a man researching his Californian insurance rights

Know Your Rights: Insurance Primer for California Residents

If you live in California, it will please you to know that our state has the most laws protecting insurance policyholders in the U.S. These laws tell insurance companies and their representatives precisely how they must behave when you file a claim.

Unfortunately many people in the industry either don’t know the law or break laws intentionally. For this reason, even a basic understanding of these laws may help you obtain a fair and speedy settlement.

Ask for Copies

Your insurer should supply you with free copies of the laws that protect you as a homeowner 15 days after you file your claim. If they do not, ask them or access them yourself.

If you want more details regarding claims deadlines and the information necessary to exchange with your insurance company refer to California’s Fair Claim Handling Regulations.

Definition of Good Faith

Your insurance company has a legal obligation to investigate your claim, process it, and pay the full amount promptly. They must deal with you in “good faith” at all times.

This means your insurance company, everyone who works for them and all their communications must be honest when describing the details of the insurance policy they sell you and any rights and duties related to a claim.

Prompt, Honest, & Complete Communications

California law states your insurer must provide a complete response to communications based on known facts within 15 calendar days. If you ask a question or request copies of documents, always communicate through email or mail so you have a record.

When you file a claim, your insurer must provide you with information regarding claim deadlines, the statute of limitations for lawsuits, and tolling (postponement of the deadline to sue).

Cooperative Investigation

Your insurer must conduct an independent investigation when you file your claim. You’re legally required to cooperate and provide truthful information during the claims process, but you do not need to respond to unreasonable requests or harassment. If your insurer asks you to answer questions over the phone, ask for a copy of the questions and provide a written response instead.

An “Examination Under Oath” can only include questions relevant to your claim. Ask for a copy of the transcript and the recording, if applicable. You have the right to clarify your answers later.

Once the insurer accumulates the evidence they’ll determine a settlement amount. They must offer a fair and equitable settlement to restore your property to its condition before the loss.

Adjusting & Paying a Claim

When an insurer calculates your loss they need a contents list with replacement prices and receipts OR photographs/videos of your household items. They can’t compel you to provide receipts if you provide either photos or videos.

You can ask your insurer for a copy of any claim-related document such as photographs, estimates, measurements, adjustor reports, and depreciation schedules so you can review them.

Your insurer cannot compel you to use a specific contractor to repair or rebuild and they cannot depreciate items such as the foundation or framing. If they state an unusual reason for depreciation, ask for written proof of the law and a verified dollar value.

If you think the amount the insurance company offers is “unreasonably low” you don’t have to accept it and they can’t force you to do so. Insurance should restore the damaged property to its condition before the loss and your insurer can’t substitute lesser materials or workmanship to do so.

Seek an independent estimate and submit it to your insurance company if you think they’ve underestimated the work. They can either split the difference between the two estimates, hire a builder to restore your property to its “pre-loss condition” or make you a better offer.

If you have replacement cost coverage, you do not have to rebuild either. You can use the funds to buy elsewhere. You’ll probably need an independent estimate to determine the settlement amount.

Filing Complaints, Legal Services, & Lawsuits

Many homeowners feel they must just accept what their insurance company offers, but this isn’t the case if you think it is unfair or illegal. If you can’t come to a satisfactory agreement with your insurer, or you believe they’ve violated the law, you may need to act.

Your carrier can’t threaten, delay your claim, or withhold payment if you file a complaint with the California Department of Insurance, seek legal advice, or sue. Of course, these measures are your last resorts. Most insurance companies would rather settle, so exhaust all avenues with them first.