When Your Insurance Company Breaks the Rules
You pay your insurance premiums expecting your insurer to hold up their end of the deal. When you file a claim, you expect a fair investigation and a reasonable settlement. But sometimes insurance companies do not play fair. When an insurer unreasonably denies, delays, or underpays a valid claim, it may be acting in bad faith.
Illinois law takes bad faith insurance practices seriously. Understanding your rights can help you fight back when an insurer tries to take advantage of you after a Chicago accident.
What Is Bad Faith Insurance?
Bad faith means the insurance company is not dealing with you honestly or fairly. It goes beyond a simple disagreement about what a claim is worth. Bad faith involves deliberate or reckless disregard of the policyholder’s rights.
Every insurance policy carries an implied covenant of good faith and fair dealing. The insurer has a duty to:
- Investigate claims thoroughly and promptly
- Evaluate claims fairly based on the evidence
- Pay valid claims within a reasonable time
- Communicate honestly about coverage and claim status
- Not put its own financial interests above the policyholder’s rights
When an insurer violates these duties, it crosses the line into bad faith.
Illinois Laws Against Bad Faith Insurance
Section 155 of the Illinois Insurance Code
The primary weapon against bad faith insurers in Illinois is Section 155 of the Illinois Insurance Code (215 ILCS 5/155). This statute allows a court to impose penalties on an insurer that engages in “vexatious and unreasonable” conduct in handling claims.
If a court finds the insurer acted in bad faith, it can award:
- Attorney fees and costs: The insurer must pay your legal expenses
- Additional penalty: Up to 60% of the amount the insurer should have paid, or $60,000, whichever is greater
These penalties are in addition to the original claim amount. They serve as both compensation for the policyholder and a deterrent to the insurer.
The Illinois Consumer Fraud Act
In some cases, bad faith insurance practices may also violate the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505). This can provide additional remedies including treble damages in some situations.
Unfair Claims Settlement Practices Act
The Illinois Department of Insurance regulates insurer conduct under 215 ILCS 5/154.6. This statute lists specific prohibited practices that constitute unfair claims settlement practices. While this statute is primarily enforced by the Department of Insurance rather than individual lawsuits, violations can support a bad faith claim under Section 155.
Common Examples of Bad Faith Insurance Practices
Unreasonable Claim Denials
Denying a claim without a legitimate basis is one of the clearest forms of bad faith. Examples include:
- Denying a claim that is clearly covered under the policy
- Denying based on a misinterpretation of policy language
- Denying without conducting a proper investigation
- Denying based on information the insurer knows is inaccurate
Unreasonable Delays
Insurance companies sometimes drag out the claims process hoping you will give up or accept less. Bad faith delay tactics include:
- Failing to acknowledge your claim for weeks
- Repeatedly requesting the same documents
- Passing your claim between multiple adjusters
- Taking months to make a decision on a straightforward claim
- Not returning phone calls or emails
Lowball Settlement Offers
Making an unreasonably low offer on a claim can constitute bad faith, especially when:
- The offer is far below the documented damages
- The insurer ignores evidence supporting a higher value
- The insurer uses flawed methods to calculate the claim value
- The offer does not account for all covered damages
Failure to Investigate
Insurers have a duty to investigate claims thoroughly before making decisions. Bad faith investigation failures include:
- Denying a claim without reviewing all submitted evidence
- Ignoring witness statements that support the claim
- Failing to obtain relevant records
- Conducting a one-sided investigation that only looks for reasons to deny
Misrepresenting Policy Terms
Sometimes insurers tell policyholders their claim is not covered when it actually is. They may:
- Cite policy exclusions that do not apply
- Misquote policy language
- Fail to inform you of coverage you have
- Interpret ambiguous policy language against you (Illinois law requires ambiguities to be interpreted in the policyholder’s favor)
Bad Faith in Third-Party Claims
Bad faith claims most commonly involve first-party claims, where you are making a claim under your own policy. But bad faith can also arise in third-party situations.
If you cause an accident and your insurer refuses to settle a legitimate claim against you within policy limits, exposing you to personal liability above your coverage, that can be bad faith. The insurer has a duty to protect you from excess judgments when a reasonable settlement opportunity exists.
How to Build a Bad Faith Case
Proving bad faith requires more than showing the insurer denied your claim or offered less than you wanted. You need evidence that the insurer’s conduct was unreasonable. Steps to build your case include:
Document Everything
- Save all correspondence with the insurer, including emails, letters, and notes from phone calls
- Record dates when you submitted documents and when (or if) the insurer responded
- Keep copies of every document you send to the insurer
- Note every phone call, including who you spoke with and what was said
Follow Up in Writing
After phone conversations, send a follow-up email or letter confirming what was discussed. This creates a paper trail that is valuable if you need to prove bad faith later.
Comply with All Requests
Provide the insurer with every document they reasonably request. If they claim they did not receive something, send it again with proof of delivery. This removes any excuse the insurer might have for denying or delaying your claim.
Get Legal Help
Bad faith claims are complex. An experienced attorney can evaluate whether the insurer’s conduct crosses the line from aggressive claims handling into bad faith. They can also help you file a complaint with the Illinois Department of Insurance.
Filing a Complaint with the Illinois Department of Insurance
You can file a complaint against an insurer with the Illinois Department of Insurance. The department investigates complaints and can take regulatory action against insurers that violate Illinois law.
While a department complaint does not directly result in compensation for you, it creates an official record of the insurer’s conduct. It can also prompt the insurer to handle your claim more fairly.
You can file a complaint online through the Illinois Department of Insurance website or by calling their consumer hotline.
Damages Available in Bad Faith Cases
If you successfully prove bad faith under Illinois law, you may recover:
- The original claim amount: What the insurer should have paid in the first place
- Section 155 penalties: Up to 60% of the claim amount or $60,000
- Attorney fees: Your legal costs for fighting the bad faith
- Consequential damages: Additional losses caused by the insurer’s bad faith, such as credit damage or emotional distress
Time Limits for Bad Faith Claims
Bad faith claims in Illinois are generally subject to a five-year statute of limitations for breach of contract or a two-year limit for statutory claims, depending on the legal theory. However, the clock can start running at different points depending on the circumstances. Do not wait to take action if you believe your insurer is acting in bad faith.
Protect Yourself from Bad Faith Insurers
If you have been injured in a car accident, truck accident, or motorcycle accident in Chicago and your insurance company is treating you unfairly, you have legal options. Bad faith is not something you have to accept. Hiring an experienced attorney can put pressure on the insurer to do the right thing.
Call Phillips Law Offices at (312) 346-4262 or contact us online at /contact/ for a free consultation.