Legal Question in Insurance Law in California

Bad faith refers to the behavior of the insurance carrier and its attorney's behavior is not always considered the same as the insurance company. Certain "lies" moreover are considered the same as the puffing up done by a salesman. It is difficult to show bad faith and that you were damaged.

I agree with Mr. Shers. Let me add that the term "bad faith" applies only to an insurer's misconduct toward its own insured, not to the insured's opponent in a lawsuit. The term is shorthand for a breach of the duty of good faith and fair dealing. That duty arises from the relationship between insurer and insured. There is no such relationship between the insurer and the insured's opponent.

If you have sued someone (or have made a demand and not yet filed suit) that is covered by their liability insurance, the insurer is probably paying for their lawyer. Your opponent's lawyer does not have the same duties to you that the insurer has to your opponent.

It is sometimes possible for a plaintiff to bring a bad-faith lawsuit against the defendant's insurer. First, though, he has to win the original lawsuit against the insured for an amount that exceeds the defendant's policy limits. Then he has to show that the insurer could have settled the case within those limits but unreasonably refused to do so. (That usually requires proof that the plaintiff made a demand within the policy limits.) In that situation the defendant would have a bad-faith claim against the insurer. That claim is assignable, which means the defendant can transfer it to somebody else. In some instances the defendant will transfer it to the plaintiff as part of a post-judgment settlement agreement. Then the plaintiff can sue the insurer for its bad faith toward the defendant. As you can imagine, this doesn't happen very often.

If opposing counsel's treatment of you is part of a strategy to unreasonably refuse a settlement within the defendant's policy limits, then it might be relevant later in a bad-faith lawsuit. I say "might" because the defense attorney is usually the defendant's agent rather than the insurer's. If he isn't acting on the insurer's behalf, then his actions are not the insurer's actions and do not show bad faith by the insurer.

Whether to pay the claim or not is the insurer's decision and not defense counsel's. Most bad faith claims allege wrongful refusal to pay a claim, but some involve other kinds of actions by the insurer toward the insured. It is conceivable that the way opposing counsel treats you would help prove that the insurer is acting in bad faith toward the defendant. But it is very unlikely.