Contracts are meant to be binding. An insurance policy is no different. It’s a contract between the insurer and the insured. When an insurance company fails to fulfill its obligations under that contract, the policyholder may have several remedies. Typically, this involves filing a breach of contract claim to recover the amount owed under the policy. However, damages in a contract case are generally limited to the value of the claim itself.
Recognizing that this limited recovery might discourage policyholders from pursuing valid claims, the Illinois legislature enacted Section 155 of the Illinois Insurance Code (215 ILCS 5/155). This statute provides additional remedies when an insurance company acts unreasonably or in bad faith in denying or delaying a claim.
If your insurance claim has been denied in Illinois, you’re not alone.
Many policyholders face delayed or denied insurance claims even after meeting their policy requirements. In some cases, an insurer’s refusal to pay may be considered “vexatious and unreasonable” under Illinois law.
What Is a “Vexatious” Denial?
Under Section 155, a denial or delay in payment becomes “vexatious and unreasonable” when an insurance company acts without a reasonable basis or fails to handle a claim in good faith. In other words, it targets conduct that goes beyond an honest disagreement about coverage and instead reflects bad faith or obstinate refusal to meet contractual obligations.
Common examples of vexatious conduct include:
- Refusing to pay a claim that is clearly covered by the policy
- Failing to conduct a timely or adequate investigation
- Misrepresenting policy terms or exclusions
- Delaying payment without any legitimate justification
These actions not only breach the policyholder’s trust but also violate the insurer’s legal duty to act fairly.
How Section 155 Applies to Denied Insurance Claims in Illinois
It’s important to understand that Section 155 is not a separate cause of action. Instead, it is a statutory remedy that can be brought in addition to an action on the policy. The insured must first allege that the insurer failed to meet its obligations under the policy. If the court finds that the insurer’s conduct was vexatious or unreasonable, Section 155 allows for enhanced recovery beyond the policy benefits themselves.
What Damages Can Be Recovered for a Wrongfully Denied Insurance Claim?
If the court determines that the insurer’s conduct violated Section 155, the insured may be awarded attorney’s fees and litigation costs, along with additional damages of up to 60% of the judgment amount or $60,000, whichever is less.
These statutory penalties are designed to discourage bad-faith tactics and ensure that insureds are not forced to bear the cost of holding an insurer accountable.
Why Section 155 Matters for Denied or Delayed Insurance Claims
Section 155 gives policyholders a meaningful way to challenge unfair insurance practices without being limited to the strict terms of the insurance contract. It helps balance the scales when insurers use delay, denial, or misrepresentation to avoid paying legitimate claims.
In addition to Section 155, policyholders may, in certain situations, have other potential claims, such as those under the Illinois Consumer Fraud and Deceptive Business Practices Act or common law fraud, though these claims can be more difficult to prove.
Talk to Mag Mile Law for Insurance Disputes
If you believe your insurance company has wrongfully denied, delayed, or mishandled your claim, you may be entitled to compensation under both your insurance contract and Section 155 of the Illinois Insurance Code.
The attorneys at Mag Mile Law have extensive experience handling insurance disputes and can help you determine whether your insurer’s conduct may qualify as “vexatious” under Illinois law.
Call Mag Mile Law today at 708-576-1624 or email [email protected] to schedule a consultation.