You filed a claim. You followed the rules. And your insurance company still won’t pay — or they’re dragging things out for months with no real answer. That’s not just frustrating. Under Illinois law, it may be the kind of conduct that carries real consequences.
Section 155 of the Illinois Insurance Code allows courts to award attorney fees, penalties, and interest when an insurer’s handling of a claim is found to be “vexatious and unreasonable.” The statute was designed to make it economically feasible for policyholders to challenge denials and delays — and to deter insurers from engaging in them.
The pressure to deny is measurable. According to the Illinois DOI 2025 Cost Containment Report, the Illinois homeowners loss ratio hit 96.8% in 2023 — insurers were paying nearly a dollar in losses for every dollar of premium collected. A Weiss Ratings analysis found that among the 13 largest homeowners insurers, 47.5% of claims were closed with zero payment. When the financial incentives push toward denial, knowing your rights under Section 155 matters. Here is how the law works.
What Makes a Bad Faith Insurance Claim in Illinois?
What does “vexatious and unreasonable” mean?
Illinois does not recognize a separate common law bad faith tort for first-party insurance claims. Cramer v. Insurance Exch. Agency, 174 Ill. 2d 513, 675 N.E.2d 897 (Ill. 1996), confirmed that Section 155 is the exclusive path. The question is whether your insurer’s conduct — in denying, delaying, or underpaying your claim — had any genuine basis. A court weighs the full picture of how the insurer handled things, not just the final decision.
How does a court decide if my insurer acted in bad faith?
Courts use a “totality of the circumstances” test. They weigh four factors, which may include: (1) the insurer’s attitude toward handling your claim, (2) how thorough the insurer’s review was, (3) whether you had to file suit to receive payment, and (4) whether you lost use of your property while waiting. No single factor controls. But in McGee v. State Farm Fire & Cas., 315 Ill. App. 3d 673, 734 N.E.2d 144 (2d Dist. 2000), the court stressed that the quality of the insurer’s review is central to whether its conduct rises to the vexatious and unreasonable standard. An insurer that does not have a bona fide dispute regarding coverage may be found to have acted in a vexatious and unreasonable manner.
Can my insurer claim it had a real reason to deny?
Yes. Insurers can raise a ‘bona fide dispute’ defense — meaning the denial rested on a ‘real, actual, genuine and not feigned’ question about your coverage. See McGee, 315 Ill. App. 3d at 683. But the defense is not self-proving. A denial without a bona fide basis does not create a real dispute, and the insurer bears the burden of showing that its conduct was the result of a genuine coverage dispute.
What Rules Must Illinois Insurers Follow?
How quickly does my insurer have to respond?
Illinois sets firm deadlines. Under 50 Illinois Admin. Code Section 919.40, your insurer should promptly respond to your messages within 15 working days. The insurer must begin a “prompt investigation” within 21 working days after notification of a loss.
Under Section 919.50, once an insurer has completed its review and affirms liability, it has 30 days to pay the part it owes that is not in dispute. If the insurer denies your claim or offers less than the amount claimed, it must provide a reasonable written explanation within 30 days after the investigation is completed. That explanation must clearly state the policy definition, limitation, exclusion, or condition the denial is based on.
The J.D. Power 2024 U.S. Property Claims Satisfaction Study found the average claims cycle time was 23.9 days — and 34.2 days for storm claims. If your insurer blows past these deadlines, that delay becomes part of the totality-of-the-circumstances analysis under Section 155.
What counts as an improper claims practice?
Section 154.6 of the Illinois Insurance Code lists conduct that constitutes improper claims handling. Examples include knowingly misrepresenting your policy terms or coverage provisions, failing to acknowledge communications with reasonable promptness, refusing to pay claims without a reasonable investigation, and compelling policyholders to file suit by offering far less than what they may ultimately recover.
Section 154.6 does not give you a private right of action — it is a regulatory rule enforced by the state. But as the court noted in Purlee v. Liberty Mut. Fire Ins. Co., 260 Ill. App. 3d 11, 31, 631 N.E.2d 433 (5th Dist. 1994), an insurer who engages in this conduct evidences vexatious and unreasonable behavior in a Section 155 case.
These regulatory standards are actively being enforced. In November 2024, the Illinois DOI opened a market conduct investigation into State Farm’s nationwide homeowners insurance business. The Illinois Attorney General subsequently sued State Farm in 2025 to compel production of claims handling data. State Farm holds 32.48% of the Illinois homeowners market.
What if my insurer pays part but not all of what they owe?
They must pay the part they clearly owe while the rest gets sorted out. Holding back clear money to pressure you into taking less is a red flag. In Millers Mut. Ins. Ass’n v. House, 286 Ill. App. 3d 378, 675 N.E.2d 1037 (5th Dist. 1997), the court ruled that an insurer who delays payment of undisputed amounts acts vexatiously and unreasonably under Section 155. If your insurer acknowledges part of your claim but refuses to pay it, that conduct alone may support a penalty.
What Sanctions Can an Insurer Face?
How much can I recover under Section 155?
Section 155 lays out three calculations plus additional reasonable attorneys fees and other costs to compensate an insured. The court runs all three calculations and may award the lesser of the following three amounts:
- 60% of the amount you recover, not counting costs
- $60,000
- The gap between what you recover and any offer the insurer made before you filed suit (exclusive of costs)
This compensation structure was built to make these lawsuits viable for regular people — not just big companies.
Can I get more than the Section 155 recoverable amounts?
Yes. Your total recovery starts with the policy money your insurer should have paid you. Courts then layer on more. In Mohr v. Dix Mut. County Fire Ins. Co., 143 Ill. App. 3d 989, 493 N.E.2d 638 (4th Dist. 1986), the court confirmed you can also recover consequential damages — like lost rental income or extra housing costs — if those losses meet any of the following:
- Were reasonably foreseeable when the policy was issued
- Were within the contemplation of the parties when the contract was entered
- Arose out of special circumstances known to the parties
You may also get prejudgment interest at 5% per year under 815 ILCS 205/2. That runs from the date payment was due. Post judgment interest increases to 9% per year under 735 ILCS 5/2-1303. In Marcheschi v. Illinois Farmers Ins. Co., 298 Ill. App. 3d 306, 698 N.E.2d 683 (1st Dist. 1998), the court upheld a combined award of a Section 155 sanctions, pre-judgment interest, and attorney fees.
Are punitive damages available?
No. Illinois does not allow punitive damages in first-party insurance claims. The Section 155 sanction is the ceiling for extracontractual penalties. But the combined effect of policy money, consequential damages, interest, the sanction, and attorney fees can add up to far more than the original claim.
What Deadlines Apply to Filing a Bad Faith Claim?
How long do I have to file a lawsuit?
Most property policies require you to file suit within one to two years from the date of loss. Courts enforce these shortened deadlines. In Steel City Nat’l Bank of Chicago v. Aetna Ins. Co., 116 Ill. App. 3d 7, 452 N.E.2d 65 (1st Dist. 1983), the court recognized that a contractual limitation requiring suit within a specific period is valid if reasonable, even though the general statute of limitations for written contracts is longer.
For the purposes of a Section 155 vexatious and unreasonable claim, the actions limitation period is five years under 735 ILCS 5/13-205, as further supported by Marcheschi v. Illinois Farmers Ins. Co., 298 Ill. App. 3d 306, 698 N.E.2d 683 (1st Dist. 1998). So even if your policy suit window is short, the bad faith piece has its own longer clock.
What is tolling, and how does it protect me?
Section 143.1 of the Illinois Insurance Code pauses the deadline by which you must file your claims. The clock stops from the date you file your proof of loss until the date your claim is denied in whole or in part. In Trinity Bible Baptist Church v. Federal Kemper Ins. Co., 219 Ill. App. 3d 156, 578 N.E.2d 1375 (5th Dist. 1991), the court supported the theory that Section 143.1 was designed to stop insurers from running out your time by sitting on your claim and allowing the limitation period to run out. Filing a proper proof of loss is critical. Without one, you may not get the benefit of tolling.
Can my insurer be stopped from raising the deadline defense?
Yes — through estoppel. If your insurer’s actions led you to believe your claim would be settled, causing you to wait past the deadline, the insurer may be blocked from using it against you. In Foamcraft, Inc. v. First State Ins. Co., 238 Ill. App. 3d 791, 606 N.E.2d 537 (1st Dist. 1992), the court confirmed that estoppel typically requires the insurer to have made advance payments in contemplation of settlement, conceded liability, and encouraged the insured to delay filing. Keep records of every payment, call, and letter to protect this argument.
Frequently Asked Questions
Does filing a complaint with the Illinois Department of Insurance help my case?
It may. A DOI complaint creates an official record of your dispute. While the DOI cannot award you money, the insurer must respond to the complaint. Per the NAIC/ValuePenguin data (2024), claim handling accounted for 65.2% of all insurance complaints nationally. A documented complaint — and the insurer’s response to it — can become evidence in a Section 155 case.
Is there a difference between a denied claim and a bad faith claim?
Yes. A denied claim means your insurer said no. A bad faith insurance claim can mean the insurer’s denial — or delay, or lowball offer — was “vexatious and unreasonable” under Section 155. Not every denial is bad faith. But a denial based on a sloppy review, a misreading of your policy, or no real investigation at all can cross the line.
Do I need a lawyer to file a Section 155 claim?
Section 155 is not a standalone lawsuit — it attaches to a breach of contract case against your insurer. You must first show the insurer owes you under the policy. The penalty and fees are added on top. Because the claim involves layered damages, deadlines, and specific case law, legal guidance tied to your policy and your insurer’s conduct is valuable — whether your property is in Cook County, Will County, or Kane County.
Does the appraisal process connect to a bad faith claim?
Appraisal resolves disputes over the dollar amount of a loss — not whether the insurer acted in bad faith. But an insurer that refuses appraisal after acknowledging coverage, or demands it only after years of delay, may be creating evidence of vexatious and unreasonable conduct under Section 155. For a full breakdown of how appraisal works and when Illinois courts have addressed insurer conduct in the appraisal process, see our guide on hail damage insurance claims in Illinois.
Talk to Mag Mile Law About Your Bad Faith Insurance Claim
If your insurer denied your claim without a real review, delayed for months, or offered far less than your loss is worth, Section 155 gives you a path to hold them to account. Penalties, attorney fees, and interest can all stack on top of the money they owe you.
Mag Mile Law focuses on first-party property insurance coverage litigation in Illinois. Steven Mikuzis, a Chicago-Kent College of Law graduate (J.D. cum laude, 2003), received the CALI Award for Trial Advocacy and was named to Chicago Magazine’s Outstanding Young Lawyers list in 2010 and 2012. Mario Iveljic earned his J.D. cum laude from Chicago-Kent and his B.A. in Economics from Yale University. He has practiced for over two decades and holds admissions in the Illinois Supreme Court, the Seventh Circuit, and federal courts across Illinois.
To discuss your options after a claim denial or unreasonable delay, contact Mag Mile Law at (773) 644-9593.
