As a policyholder lawyer, much of my practice over the past 10 years has been in Illinois and the Midwest. Accordingly, I would like to give an introduction into Illinois “bad faith.” I put that term in quotations because Illinois does not have a traditional “bad faith” law. Rather, Illinois law provides an extracontractual remedy to policyholders when an insurer’s action in handling a claim is vexatious and unreasonable. 215 ILCS 5/155 (West 2010). This extracontractual remedy, commonly referred to as “Section 155,” provides for the recovery of taxable costs, reasonable attorneys’ fees, other costs, plus an amount not to exceed one of the following:
- 60% of the amount which the court or jury finds such party is entitled to recover against the insurance company, exclusive of costs;
- the excess of the amount which the court or jury finds such a 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 pursuit of such claims, for years I (and others) have fought insurance companies in Illinois to discover, among other things, claims manuals, guidelines, practices and procedures relative to the handling of similarly situated claims whether it be a fire, hail damage, water loss, etc. In support of such arguments, I often cited acts constituting improper claims practices under the Illinois Insurance Code such as the failure to acknowledge with reasonable promptness pertinent claims communications; failing to affirm or deny coverage within a reasonable time after the submission of a proof of loss; or not attempting in good faith to effectuate a prompt, fair and equitable settlement. 215 ILCS 5/154.6. While the Illinois Insurance Code is a regulatory provision that does not provide a policyholder with a private remedy or cause of action (an argument defense counsel is always quick to point out), it is arguably a factor the court could consider in assessing the totality of the circumstances surrounding the insurer’s attitude and motivation relative to a claims decision.
Recently, in Zagorski v. Allstate Insurance Company,1 the Appellate Court of Illinois agreed with such arguments. In allowing the policyholder to discover information from the insurer which included guidelines and manuals, as well as materials related to the number of times Allstate had been cited by the Illinois Department of Insurance for vexatious delay or improper claims practices within the last five years, the Illinois appellate court concluded that certain improper claims practices outlined within the Illinois Insurance Code, while not dispositive of, are relevant to determining whether an insurer’s conduct in a given case is vexatious and unreasonable.
1 Zagorski v. Allstate Ins. Co., 2016 IL App (5th) 140056 (May 16, 2016).