“Living Document” of US Common Law Lives: California Supreme Court Ruling Grants Insured New Tools to Battle Bad Faith Insurance

Ask an American what makes their country great and chances are you’ll hear statements like: “social and economic mobility,” the freedom to live out the Declaration of Independence’s credo of “life, liberty and the pursuit of happiness,” and religious tolerance.

All excellent answers. But what about our legal system? Our system’s strength (which codifies and legitimizes Americans’ relationship to their government) rests not in excess rigidity, but durability through flexibility – able to absorb societal shocks when the winds of change blow.

Case in point: From 1896-1954 racial segregation was permitted in public facilities provided they were “separate but equal.” This was the law of the land – until it wasn’t. In 1954, the US Supreme Court determined that separate but equal was “inherently unequal.” Case law or “common law” derived from situational developments debated in court – not inflexible dictates – is what makes US law so unique. Our laws aren’t a static list of “dos” and “don’ts,” but rather a “living document,” adapting to the times, reliant on case law and statutory law to define what’s legal and what isn’t. Strength through flexibility at its finest.

This great American legal strength was on full display in 2013 across California and sets an encouraging tone for the new year ahead. In August 2013, the California Supreme Court greatly expanded the types of claims insurance policyholders could file under the California Unfair Competition Law or UCL, with their holding in Zhang v. Superior Court.

The court found that policyholders could sue their insurance company under the UCL based on allegations of bad faith and unfair, deceptive, untrue or misleading advertising. The recent case before the court concerned a plaintiff represented by Viau & Kwasniewski, who was seeking insurance company compensation following a fire at her business and the insurance company’s alleged false advertising which promised timely and proper payment.

While these types of claims could have been argued through other legal mechanisms before, applying such criteria to the UCL was a first and offered a much broader, more liberal interpretation of policyholder rights. In other words, the court granted the insured a new tool in the fight against bad faith insurance companies.

The bigger takeaway is this: Americans’ rights are under continual review and each new case tests the accuracy and robustness of established legal precedent. Insurance bad faith remains an all-too-common problem and is particularly vexing when policyholders are at their most vulnerable following significant property damage or complete loss. These are crisis points where insurance companies should to the best of their abilities make their clients whole as quickly as possible.

Expanded insurance policyholder rights may not be as profound as re-writing America’s racial rulebook. But that commitment to endless revision, to unabashed national legal self-critique is one of our country’s most enduring qualities.

As we enter 2014, it’s inspiring to us at Viau & Kwasniewski to think about what additional decisions the California Supreme Court and other jurisdictions will hand down as related to insurance bad faith. What other immutable laws of the land are about to be re-written and fundamentally re-interpreted? What new rights are about to be won?

Armed with a new tool to battle insurance bad faith, I hope you will consider Viau & Kwasniewski a valuable resource. Let me know your thoughts in the space below or email the lawyers at Viau & Kwasniewski; Gary Kwasniewski at gkk@vklawyers.com or Jeanette Viau at jlv@vklawyers.com, or call us at (800) 663-1095.