What Damages Can Be Recovered in a Bad Faith Case?

Insurance is supposed to provide peace of mind when the unexpected happens. Unfortunately, many companies care more about protecting their bottom line than helping those who trusted them. When valid claims are delayed or denied without reason, it becomes bad faith, a practice that leaves families under financial strain and asking, What damages can be recovered in a bad faith case?

At VandenBout Law, we’ve seen firsthand how these tactics harm people in Pasadena and across California. Our team is committed to holding insurers accountable and fighting for the compensation our clients are owed under the law.

Understanding Bad Faith Insurance Practices

Insurance is supposed to be a lifeline when you need it most, not just another headache. When you pay your premiums, your insurance company takes on a legal duty to handle your claims fairly. This means they have to investigate thoroughly and pay out valid benefits without unnecessary delays. In California, if an insurer fails to do this, it can be held responsible.

Under California law, an insurance company acts in bad faith when it behaves unreasonably, for example, by denying a claim without a good reason or refusing to look into the facts of your case. This isn’t just a technical mistake; it’s a violation of the trust at the core of every insurance contract.

Bad faith conduct isn’t just paperwork—it can mean losing medical care, delaying home repairs, or facing overwhelming financial pressure.

Types of Damages You May Recover in a Bad Faith Case

Courts in California recognize that insurance misconduct can harm policyholders in more ways than one. The damages awarded in these cases reflect the financial losses and the personal impact of an insurer’s bad faith.

Contractual, Extracontractual, and Punitive Damages

The most common way to explain what damages can be recovered in a bad faith case is by dividing them into three categories.

• Contractual damages: These restore the benefits owed under your policy. For example, if a medical insurance claim worth $50,000 were wrongfully denied, the damages would include that amount plus interest.
• Extracontractual damages: These cover additional losses caused by the insurer’s misconduct. Examples include lost wages, bankruptcy, and emotional distress damages from wrongful denial or delay. Families facing denied health coverage often experience stress, anxiety, and even reputational harm, which are compensable.
• Punitive damages: In California, Civil Code Section 3294 allows punitive damages when an insurer acts maliciously, fraudulently, or oppressively. These damages punish wrongful conduct and deter insurers from similar behavior in the future.

California courts may also award “Brandt fees” for attorney costs incurred proving policy-owed amounts. This prevents policyholders from losing compensation just to secure deserved benefits, leveling the playing field against powerful insurers.

Punitive damages require “clear and convincing” evidence, a stricter test than the usual civil standard. This higher bar ensures they apply only in the worst cases of insurer misconduct, making them a powerful deterrent.

Why Insurers Are Held Liable for Bad Faith

Insurance contracts create a duty of fairness beyond ordinary business agreements. Courts weigh what damages can be recovered in a bad faith case and why insurers must be held accountable.

Insurers hold significant power over claimants, and unfair denials or delays can strip families of medical care, housing, or financial security. Under California’s Civil Jury Instructions (CACI 2332), acting “unreasonably” or “without proper cause” qualifies as bad faith. 

Liability exists because these breaches warrant more than contract damages, often extending to emotional distress and, in extreme cases, punitive damages. Clients often wonder, how much evidence do you need to prove bad faith?, especially when insurers deny valid claims without proper cause. Courts emphasize liability in bad faith cases because it:

• Protects policyholders who depend on insurance for financial stability during crises.
• Deters systemic misconduct by discouraging insurers from adopting unfair practices.
• Reinforces public trust in the insurance system by ensuring fairness and accountability.
• Upholds consumer rights so families in Pasadena and across California receive the protection they paid for.

Contact Vanden Bout Law to Pursue a Bad Faith Insurance Claim

At VandenBout Law, we understand how frustrating it feels to ask, “What damages can be recovered in a bad faith case?” and not to get a clear answer from the insurer who wronged you. We’re dedicated to making sure companies do the right thing, helping you get back what you’re owed, find relief for emotional hardship, and even penalize them for truly outrageous behavior.

Call us at What damages can be recovered in a bad faith case? Learn about contractual, extracontractual, and punitive damages in California. to discuss your situation and learn how our Pasadena team can fight for the full compensation you deserve in your bad faith insurance claim.

“At VandenBout Law, we focus on helping policyholders in New Mexico navigate disputes involving insurance bad faith. Our practice exclusively represents individuals and families—not insurance companies. ”

Lawrence VandenBout

Trial Lawyer

Lawrence VandenBout

Mr. VandenBout has successfully tried multiple cases, he understands that many times the most efficient and effective resolution to a legal dispute occurs outside the courtroom and through the process of mediation. He has been successful in negotiating many favorable settlements for his clients. Mr. VandenBout also utilizes his experience to counsel and assist clients in developing strategies for minimizing the risk of becoming involved in potential legal disputes in the future.

Years of experience: Over 11 years
Recognition: Rising Star 2021, 2022, 2023 & 2024.
Location: Denver, CO