California Insurance Code & EthicsQuestion 55 of 474
After accepting a homeowners claim, an insurer denies coverage based on a policy provision that, on the facts, clearly does not apply. Under §790.03(h)(13), this conduct is best characterized as:
a.Permissible underwriting discretion
b.A trade secret protected from disclosure
c.Failure to provide a reasonable explanation of the basis for denial
d.A good-faith dispute over coverage, which §790.03 expressly exempts from the list of unfair claims practices
Explanation
Section 790.03(h)(13) treats as unfair the act of failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement. Citing an inapplicable provision is exactly the kind of pretextual denial the statute targets.
Law Reference: Cal. Ins. Code §790.03(h)(13)This topic, taught in full in the Personal Lines Insurance Producer guide. Personal Lines Insurance Producer — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
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