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Illinois Bad Faith Insurance Law
If your insurance company isn’t handling your claim how it should, talk with a bad faith insurance lawyer immediately. Insurers often take their time with a claim, which is frustrating when you need the compensation to get back on your feet. But some insurers’ conduct isn’t fair or reasonable. When the insurer wrongfully denies your claim or has delayed settling for months, you might have a bad faith case against the insurance company. Through a bad-faith insurance lawsuit or claim, you can demand compensation in addition to what you deserve under your initial insurance claim.
To learn more about bad faith insurance cases, call our Illinois personal injury lawyers at (312) 236-2900. Or, send us your information through the online form. We offer free, no-risk consultations and work on a contingency fee basis.
Your Insurer Has a Duty Toward You
When you pay for auto and homeowners or renter’s insurance, you establish a contract between you and the insurance company. Under contract law and Illinois’ Insurance Code, this creates several rights and obligations. You can find Illinois’ bad faith law at 215 ILCS 5/155.
When you file a first-party claim, like after a car crash, your insurer has a duty to uphold the insurance policy and treat you fairly. This duty exists for all types of insurance policies, like homeowner’s, renter’s, and health insurance. But there is an exception. Federal law doesn’t allow bad faith claims against employer-sponsored benefit plans.
Read What To Do if Your Car Insurance Claim is Denied
What Your Insurer Must Do
Once you file a first-party claim with your insurance company, it has to get started. The insurer must open a claim and assign someone to investigate. Within a reasonable amount of time, the insurer must gather evidence about what happened. In the case of a car accident, this includes getting an estimate on the cost of vehicle repairs, calculating the current market value of your vehicle, and reviewing your medical records and bills related to the crash.
After the car accident, the insurer can approve or deny your claim. Whether your claim is approved or denied depends on the type of coverage you have. When you have basic bodily injury liability and property damage liability insurance, then you’re covered if the other driver was at fault. If you can prove another motorist was responsible, then their insurer should either pay to repair the damaged vehicle or pay to replace your totaled vehicle.
When Does an Insurer Act in Bad Faith?
Under the law, your insurer must act promptly. It should pay you compensation based on your insurance policy and damages. But sometimes, the insurance company doesn’t do what it’s supposed to.
You might have a claim for bad faith if your insurer:
- Wrongfully denies your claim (refuses to provide coverage);
- Disputes the value of your losses in the claim; or
- Delays settling your claim.
When your insurance claim process isn’t going smoothly, talk with a lawyer right away. If you can show that your insurance company’s conduct or delay is unreasonable and vexatious, then you have a claim for bad faith against the insurer. Vexatious means something causes you frustration, worry, or annoyance. Although, a court isn’t concerned with whether you were annoyed. It will determine whether or not the insurance company’s delay caused you real, financial harm.
Examples of Bad Faith in a First-Party Claim
It typically isn’t hard to establish the insurer’s problematic conduct. You could prove the insurer wouldn’t approve your claim despite the accident clearly being covered by the policy. Or you could show that the insurer disputed what your injuries were worth or delayed settling your claim for months. A lawyer can prove the insurer’s conduct through its communications with you or the law office.
The more challenging element of a bad faith claim is proving the insurer’s conduct was both unreasonable and vexatious. It’s important to work with an experienced attorney to craft a strong argument for your case.
Examples of unreasonable and vexatious behavior include:
- Failing to adequately investigate a claim.
- Denying a claim without adequate supporting evidence.
- Failing to evaluate a claim objectively.
- Interpreting policy provisions in an unreasonable way.
- Making an unreasonably low settlement offer.
- Relying on misrepresentations in the insurance application, which are very minor or where the insurance company’s agent knowingly filled out the application falsely.
- Using abusive or coercive practices meant to force you to compromise.
Read 8 Reasons Why Car Insurance Claims Are Denied in Chicago
When an Insurer Isn’t Being Unreasonable
A court won’t find an insurance company’s delay to be unreasonable or vexatious if there is a genuine dispute regarding coverage. Bonafide coverage disputes can include whether there’s evidence you hid material facts about the accident or your health.
Damages in a Bad Faith Insurance Claim
When you win a bad faith claim, you are entitled to damages, which include attorney’s fees, court costs, and interest. Not including fees and costs, you can win compensation that doesn’t exceed:
- 60% of the amount the judge finds you are entitled to under your insurance policy;
- $60,000; or
- The excess of the amount which the judge finds you are entitled to recover over the amount if any, that the insurer offered to pay to settle your claim before the lawsuit.
Your Insurer Has a Duty to Defend You Against Third-Party Claims
Another area where insurance issues might come up is when another party claims you caused them harm and owe them compensation. For example, another driver might blame you for a crash. When someone else files a claim with your insurer, this is a third-party claim. Your insurance company is responsible for defending you against this claim.
Your insurer is also responsible for paying the third party’s claim if it’s a valid claim covered by your policy. Your insurer has a legal duty to try and resolve the claim with a fair settlement—though it isn’t necessarily required under the law to initiate settlement negotiations. The insurer’s duty to settle doesn’t come up until the third party makes a settlement demand that’s within the policy limit. Except that an insurer is required to start settlement negotiations if it’s likely that a court would find you liable and the amount of damages would greatly exceed the policy limits.
Negotiations are often where problems arise. The third party wants to recover as much as possible, while your insurer wants to pay out as little as possible. But your insurer might take this desire too far and refuse to settle the case for a fair amount, especially when a fair sum is more than your policy limit.
If your insurer doesn’t defend you against wrongful claims or settle valid claims, it puts you at risk for being sued directly by the injured party. Talk with a lawyer about what to do when your insurance company isn’t handling a third-party claim against you appropriately. You might have the right to file a lawsuit against your insurer.
Bad Faith in Failing to Settle a Third-Party Claim
Illinois courts have created seven factors for judges to review when deciding whether an insurance company acted in bad faith when it failed to settle a third-party claim against you.
- The insurance company’s adjusters’ advice.
- The insurance company’s refusal to negotiate.
- The defense attorney’s advice.
- Communication with the insured party regarding the third-party’s willingness to settle for the policy limit.
- Whether the insurance company’s investigation and defense were adequate.
- The likelihood of a verdict against the policyholder.
- The likelihood of damages exceeding the policy limit.
A judge also will consider whether the insurance company put its interests before the policyholder’s interests. When it comes to a third-party claim, the law requires an insurer to balance its interests with the insured’s interests.
Illinois Bad Faith Doesn’t Cover Your Third-Party Claims
A first-party claim involves you filing a claim with your insurance company. A third-party claim entails filing a claim against another person or business’s policy when you believe they at fault for your injuries.
Illinois’ bad faith law only applies when you file a claim with your insurance company—a first-party claim. In a third-party claim, you don’t have a contract with another person or business’s insurance company. If they’re unreasonable, you can’t file a bad faith lawsuit. Instead, you have to pursue a lawsuit against the liable person or business directly.
Assignment of Claims Against an Insurer
Bad faith insurance issues are tricky when third-party claims are involved. If another person filed a third-party claim against your policy, but your insurer acted in bad faith, then you have the right to sue—not the injured third party. But it’s the injured third party who is still looking for compensation. That is why, in many circumstances, you assign your right to file the bad faith claim or the judgment from the bad faith claim to the third party.
What about when you have a third-party claim that isn’t settled? When your third-party claim isn’t resolved fairly, then you have to pursue a legal claim against the policyholder. It’s that person or business’s responsibility to go after their insurer for bad faith. You might win a judgment the person can’t pay. To resolve this issue, they assign you the right to bring the bad faith action against the insurer, which then allows you to sue the insurer and demand compensation.
Frequently Asked Questions About Bad Faith Insurance
How do I know if my insurer is acting in bad faith?
Signs of bad faith can include delayed investigations, unreasonable claim denials, lowball settlement offers, misrepresentation of policy terms, failure to defend you against third-party claims, or using abusive tactics to force you to settle. If you believe your insurer isn’t handling your claim properly, speaking with an experienced Illinois bad faith insurance lawyer can help you determine your next steps.
Does Illinois law allow bad faith claims against all types of insurance?
Illinois law permits bad faith claims for most types of insurance, including auto, homeowner’s, renter’s, and health insurance policies. However, you cannot bring a bad faith claim under federal law for employer-sponsored benefit plans governed by ERISA. It’s critical to consult an experienced Illinois insurance dispute lawyer to understand whether your policy qualifies.
Can I sue the other party’s insurance company for bad faith in Illinois?
No. In Illinois, bad faith laws apply only to first-party claims, meaning your legal relationship is with your own insurer. If another person’s insurance company delays or denies a claim unfairly, your legal action is against the at-fault individual or business, not their insurer directly.
What happens if my insurer refuses to settle a third-party claim fairly?
If your insurance company refuses to settle a third-party claim within policy limits when it should have, it may expose you to excess liability. In such cases, you could have grounds for a bad faith lawsuit against your insurer for failing to protect your interests. An Illinois bad faith insurance lawyer can help you navigate this complex situation.
How long do I have to file a bad faith insurance lawsuit in Illinois?
Generally, you must file a bad faith insurance lawsuit within the same period as a breach of contract claim, which is usually 10 years under Illinois law. However, earlier action is always better to preserve evidence and strengthen your case. Contact a bad faith insurance attorney as soon as you suspect unfair treatment.
What is the standard for proving bad faith insurance practices in Illinois?
To win a bad faith claim in Illinois, you must show that the insurer’s actions were both unreasonable and vexatious. Courts consider factors such as delay length, justification for denial, settlement offers, and the insurer’s overall conduct during the claims process. Working with an experienced bad faith lawyer is essential to meet this legal standard.
Can I assign my bad faith claim to another person after a lawsuit?
Yes. In certain cases, particularly involving unresolved third-party claims, an insured person may assign their rights to pursue a bad faith claim against their insurer to a third party. This strategy often arises when an insurer’s wrongful conduct prevents fair settlement and leads to an excess judgment.
Why do insurance companies act in bad faith?
Insurance companies may act in bad faith to protect their bottom line, minimizing payouts on legitimate claims. Some adjusters are trained to delay, deny, or undervalue claims hoping claimants will accept less. Holding insurers accountable through bad faith lawsuits helps ensure they fulfill their legal obligations to policyholders.
Talk with a Chicago Lawyer About Insurance Bad Faith
A bad outcome in an insurance claim might not give you a legal claim. But it’s best to talk with an attorney when your insurer isn’t upholding the contract or the law. At Staver Accident Injury Lawyers, P.C., we’ll closely examine your claim and how your insurer has behaved. We’ll strive to get your claim resolved fairly. If there’s evidence the insurer is acting in bad faith, we might recommend filing a lawsuit and pursuing damages.
To schedule a free initial consultation, use our online form or call (312) 236-2900.
