By: Tyler J. Moore
If you have a claim against an insurance company that exceeds the amount of the insurance proceeds available, you may be able to bring an action for bad faith. This article addresses a remedy that you may have against an insurance company when an insurance company delays payment on your claim—Illinois law provides an extra-contractual remedy when the insurance company unreasonably delays payment and that the delay was vexatious and unreasonable. See 215 ILCS 5/155.
Section 155 of the Illinois Insurance Code (215 ILCS 5/155) provides a remedy for policyholders when the insurance company engages in misconduct. Section 155 was enacted in 1937 as part of changes to the Illinois Insurance Code. Before then, the only recourse available was to seek a breach of contract action against the insurance company to receive the insurance proceeds. However, penalties and attorney’s fees were not available. The statute is intended to make suits by policyholders more feasible and to punish insurers that unreasonably refuse to pay out on legitimate claims. It also allows the policyholder to recover reasonable attorney fees and other costs, as well as an additional sum that constitutes a penalty. See Cramer v. Insurance Exch. Agency, 174 Ill. 2d 513 (1996).
In addition to recovering the proceeds of the insurance policy, the statute provides that a plaintiff may seek reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:
- 60% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;
- the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action.
In order to recover against an insurance company on a policy of insurance, a policyholder must show that there was a delay in settling a claim and that the delay is vexatious and unreasonable. For example, if an underinsured motorist carrier refuses to settle within the policy limits where an injured policyholder has medical bills that exceed the policy limits, the insurance company may be exposed to a bad faith claim. Due to the complexity of bad faith litigation against insurance companies, we recommend that you contact an experienced attorney to discuss your legal options.