What Is Health Insurance Bad Faith?

Dec 12, 2019 | Blog |

Insurance companies and their insureds do not interact on a level playing field. The balance of power favors big business. However, when these companies unreasonably deny healthcare claims, they can put you in a precarious and vulnerable position. That’s why insurers owe their policyholders a duty of good faith and fair dealing.

At Bryant Legal Group, we help people when their health insurers deny legitimate claims, improperly delay benefits, or otherwise act in bad faith. In this article, we outline everything you need to know about health insurance bad faith claims.

When Does a Health Insurer Act in Bad Faith?

Under Illinois law, insurance companies cannot unreasonably delay or deny your healthcare claims on “vexatious and unreasonable” grounds. An insurer could be acting in bad faith if they:

  • Deny a valid health insurance claim without a legitimate reason
  • Intentionally misrepresent the facts or the policy’s terms and conditions
  • Fail to communicate with the insured
  • Improperly investigate a claim
  • Refuse to pay part of a claim that it acknowledges is due
  • Deny a valid claim and force litigation
  • Deliberately undervalue a claim or settlement
  • Delay the processing or payment of a clearly valid claim

Admittedly, not every insurance denial involves bad faith. Many insurance disputes involve legitimate disagreements about someone’s eligibility for benefits.  

To determine whether the insurance company is acting unreasonably or vexatiously, insurance lawyers and the courts weigh all the facts surrounding the dispute. Typically, they will consider the sufficiency of the insurer’s investigation and claims process, its behavior during settlement negotiations, statements made by its adjusters and legal counsel, and its conduct towards the insured.

To build your health insurance bad faith claim, it’s best to keep copies of any correspondence between you and the insurer and careful notes from any conversations you have with the adjuster.

RELATED: Insurers Must Act in Good Faith When Handling Claims

Bad Faith Claims Are Unavailable in ERISA Claims

Notably, ERISA, the federal law that governs employer-sponsored benefit plans, does not permit bad faith claims. If your claim involves your employer’s health insurance plan, you might be unable to file a bad faith claim against the company.

However, ERISA does not cover every health plan. Federal, state, and local government employees’ plans are typically exempt from this law. It also does not cover health insurance that you purchase on the marketplace.

RELATED: 5 FAQs About Private Disability Insurance Claims

What Remedies Are Available in Bad Faith Claims?

In most health insurance claims, you’re demanding coverage, not compensation. However, under §155 of the Illinois Insurance Code, you might be eligible for compensation if a health insurer denies your claim in bad faith. In addition to your health benefits, you could potentially receive either:

  • 60% of your jury award
  • $60,000
  • The difference between your jury award and the insurance company’s settlement offer

Additionally, the insurance company will have to pay your attorney’s fee and case costs.

How Do I File a Bad Faith Claim Against a Health Insurance Company?

In Illinois, you have several options available after a health insurer denies your claim. First, you can file an appeal with the Illinois Department of Insurance. However, the Department of Insurance will not award compensation for a bad faith denial or delays. Instead, it will simply evaluate your eligibility for coverage.

Second, you can file a bad faith lawsuit in a state court. In this claim, you can demand compensation, attorney’s fees, and your case costs under §155. If you file your lawsuit with an Illinois court, you must do so within five years of the denial. 

You should also consider consulting with an experienced lawyer who handles bad faith insurance claims. These cases typically require a detailed legal and factual analysis, and most people cannot adequately represent themselves.

Bryant Legal Group: Trusted Illinois Disability Insurance Lawyers

Bryant Legal Group’s team of respected insurance lawyers handles bad faith claims in Chicago and throughout Illinois. If you believe that your health plan’s delays or denials are vexatious or unreasonable, contact us today for a no-risk consultation. We’ll help you understand your legal options.

To schedule an appointment, please complete our online form or call us at (312) 561-3010.


50 Il. Admin. Code §2001.3 (2005). Retrieved from http://www.ilga.gov/commission/jcar/admincode/050/050020010A00030R.html

Fontaine v. Metropolitan Life Ins. Co., 800 F.3d 883. (7th Circ., 2015). Retrieved from https://www.dol.gov/sol/media/briefs/fontaine(A)-10-15-2014.pdf

Prohibition on the Use of Discretionary Clauses Model Act. (2004). National Association of Insurance Commissioners. Retrieved from https://www.naic.org/store/free/MDL-042.pdf

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.

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