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  • Writer's pictureAcclaim Law Group

The Good Faith Covenant

It’s raining. You’ve had a bad day at work and you’re in a rush to get home and relax. When, suddenly, you collide with someone. Accidents happen, which is why we protect ourselves by getting insurance. But what happens when your insurance company fails to protect you from bearing the damages that resulted from the collision.

When insurance companies break the good faith covenant by denying an insurance claim or improperly handling a claim, the consequences can be severe for their policyholder. The California law of good faith and fair dealing states:

"In every contract or agreement there is an implied promise of good faith and fair dealing. This means that each party will not do anything to unfairly interfere with the right of any other party to receive benefits of the contract; however, the implied promise of good faith and fair dealing cannot create obligations that are inconsistent with the terms of the contract.” (CACI No. 325)[i]

In layman’s terms, the law of good faith establishes that every contracted party should act in the best interests of each other until the agreed upon contract expires, and, if any party breaks the terms of the contract, their actions are punishable through the courts.

A great deal of the time people are uninformed about what they are buying when it comes to insurance. They forego coverages like underinsured motorists and med pay, and opt for a basic policy, with the belief that the policy offers them enough protection.

There is an unspoken promise between insurance companies and their policyholders that holds deep value and drives them to continue renewing their policies. Insurance is supposed to act as your armor and shield, and, in exchange, you offer your loyalty. So, what can you do if your insurance company breaches the agreed upon contract and jeopardizes your financial stability?

You can go after your insurance company if they commit actions such as:

  • Denying an insurance claim without an investigation or underpaying an insurance claim

  • Refusing to enter into settlement negotiations or failing to respond to a time limit demand

  • Refusing to represent you in court [ii]

You can sue your insurance company for damages such as, contract damages, bad faith damages, emotional distress, punitive damages, and any other damage that resulted from the breach of contract. If the limits on your insurance policy were made opened you can be sued for damages that exceed your policy limits which can push you, or your business, into bankruptcy. You should not bear the costs of a lawsuit due to your insurance company’s improper handling of a claim against you.

To learn more about your rights contact an experienced personal injury attorney La Mesa at Acclaim Law Group. We will advise you on the steps going forward and answer any pressing questions you may have. Call Brett Geruntino, Esq. at (858) 252-0781.

Disclaimer: While we always seek to establish accuracy when publishing articles, this piece is not intended to provide legal advice, and should not be used as such. Each individual case will differ and should be discussed with an attorney or legal expert. If you would like to inquire about pursuing a claim against your insurance company, please contact a San Diego injury lawyer at (858) 252-0781 or email

[i] Breach of Covenant of Good Faith and Fair Dealing—Essential Factual Elements. (2017). Retrieved from

[ii] Insurance Claims: Typical Bad Faith Insurance Lawsuits and Awards. (n.d.). Retrieved from

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