CACI No. 2333. Bad Faith (First Party) - Breach of Duty to Inform Insured of Rights - Essential Factual Elements

Judicial Council of California Civil Jury Instructions (2024 edition)

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2333.Bad Faith (First Party) - Breach of Duty to Inform Insured of
Rights - Essential Factual Elements
[Name of plaintiff] claims that [name of defendant] breached the obligation
of good faith and fair dealing by failing to reasonably inform [him/her/
nonbinary pronoun/it] of [his/her/nonbinary pronoun/its] rights and
obligations under an insurance policy. To succeed, [name of plaintiff] must
prove all of the following:
1. That [name of plaintiff] suffered a loss covered under an insurance
policy with [name of defendant];
2. That [name of defendant] [denied coverage for/refused to pay]
[name of plaintiff]’s loss;
3. That under the policy [name of plaintiff] had the [right/obligation]
to [describe right or obligation at issue; e.g., “to request arbitration
within 180 days”];
4. That [name of defendant] did not reasonably inform [name of
plaintiff] of [his/her/nonbinary pronoun/its] [right/obligation] to
[describe right or obligation];
5. That [name of plaintiff] was harmed; and
6. That [name of defendant]’s failure to reasonably inform [name of
plaintiff] was a substantial factor in causing [his/her/nonbinary
pronoun/its] harm.
New September 2003; Revised May 2020
Directions for Use
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.
This instruction is intended for use in appropriate cases if the insured alleges that
the insurer breached the implied covenant of good faith and fair dealing by failing
to reasonably inform the insured of the insured’s remedial rights and obligations
under an insurance policy.
For instructions regarding general breach of contract issues, refer to the Contracts
series (CACI No. 300 et seq.).
Sources and Authority
The insurers implied duty of good faith and fair dealing includes “the duty
reasonably to inform an insured of the insured’s rights and obligations under the
insurance policy. In particular, in situations in which an insured’s lack of
knowledge may potentially result in a loss of benefits or a forfeiture of rights, an
insurer [is] required to bring to the insured’s attention relevant information so as
to enable the insured to take action to secure rights afforded by the policy.”
(Davis v. Blue Cross of Northern California (1979) 25 Cal.3d 418, 428 [158
Cal.Rptr. 828, 600 P.2d 1060].)
The trial court in the instant case found that [the insurer] knew that in many
instances its insureds would not be aware of the arbitration clause and that,
despite this knowledge, [it] deliberately decided not to inform its insureds of the
arbitration procedure. In this context, the practical effect of the insurers practice
was to transform its arbitration clause into a unilateral provision, establishing a
procedure to which the insurer could require its insureds to resort when [it]
deemed it advisable, but one that would not generally provide a speedy,
economic or readily accessible remedy for the bulk of [its] uninformed insureds.
[¶] We think the trial court was fully justified in finding that [the insurer] had
breached its duty of good faith and fair dealing in adopting such a course of
conduct. (Davis, supra, 25 Cal.3d at pp. 430-431.)
“When a court is reviewing claims under an insurance policy, it must hold the
insured bound by clear and conspicuous provisions in the policy even if
evidence suggests that the insured did not read or understand them. Once it
becomes clear to the insurer that its insured disputes its denial of coverage,
however, the duty of good faith does not permit the insurer passively to assume
that its insured is aware of his rights under the policy. The insurer must instead
take affirmative steps to make sure that the insured is informed of his remedial
rights.” (Sarchett v. Blue Shield of California (1987) 43 Cal.3d 1, 14-15 [233
Cal.Rptr. 76, 729 P.2d 267], plurality opinion.)
But see Chase v. Blue Cross of California (1996) 42 Cal.App.4th 1142, 1155 [50
Cal.Rptr.2d 178] [while insurer may not misrepresent facts or fail to clarify an
insured’s obvious misunderstanding of the policy coverage, it does not have an
ongoing duty to keep the insured informed of his or her rights once those rights
have been clearly set forth in the policy].)
“In order to find a forfeiture by the insurer of the right to arbitration, we
understand Davis and Sarchett to require conduct designed to mislead
policyholders.” (Chase, supra, 42 Cal.App.4th at p. 1157, original italics.)
An insurer owes a duty to an additional insured under an automobile policy to
disclose within a reasonable time the existence and amount of any underinsured
motorist coverage. (Ramirez v. USAA Casualty Insurance Co. (1991) 234
Cal.App.3d 391, 397-402 [285 Cal.Rptr. 757].)
“California courts have imposed a duty on the insurer to advise its insureds of
the availability of and procedure for initiating arbitration; to notify him of a 31-
day option period in which to convert his group insurance policy into individual
coverage after termination; and to notify an assignee of a life insurance policy
taken as security for a loan to the insured of previous assignments of the policy
known to the insurer.” (Westrick v. State Farm Insurance (1982) 137 Cal.App.3d
685, 692 [187 Cal.Rptr. 214], internal citations omitted.)
Secondary Sources
Croskey et al., California Practice Guide: Insurance Litigation, Ch. 12C-D,
Application - Matters Held “Unreasonable”, ¶¶ 12:953-12:963 (The Rutter Group)
2 California Insurance Law & Practice, Ch. 13, Claims Handling and the Duty of
Good Faith, § 13.05 (Matthew Bender)
2 California Uninsured Motorist Law, Ch. 24, Bad Faith in Uninsured Motorist
Law, § 24.22 (Matthew Bender)
12 California Points and Authorities, Ch. 120, Insurance, §§ 120.383-120.384,
120.390 (Matthew Bender)

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