A bad faith claim alleges that an insurance company has acted dishonestly or unfairly in handling your claim. This can apply whether you’re a policyholder or a third-party claimant. It’s a powerful legal tool you can use against an insurance company, defendant, or adjuster who is engaging in unethical or abusive practices.
First-Party Claims vs. Third-Party Claims
In a first-party claim, you file a claim against your own insurance company. This might happen, for example, if you claim against your own health insurance policy. Alternatively, you might file a third-party claim against the liability insurance company of a driver whose accident injured you.
Naturally, you can file a bad faith claim against your own insurance company if they act in bad faith. You can also file a bad faith claim against an insurance company against whom you asserted a third-party claim.
The Implied Covenant of Good Faith and Fair Dealing: Not Optional for Insurance Companies
Illinois law requires all insurance companies to act in good faith and engage in fair dealing with both first-party and third-party claimants. This obligation applies regardless of whether it is explicitly stated in the insurance contract, making it an “implied” duty. Even if an insurance policy attempts to disclaim these obligations, a court would override such a disclaimer, ensuring that insurers are held to the standard of fair conduct.
How Does Illinois Statutory Law Support Insurance Bad Faith Claims?
While most of us have a general understanding of what “good faith” means, when it comes to filing a lawsuit, it’s important to define it more precisely. The following statutes and rules apply:
- Section 155 of the Illinois Insurance Code forbids “vexatious and unreasonable” delays in processing your claim. It also forbids the unreasonable or arbitrary denial of your claim.
- Section 154.6 of the Illinois Insurance Code lists specific acts of insurance bad faith, such as misrepresentation, failure to communicate, or refusal to pay a valid claim.
- Illinois common law (court-made law) defines certain behavior as bad faith. For a full list, refer to Illinois case law.
This list of bad faith claims is not exhaustive, as Illinois courts may recognize new forms of bad faith if they encounter claims that have not been addressed in previous rulings.
The Legal Elements of a Bad Faith Claim
To win a bad-faith claim, you must prove all of the following facts true by a preponderance of the evidence (a “more likely than not” standard):
- The insurer disputed the amount of your claim or otherwise refused to provide coverage for your valid claim, and
- The insurer’s actions were unreasonable.
You bear the burden of proof, meaning that it’s up to you to prove your case, not up to the defendant to prove you wrong. The burden of proof switches to the defendant if the defendant asserts an affirmative defense, such as the expiration of the statute of limitations deadline.
Examples of Bad Faith
Following are some typical examples of insurance bad faith:
- Failing to investigate your claim
- Unreasonably delaying the resolution of your claim
- Misrepresenting the terms of the policy or grossly misinterpreting them
- Denying your claim without explanation or on an unreasonable pretext
- Using threats or intimidation
There are many other ways an insurance company can act in bad faith.
Bad Faith Plus Personal Injury: Two Claims in One
To win a bad faith claim, you must win two cases in one. You must prove that the defendant acted in bad faith, and you must prove that your insurance claim would have won your original insurance claim but for the defendant’s bad faith. Proving this much will allow you damages for both personal injury and bad faith, potentially leading to a windfall judgment in your favor.
Your personal injury claim alone might be worth more than you think it is. There are several different types of personal injury damages—economic damages, noneconomic damages, and sometimes punitive damages. A bad faith claim piled on top of a personal injury claim will yield even more in the way of damages.
Damages in Bad Faith Claims
If you prevail in an Illinois bad faith claim—which can be challenging, especially without legal representation—you may be entitled to the following types of damages:
- Your economic losses: The amount of your original personal injury claim, for example, that you lost due to the insurance company’s bad faith.
- Attorney’s fees: The defendant should reimburse you for every dime you had to spend on attorney’s fees to enforce a claim that you shouldn’t have had to fight for in the first place.
- Punitive damages: A court might even tack on punitive damages if the insurance company’s conduct was so unprofessional that the judge feels the need to make an example out of them.
The total amount of damages in an insurance bad faith claim can be quite substantial.
Let Zayed Law Offices Personal Injury Attorneys Handle Your Bad Faith Claim
Zayed Law Offices, a trusted personal injury law firm, has a proven track record of securing settlements for our clients. If you’re seeking experienced and skilled representation in Chicago, contact us for a free initial consultation at (312) 726-1616 to discuss your case.
