Illinois Bad Faith Statute

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(215 ILCS 5/155) Sec. 155. Attorney fees. (1) In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts: (a) 60% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs; (b) $60,000; (c) the excess of the amount which the court or jury finds such 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.
(2) Where there are several policies insuring the same insured against the same loss whether issued by the same or by different companies, the court may fix the amount of the allowance so that the total attorney fees on account of one loss shall not be increased by reason of the fact that the insured brings separate suits on such policies.

If a court determines that an insurer's conduct was vexatious and unreasonable, policyholders may recover:

• Reasonable attorney fees and court costs.
• An additional penalty capped at the lesser of:
  • 60% of the amount owed on the claim (excluding costs),
  • $60,000, or
  • The difference between the court's award and any pre-lawsuit settlement offer made by the insurer.

These remedies are extracontractual, meaning they are awarded in addition to any damages for breach of the insurance policy itself. Courts evaluate bad faith claims based on the totality of the circumstances, including whether the insurer's position was grounded in a bona fide dispute.

Insurers may act in bad faith by:

• Unreasonably denying a covered claim without proper investigation.
• Delaying payment or settlement without justification.
• Lowballing claim valuations.
• Misrepresenting policy terms.
• Failing to communicate promptly or adequately.

Section 154.6 of the Illinois Insurance Code lists specific improper claims practices that can support a finding of vexatious and unreasonable conduct under Section 155.