New California Insurance Laws That You Need to Know

Starting January 1, 2023, a new law, Senate Bill 1155, officially went into effect in California. This law, introduced by Senator Bob Hertzberg, was designed to regulate how bad faith lawsuits against insurance companies are handled. According to the official legislative text, this bill specifically outlines new procedural requirements for filing lawsuits and the conditions under which insurance companies must respond to claims.

All insurance companies in the state of California must act in good faith, meaning that they must not engage in bad faith practices like misrepresentation or fraud. When an insurance company engages in unfair conduct, the insured is able to file a claim or lawsuit against their insurance company. One common example of a bad faith insurance lawsuit involves insurance companies and their delays in investigating when a claim is filed. 

Insurance exists for just about everything. Examples include the following:

• Car Insurance
• Health Insurance
• Homeowners Insurance
• Boat Insurance
• Life Insurance
• Commercial Insurance

When you have been involved in an accident, you have a reasonable expectation that the insurance you have will be able to compensate you for any injuries or property damages that you have suffered. In order to get compensated from your insurance company, you must first let them know about the accident. This is done through a process called the claims process. But, in certain circumstances, an insurance company may act in bad faith. In such an instance, the insured then has the right to file a lawsuit against the insurance company. For individuals facing difficulties with their insurance claims, there are multiple options available. You can consult with a Heidari Law Group attorneys specializing in bad faith insurance claims or seek assistance from free legal aid organizations such as Legal Aid at Work or the California Department of Insurance, which provides consumer protection services and mediation programs.

This new law is referred to as Senate Bill 1155. As of January 1st, bad faith lawsuits filed against insurance companies have a specific set of limitations and regulations. If you are filing a bad faith lawsuit, and you fail to follow the requirements, you could have your entire case thrown out. That is why it is very important to have a highly qualified bad faith insurance attorney on your side to keep up with all the present requirements and make sure that your lawsuit has been filed properly. An inexperienced attorney could put your entire lawsuit at risk. 

This new law requires that a party send a demand to the insurance company to settle claims. This means that if you have a claim against an insurance company for injury, property damage, or a wrongful death claim, you must file a demand with the insurance company prior to filing the lawsuit. This goes for all types of insurance, including car insurance, motorcycle insurance, and property insurance.

This is referred to as a time limited demand. If this time limited demand is not sent to the insurance company prior to the lawsuit being filed, then the party is unable to get compensation from the insurance company.

Requirements for the demand include:

• The demand must be titled as a “demand,” and specifically cite the new insurance laws that require the demand. 
• The demand must mention an offer to settle claims with the insurance company. It must have a specific compensation amount, and must show that the insured is willing to settle.
• The demand must go into specifics to explain when the accident occurred, what injuries the insured suffered, the claim number, and the insurance adjuster that was assigned to the claim.
• The demand must be accompanied with proof of damages, such as invoices for property damage, or medical bills that show the insured suffered bodily injuries.
• The demand must be accompanied by proof of lost wages if the insured took time off from work due to their injuries. 
• The demand must provide the insurance company 30 days to accept or deny the demand. Keep in mind that the number of days may increase if it is sent through standard mail.

There may be several other requirements that must be followed depending on the circumstances of your accident, and how the demand is sent. We recommend that you speak to a California bad faith insurance attorney as soon as possible to make sure that you meet all these requirements.

How will the insurance company respond to the demand?

The demand is essentially an offer to settle with the insurance company, and to give the insurance company notice that there will be a potential lawsuit filed by the insured. The insurance company could then: 

•  accept the demand
•  counter offer the demand
•  reject the demand
•  ask for more information

What if the insurance company rejects the demand? 

If the insurance company rejects the demand, they must notify the insured within 30 days, and explain why they have rejected the demand. The insurance company is then responsible for explaining in detail exactly what made them why they rejected the demand.

What happens if I fail to follow this new requirement?

If you or your attorney fail to follow this new law, your lawsuit may be delayed or dismissed until the demand is properly sent. Additionally, California Civil Code Section 999.1 outlines that failure to comply with the demand letter process may result in the court ruling in favor of the insurance company, limiting your ability to seek damages. In some cases, exceptions may apply, such as if the insurer has already demonstrated bad faith through prior actions, but these scenarios are rare and legally complex. If, for instance, you did not send the demand letter to the insurance company, and then filed the lawsuit, the insurance company may argue that you have not met all the requirements for filing a lawsuit.

Why was this law passed? 

This law was passed as a way to assist both the insurance company and their insureds who are filing a potential lawsuit. The goal is to try to find a resolution before a lawsuit is filed in court. Often, lawsuits can take months or even years to reach a settlement. A demand can reduce the amount of time by allowing the parties to negotiate before the court is involved.

This law has also received some recent criticism from the public who have argued that this has made it harder to file a lawsuit against an insurance company. Many argue that this has now become just one more obstacle a potential plaintiff has to face in order to file their lawsuit. However, an experienced attorney will be able to help make the process easier for you. 

Frequently Asked Questions

What is Senate Bill 1155, and how does it affect bad faith insurance lawsuits?

Senate Bill 1155 is a California law that went into effect on January 1, 2023, changing how bad faith insurance lawsuits are handled. The law requires policyholders to send a formal time-limited demand letter to the insurance company before they can file a lawsuit. This step ensures that insurers have an opportunity to settle claims fairly before legal action is taken, potentially reducing lengthy court disputes.

What happens if I fail to send a demand letter before filing a lawsuit?

If you do not send a proper demand letter before filing your lawsuit, the court may dismiss your case or require you to restart the process. Under California Civil Code Section 999.1, failing to meet the demand letter requirement can give the insurance company legal grounds to delay or deny the claim. It is crucial to follow the correct procedures and include all necessary documentation to ensure your demand is valid and enforceable.

What should I include in my demand letter to comply with Senate Bill 1155?

Your demand letter must be clearly labeled as a “demand”, reference Senate Bill 1155, and include a specific settlement amount. Additionally, it should provide detailed information about the claim, including the date and location of the accident, the claim number, the insurance adjuster’s name, and supporting evidence like medical bills, repair invoices, and lost wage documentation. The letter must also give the insurance company at least 30 days to respond, or longer if mailed.

Can an insurance company reject my demand, and what should I do if they do?

Yes, an insurance company can reject your demand, but they must provide a written explanation within 30 days detailing why they are denying or countering your request. If your demand is rejected due to missing information, you may have an opportunity to submit a revised demand with the required details. If the rejection appears to be in bad faith or unreasonable, you may proceed with filing a bad faith lawsuit against the insurer.

Do I need an attorney to file a demand letter, or can I do it myself?

While you are not legally required to hire an attorney to file a demand letter, working with an experienced bad faith insurance lawyer can significantly improve your chances of success. Attorneys ensure that your demand meets all legal requirements, is properly formatted, and includes the right supporting evidence to prevent unnecessary delays or rejections. If your case proceeds to court, legal representation becomes even more critical in holding the insurance company accountable.

Why should I hire a bad faith insurance attorney? 

We recommend that you hire a bad faith insurance attorney as soon as possible if you believe you have a claim against your insurance company. An experienced bad faith insurance attorney will be able to help you create this demand and send it to the proper insurance company. There are specific words and pieces of evidence that are essential to a demand. A demand that has not been drafted correctly will be denied by the insurance company. 

Our California insurance attorneys will help you draft and send this demand to make sure that you have a strong case. 

Give us a call today to see how we can help you with your bad faith insurance lawsuit. There are many steps to filing an insurance lawsuit, and this new law has added an additional one. Our attorneys are available 24/7 to make sure that you have a strong case, and you have met all the necessary requirements in order for you to get the compensation you deserve. 

If you think you have a case against an insurance company for bad faith practices, give us a call today to schedule a free case evaluation. Our California bad faith insurance attorneys are essentially risk-free, and take $0 up front unless we win compensation.

***Disclaimer: This webpage has been crafted by Heidari Law Group solely for educational purposes. The content of this article aims to offer a broad comprehension of the law and does not constitute specific legal advice. By accessing this site and perusing its contents, no attorney-client relationship is established between you and any member of Heidari Law. Additionally, it’s important to note that the legal landscape is subject to continuous change, rendering some of the information provided herein potentially outdated or no longer applicable.