California Insurance Code 790.03 identifies a list of unfair claims settlement practices that, when knowingly committed with such frequency as to indicate a general business practice, form the regulatory backbone against which insurer conduct is measured in bad-faith litigation. Understanding what section 790.03 actually prohibits helps explain why certain insurer conduct, like failing to promptly investigate or settle a claim once liability is reasonably clear, carries legal consequences beyond a simple contract dispute.
790.03
Insurance Code section listing unfair claims settlement practices
$13.8M
Judgment where the statute's settlement duty was the benchmark
Insurance Code section 790.03 lists numerous practices considered unfair methods of competition and unfair or deceptive acts in the business of insurance, including misrepresenting policy provisions, failing to acknowledge and act reasonably promptly on communications about claims, failing to adopt and implement reasonable standards for prompt investigation of claims, and failing to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. While section 790.03 itself is enforced primarily through the California Department of Insurance rather than providing a direct private right of action, the conduct it describes closely tracks the common law duty of good faith and fair dealing that does support a private bad-faith lawsuit, and courts and juries often look to the statute's specific list of prohibited practices as a benchmark for what reasonable claims handling looks like.
One of the most litigated concepts under this framework is the point at which liability becomes reasonably clear, triggering an insurer's obligation to attempt a fair settlement. Once the facts establish that the insured driver was likely at fault and that damages are likely to meet or exceed the available policy limits, an insurer that continues to delay, under-investigate, or simply fails to communicate a decision is operating outside the reasonable claims-handling standard the statute and the common law both describe.
Bad-faith litigation frequently involves discovery into an insurer's own claims-handling manuals and training materials, which often describe standards for prompt investigation and communication that mirror the language of section 790.03. When an insurer's own documents describe a standard it failed to follow, that gap can be powerful evidence at trial.
Because the statute concerns practices committed with such frequency as to indicate a general business practice, evidence of how an insurer handled other similar claims can sometimes be relevant, though obtaining pattern evidence in a single claimant's case requires careful discovery strategy and is subject to significant procedural limits.
Attorneys often introduce the statute's list of specific unfair practices as a framework for the jury to evaluate whether an insurer's conduct fell below the standard of good faith the law requires, even when the claim is brought as a common law bad-faith action rather than a direct statutory claim.
An insurer that verbally approves a policy-limits settlement internally, then fails to communicate that approval to the claimant or the claimant's attorney before an established deadline passes, has failed to attempt in good faith to effectuate a prompt and fair settlement, precisely the kind of conduct section 790.03 identifies as an unfair claims practice.
The case behind this page
How a policy-limits settlement that was approved and never sent became a $13.8 million verdict.
Read the full caseRelated standard
Why a jury can find bad faith under this framework and still decline to add punitive damages.
See the punitive standardRelated breakdowns from this case and our insurance bad-faith practice.
We take bad-faith cases built on the 790.03 standards as counsel or co-counsel and pay statutory referral fees.
Refer a caseInsurance Code section 790.03 is a statute that lists specific unfair claims settlement practices, such as failing to promptly investigate claims or failing to attempt in good faith to settle claims once liability is reasonably clear, that are prohibited in the business of insurance in California.
Section 790.03 is primarily enforced by the California Department of Insurance and does not itself create a direct private right of action, but the conduct it describes closely parallels the common law duty of good faith and fair dealing, which does support a private bad-faith lawsuit against an insurer.
Conduct that violates this duty includes failing to investigate a claim promptly, failing to communicate settlement decisions to the parties who need to act on them, and allowing a reasonable settlement deadline to pass without a response, especially once liability is reasonably clear and damages could exceed the policy limits.
