Fair Claims Settlement Practices in California

When you file a homeowners insurance claim for a covered event, such as water damage, your insurance company appoints an insurance adjuster to adjust and manage your claim.

Many homeowners believe insurance companies and their adjusters are on their side. However, an insurance adjuster looks after the best interests of your insurance company – they are expected to mitigate their liability.

An insurance adjuster is not your friend, won’t leave any money on the table, and won’t do you any favors at the expense of your insurer.

Despite the above, insurance companies are typically not out to scam you. However, this does not mean they are always fair to you or give your claim the attention it deserves.

To protect consumers, California has Fair Claims Settlement Practices to regulate the practices of insurance companies to ensure transparency and fairness.

In this article, we look at some of the most important regulations that homeowners should be aware of.

Book with title California Law and a judges gavel and block

Fair Claims Settlement Practices Regulations

California Code of Regulations – Title 10, Chapter 5, Subchapter 7.5

Section Number Section Title
Section 2695.1 Preamble
Section 2695.2 Definitions
Section 2695.3 File and Record Documentation
Section 2695.4 Representation of Policy Provisions and Benefits
Section 2695.5 Duties Upon Receipt of Communications
Section 2695.6 Training and Certification
Section 2695.7 Standards for Prompt, Fair and Equitable Settlements
Section 2695.8 Additional Standards Applicable to Automobile Insurance
Section 2695.81 The Standardized Auto Body Repair Labor Rate Survey
Section 2695.82 Questionnaire for the Standardized Labor Rate Survey
Section 2695.85 Auto Body Repair Consumer Bill of Rights
Section 2695.9 Additional Standards Applicable to First Party Residential and Commercial Property

Insurance Policies

Section 2695.10 Additional Standards Applicable to Surety Insurance
Section 2695.11 Additional Standards Applicable to Life and Disability Insurance Claims
Section 2695.12 Penalties
Section 2695.13 Severability
Section 2695.14 Compliance Date

Regulations That Help Speed Up Homeowners’ Insurance Claims

Man in a hurry to file an insurance claim

Nothing is more frustrating when you have suffered damages to your property and your insurance company is dragging its feet in settling your claim.

The following regulations help speed up homeowners’ insurance claims.

Californian insurance companies have:

– 15 days to respond to any communication from a claimant

Section 2695.5(b) – “Upon receiving any communication from a claimant, regarding a claim, that reasonably suggests that a response is expected, every licensee shall immediately, but in no event more than fifteen (15) calendar days after receipt of that communication, furnish the claimant with a complete response based on the facts as then known by the licensee. This subsection shall not apply to require communication with a claimant subsequent to receipt by the licensee of a notice of legal action by that claimant.”

– 21 days to respond in writing to inquiries from the California Department of Insurance

Section 2695.5(a) – “Upon receiving any written or oral inquiry from the Department of Insurance concerning a claim, every licensee shall immediately, but in no event more than twenty-one (21) calendar days of receipt of that inquiry, furnish the Department of Insurance with a complete written response based on the facts as then known by the licensee.”

– 15 days to acknowledge a claim, provide forms, instructions, and assistance, and begin investigating the claim

Section 2695.5(e) – “Upon receiving notice of claim, every insurer shall immediately, but in no event more than fifteen (15) calendar days later, do the following unless the notice of claim received is a notice of legal action:

(1) acknowledge receipt of such notice to the claimant unless payment is made within that period of time. If the acknowledgment is not in writing, a notation of acknowledgment shall be made in the insurer’s claim file and dated.

(2) provide to the claimant necessary forms, instructions, and reasonable assistance, including but not limited to, specifying the information the claimant must provide for proof of claim;

(3) begin any necessary investigation of the claim.”

– 40 days to accept or deny a claim or provide the claimant with written notice of the need for additional time

Section 2695.7(b) – “Upon receiving proof of claim, every insurer, except as specified in subsection 2695.7(b)(4) below, shall immediately, but in no event more than forty (40) calendar days later, accept or deny the claim, in whole or in part. The amounts accepted or denied shall be clearly documented in the claim file unless the claim has been denied in its entirety.”

Section 2695.7(c)(1) – “If more time is required than is allotted in subsection 2695.7(b) to determine whether a claim should be accepted and/or denied in whole or in part, every insurer shall provide the claimant, within the time frame specified in subsection 2695.7(b), with written notice of the need for additional time. This written notice shall specify any additional information the insurer requires in order to make a determination and state any continuing reasons for the insurer’s inability to make a determination. Thereafter, the written notice shall be provided every thirty (30) calendar days until a determination is made or notice of legal action is served.”

Note: Unfortunately, as per Section 2695.7(c)(1), the 40 days limit isn’t cast in stone. Your insurer might give you notice that they require additional time and every 30 days thereafter until they decide whether or not to approve your claim.

– 30 days after accepting a claim to make a full or partial payment on the portion of the claim that’s not in dispute

Section 2695.7(h) – “Upon acceptance of the claim in whole or in part and, when necessary, upon receipt of a properly executed release, every insurer, except as specified in subsection 2695.7(h)(1) and (2) below, shall immediately, but in no event more than thirty (30) calendar days later, tender payment or otherwise take action to perform its claim obligation.”

Unreasonably Low Settlement Offer Regulations

Couple looking at bad settlement offer

One of the most common complaints of homeowners after filing an insurance claim is that their insurer gave them a bad settlement offer.

The Fair Claims Settlement Practices Regulations in California cover unreasonably low settlement offers.

No insurer shall attempt to settle a claim by making an unreasonably low settlement offer.

Here is the relevant section:

Section 2695.7(g) – “No insurer shall attempt to settle a claim by making a settlement offer that is unreasonably low. The Commissioner shall consider any admissible evidence offered regarding the following factors in determining whether or not a settlement offer is unreasonably low:

(1) the extent to which the insurer considered evidence submitted by the claimant to support the value of the claim;

(2) the extent to which the insurer considered legal authority or evidence made known to it or reasonably available;

(3) the extent to which the insurer considered the advice of its claims adjuster as to the amount of damages;

(4) the extent to which the insurer considered the advice of its counsel that there was a substantial likelihood of recovery in excess of policy limits;

(5) the procedures used by the insurer in determining the dollar amount of property damage;

(6) the extent to which the insurer considered the probable liability of the insured and the likely jury verdict or other final determination of the matter; 

(7) any other credible evidence presented to the Commissioner.

Filing a Complaint With the California Department of Insurance

You are entitled to file a complaint with the California Department of Insurance – see our guide: Step By Step Guide to Filing a Complaint with the California Department of Insurance for details.

However, as explained in our above guide, filing a complaint is not necessarily your best option.

The California Department of Insurance (CDI) investigates complaints against insurance companies and can audit claim files to determine compliance with legal requirements. They typically look for patterns – if they receive many similar complaints, they may decide to take action.

When you file a formal complaint with the CDI, they will approach your insurance company to get their side of the story. However, they will typically not adjudicate (act as a judge) your case.

According to United Policyholders, the CDI does not typically resolve disputes between individuals and insurers concerning large dollar or coverage disputes.

Your best bet is to consult a public adjuster.


The Fair Claims Settlement Practices Regulations in California are there to protect consumers, such as homeowners, by requiring insurance companies to be fair when settling claims.

It typically takes anywhere from a few days to several weeks or longer to receive payment from your insurer for a claim.

The exact length of time depends on many factors, including:

  • The size and complexity of your claim
  • The timely submission of paperwork
  • Submitting the correct documentation
  • Your homeowners’ insurance company
  • The insurance adjuster appointed by your insurer

However, insurance claims are not only about when you will receive payment but also about the amount you will receive.

The Fair Claims Settlement Practices Regulations in California aim to safeguard your interests, but the California Department of Insurance is not going to negotiate a settlement offer with your insurer on your behalf.

Homeowners typically do not have the experience and expertise to deal with or negotiate with insurance companies on large or complicated claims. It might cause delays in the insurance claims process and result in a lower settlement than what you are entitled to under your homeowners’ insurance policy.

For large or complex claims, we recommend you hire a licensed public adjuster who can look after your best interests.

Avner Gat, Inc. has 17+ years of experience as a Los Angeles public adjuster covering Southern California. We protect homeowners from the games and fine print that insurance companies are known for.

Call us at (818) 917-5256 to find out how we can help you.

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