First-Party vs. Third-Party Bad Faith in California
Whether you are the policyholder or the person the policyholder injured decides what claim you have. In California the difference is stark: one route is direct, the other is not available to you at all without going through the insured.
First-party: your own insurer
A first-party claim is against the company you pay premiums to — for your own property damage, medical benefits, uninsured motorist coverage, disability, or life benefits. This is where California's bad-faith tort operates most directly.
Third-party: the other side’s insurer
A third-party claim concerns an insurer's duty to defend and settle on behalf of its own insured. The duty runs to the insured — not to you as the claimant — which is why California does not let an injured person sue the other driver's insurer directly for bad faith.
How the third-party route actually gets used
Through the insured. If an insurer unreasonably refuses a within-limits settlement demand and a judgment lands above the policy limits, the insured is exposed for the excess — and the insured's bad-faith claim against their own carrier can be assigned to the injured person as part of resolving it.
Time-limited demands have their own rules
California has statutory requirements governing time-limited policy-limit demands, which are relatively recent and prescribe how such demands must be made and handled. Getting the mechanics right matters to whether the duty is triggered at all.
Common questions
Can I sue the other driver’s insurance company in California?
Not directly for bad faith. The route runs through the insured — typically via excess-judgment exposure and an assignment of the insured’s claim.
What is an excess judgment?
A judgment larger than the policy limits. If the insurer unreasonably refused a within-limits settlement, its own insured may have a claim against it for that exposure.
Is your insurer treating you unfairly?
A free, confidential review can tell you whether what happened crosses the line — no cost, no obligation.
Related California law
General information about California law, not legal advice. Every policy and every claim is different.