How Do You Know If Your Insurer Has Acted in Bad Faith?
Individuals and businesses procure insurance to protect against a variety of potential losses. For example, individuals insure their homes in case of property damage, and businesses insure for certain potential economic losses. When a loss occurs, often times the claim process seems simple: the insured submits a claim and the insurer pays the claim. However, things are not always so simple. The insurer may take the position that it is only required to pay some of the loss, or it may deny the claim altogether by contesting either the existence or the scope of coverage.
Contesting the scope of coverage or denying coverage outright is not necessarily bad faith. Bad faith is defined under Illinois law as conduct by an insurer that is “vexatious and unreasonable.” In an insurer is found to have committed bad faith, Section 155 of the Insurance Code allows the prevailing insured to recover reasonable attorneys’ fees, costs, and significant penalties.
Section 154.6 of the Illinois Insurance Code delineates certain improper claims practices that could constitute bad faith depending on the circumstances. Some examples include:
- Knowingly misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue.
- Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under the insurer’s policies.
- Failing to adopt and implement reasonable standards for the prompt investigations and settlement of claims arising under its policies.
- Compelling policyholders to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them.
- Refusing to pay claims without conducting a reasonable investigation based on all available information.
- Failing to affirm or deny coverage of claims within a reasonable time after poof of loss statements have been completed.
While an insurance company who commits an improper claims practice under Section 154.6 of the Insurance Code is not per se engaged in bad faith, courts will review the totality of the circumstances in determining whether the insurer’s conduct was “vexatious and unreasonable” under Section 155. Such a finding would entitle the insured to recover fees and penalties.
Having an experienced attorney evaluate your individual or business insurance claims is critical for swift and effective resolution. For more information regarding these or similar issues, please contact Roenan Patt at (312) 368-0100.
