant] acted unreasonably or without proper cause if it failed to conduct a full, fair, and thorough investigation of all of the bases of the claim. 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

Directions for Use

This instruction must be used with CACI No. 2331, Breach of the Implied Obligation of Good Faith and Fair Dealing—Failure or Delay in Payment (First Party)—Essential Factual Elements, if it is alleged that the insurer acted unreasonably or without proper cause by failing to properly investigate the claim.

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 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 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].)
  • “[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 (The Rutter Group) ¶¶ 12:848—12:874

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)