In Illinois, and throughout the country, the nature of the insurance business — whether in the health insurance, property insurance, business liability insurance, or disability insurance contexts — is to sign on policyholders while limiting the payout amount in a potentially covered event. Considered from the perspective of the insurance company, success is being able to deny coverage for a legitimate claim, or perhaps delaying the processing of the claim to such an extent that the policyholder simply withdraws from any further attempt at recovering their rightful benefits.
State and federal law grants policyholders a number of rights, however, centered around the duty of good faith imposed on insurance companies. Failure to adhere to this duty of good faith may entitle the policyholder (who has had their claim wrongfully denied, delayed, or otherwise mishandled) to sue and recover damages through bad faith litigation.
General Duty to Act in Good Faith
Under Illinois law, insurers have an implied duty of good faith towards their policyholders, which arises from the fundamentally asymmetric and inequitable nature of their relationship with the policyholder — after all, the relationship is based (at least in part) on the fact that policyholders trust the insurer to have specialized knowledge relating to insurance law and insurance agreements. Policyholders therefore rely on the specialized knowledge of their insurer. If the insurer uses this informational inequity to unreasonably disadvantage of their policyholder, then there may be a bad faith conflict.
In Illinois, the courts have found that there is no “common law” basis for a bad faith action against the insurer. Instead, bad faith actions are elaborated upon by section 155 of the Insurance Code, which establishes the penalties for bad faith and defines the type of conduct that qualifies as a bad faith violation. Such conduct includes:
- Knowing misrepresentations to the policyholder
- Failure to maintain regular communication with the policyholder with regard to the processing of an insurance claim
- Failure to payout the benefits that are due to the policyholder
- Knowingly denying a reasonable claim, such that the policyholder is forced to litigate in order to secure their rightful benefits
- Failure to conduct a proper investigation of the facts
- Failure to adopt reasonable investigation standards
- Attempting to settle a claim for less than it is reasonably worth
- Delaying the processing of the claim
- And more
It’s worth noting that section 155 penalties — though significant — are less than the punitive damages that might be available were you to bring a separate tort claim against the insurance company, such as fraud. If the facts point to independent tort liability (i.e., fraud, intentional infliction of emotional distress, etc.), then your attorney may be able to secure additional damages on your behalf. Generally speaking, however, the conduct of the insurer would have to be particularly egregious to justify such claims.
In any case, courts have found that problematic insurer conduct — by itself — may not necessarily give rise to a bad faith claim unless it is accompanied by vexatious, unreasonable, or outrageous conduct.
- Related Article: 5 FAQs About Private Disability Insurance Claims
Vexatious, Unreasonable, and Outrageous Conduct
Whether the insurer’s conduct will be considered vexatious, unreasonable, or outrageous enough (to justify a bad faith claim) depends on the totality of the circumstances. Generally speaking, conduct will be deemed vexatious or unreasonable if there is no proper justification for the detriment imposed on the policyholder. This is a fact-based issue.
For example, suppose that you are a disability insurance policyholder. Some time after you enter into the insurance agreement, you come down with a serious illness, which disables you for a number of years. There is very little ambiguity with regard to your claim — in fact, the disabling condition qualifies automatically for benefits under the policy. Your insurer affirms the payout of benefits but delays the payout for a long time. Given that there is no reasonable basis to avoid paying out the claim, the conduct would likely be deemed vexatious and would give you the right to sue for bad faith.
Contact an Experienced Chicago Bad Faith Insurance Lawyer for Assistance
If your insurance claim has been mishandled (wrongfully denied, excessively delayed, undervalued), then Illinois law may give you a right of action against the insurer for damages pursuant to a bad faith claim. Insurers have a duty to act in good faith. Failure to do so may expose them to substantial liability — in some cases, policyholders may even have a legitimate argument for an award of punitive damages.
Here at Bryant Legal Group, PC, our attorneys have decades of combined experience representing the interests of Illinois policyholders against their insurers. We understand that the wrongful denial, delay, or low valuation of a claim can put the policyholder in an incredibly vulnerable position. As such, we work closely with our policyholder clients to ensure that they understand their case at every stage of the litigation process, from the internal appeals process to trial.
Call (312) 561-3010 today to schedule a consultation with an experienced Chicago bad faith insurance lawyer here at Bryant Legal Group, PC.