Every California insurance contract contains an **implied covenant of good faith and fair dealing**. When an auto insurer unreasonably delays investigations, misrepresents policy language, or refuses a reasonable settlement offer within policy limits (*Royal Globe / Gruenberg doctrine*), the insurer can be sued for Bad Faith, opening the policy limits to unlimited liability.
1. Common Bad Faith Insurance Tactics
| Bad Faith Practice | Factual Manifestation | Legal Recourse |
|---|---|---|
| Unreasonable Delay | Failing to communicate or investigate within 40 days (Cal. Ins. Regs § 2695.7). | Formal DOI complaint & bad faith tort claim. |
| Unreasonable Settlement Rejection | Rejecting policy-limit demand despite clear liability and excess damages. | *Stinson/Comunale* excess judgment liability. |
| Lowballing Valid Claims | Offering $2,000 for verified $40,000 orthopedic surgeries. | Compelled discovery of internal claim manuals. |