What Is a Bad Faith Claim?

The problem with insurance companies is that insurance is a for-profit business. Insurance companies earn money by accepting premiums from you, and they lose money if they pay your claim.

For this reason, don’t be surprised if the insurance company plays hardball with you. If they step over the line into bad faith, however, you might have an insurance bad faith claim against them. So what is bad faith anyway? Ultimately, it just means honesty and fairness.  

The Implied Covenant of Good Faith and Fair Dealing

The Implied Covenant of Good Faith and Fair Dealing

In every insurance contract, the insurer must perform its duties with good faith and fair dealing towards the insured. No “covenant of good faith and fair dealing” needs to be included in the contract; it is implied. 

If the insurance company fails to meet their obligation, you might qualify to demand compensation from them. 

To prove insurance bad faith in Illinois, you must prove that (1) the insurer disputed the amount of your claim or refused to provide coverage for a valid claim and (2) that the insurer’s actions were unreasonable under the circumstances. The standard of proof is “a preponderance of the evidence,” which means something like 51%. 

Examples of Bad Faith Insurance

An insurance adjuster might try to use one of the following bad-faith tactics against you:   

  • Denying your claim without giving a reason. You should be particularly suspicious if the insurance company refuses your reasonable requests for documentation of the reasons for their refusal. 
  • Failure to investigate your claim.
  • Misleading claims about the meaning of the language of the relevant insurance policy.
  • Intentionally misrepresenting the facts related to your claim.
  • Issuing a ‘lowball’ settlement offer and then refusing to budge from there or issuing repeated lowball settlement offers.
  • Delaying decisions on medical claims. This could result in delayed medical treatment that might endanger your health.
  • Canceling or refusing to renew your policy without a valid reason (because you made a valid claim against it, for example).
  • Using high-pressure tactics to force you to settle for less than the amount your claim is worth.
  • Unreasonably delaying payment on a valid claim.
  • Refusing to pay a claim that is clearly justified;
  • Deliberately failing to communicate important information to you;
  • Demanding unnecessarily burdensome documentary requirements as a condition for payment;
  • Failing to either accept or reject a claim within a reasonable time;
  • Engaging in intimidation tactics;
  • Ignoring evidence that supports your claim;
  • Arbitrarily changing the terms of the policy after you file a claim; or
  • Employing illegal or unethical investigative techniques.

Don’t fall for any of them. If you get a lawyer, your lawyer can put a stop to any further bad-faith tactics.

Insurance Bad Faith Under Illinois Law

Illinois does not have a single, standalone “bad faith insurance” statute. However, it provides several avenues for addressing bad faith practices by insurance companies:

  1. Section 155 of the Illinois Insurance Code: This section prohibits “vexatious and unreasonable” delay or denial of an insurance  claim.
  2. Section 154.6 of the Illinois Insurance Code: This section details specific acts that constitute insurance bad faith, including misrepresenting facts, failing to communicate, or refusing to pay a valid claim without justification.
  3. Common law bad faith: Illinois courts have long held that insurers have a duty of good faith and fair dealing towards their clients. 

An Illinois personal injury lawyer should be well familiar with these rules.

Damages: Two Cases in One

If you win an insurance bad faith claim, you win two cases in one. Your underlying personal injury claim must be justified; otherwise, the insurance company’s actions could not have harmed you. In addition, you can seek the following damages against the insurance company for its bad faith:

  1. Contractual damages: Contractual damages compensate you for the amount of the claim that your insurer wrongfully denied you. They aim to put you in as good a financial position as you would have been if the insurer had fully performed the contract. These damages might include medical bills, lost wages, pain and suffering, and other personal injury damages.
  2. Consequential damages: These damages compensate you for any additional losses you suffered as a consequence of the insurer’s bad faith. That might mean interest on the unpaid portion of your claim, attorney’s fees, and more.
  3. Punitive damages: A court might award you punitive damages to punish the insurer for outrageous conduct and to deter other insurance companies from imitating their behavior. Even though the purpose of punitive damages is to punish the defendant, the money still goes to you. 

The specific amounts of damages depend on the facts of your case. Please note, however, that they are not limited by insurance policy limits.

A Chicago Personal Injury Lawyer Can Help You Prevail

There is an irony here: the more quickly you hire a Chicago personal injury lawyer, and the better the lawyer you hire, the less likely it is that the insurance company will dare to engage in bad faith tactics with you. That’s because they know your lawyer isn’t going to put up with it.

You don’t need to worry about your legal bill. Personal injury lawyers work on a contingency fee system. That means as long as your claim is strong, your attorney will take their legal fee as a percentage of the amount that they win for you. If you don’t win, your legal bill for attorney’s fees will total $0.00. Contact a Chicago personal injury lawyer at Attorneys of Chicago Personal Injury Lawyers to schedule a free initial consultation as soon as you can or call us at (312) 929 2884.