Skip to Content

Bad Faith Blog

We cover current issues, highlights and best practices exclusively on claims of bad faith and extra contractual damages.

Bad Faith Blog
October 22, 2019

Seventh Circuit finds a “mere possibility of liability” against an insured is insufficient for an insurer’s duty to settle to arise under Illinois law.

The Seventh Circuit Court of Appeals concluded the mere possibility of liability against an insured is insufficient for an insurer’s duty to settle to arise under Illinois law.

American Physicians Assurance Corporation, Inc. and American Physicians Capital, Inc. (“APA”) issued a medical malpractice insurance policy to Surgery Center at 900 North Michigan Avenue, LLC (“Surgery Center”) with a $1 million limit of liability. APA defended Surgery Center for medical malpractice claims brought against it by Gwendolyn Tate for complications resulting from a surgery performed by Dr. Harrith Hasson at the Surgery Center. Dr. Hasson was an outside physician with privileges at Surgery Center but not its employee.

Bad Faith Blog
May 19, 2015

Insurer Found to Be Reasonable in Disclaiming Coverage Even Though Illinois Appeals Court Found Coverage for UIM Benefits

Summary: Automobile insurer brought a declaratory judgment action against insureds and automobile rental company seeking to disclaim liability for underinsured motorist (UIM) benefits arising out of a collision between the insureds’ vehicle and a rental vehicle. Insureds filed counterclaims for breach of insurance policy and vexatious refusal to pay and the rental company filed counterclaims including request for declaration that it did not provide liability insurance arising out of the collision. After partial summary judgment was granted to the insurer by the trial court, the insureds appealed. The appellate court held the insureds were not required to exhaust the minimum financial responsibility amounts required to be provided by rental companies before they could collect UIM benefits and the insurer’s conduct was not vexatious and unreasonable.

Bad Faith Blog
April 16, 2015

No Penalty for Wrong Coverage Decisions

Summary: The Trust owned a building in Galena, Illinois which was leased to an architect and artist. When the Trust sold the real estate, it removed and destroyed artwork and other personal items without the artist’s permission. He filed suit in federal court under multiple theories for wrongfully evicting him without proper notice and the destruction of his personal items without compensating him. After Country Mutual denied duties to defend and indemnify, the Trust filed a declaratory judgment action. The trial court found coverage, but denied plaintiff’s motion for sanctions under Illinois’ vexatious refusal statute. The appellate court affirmed finding Country Mutual had a duty to defend the federal lawsuit under the policy’s personal and advertising injury coverage, but vexatious penalties were properly denied.

Bad Faith Blog
March 10, 2011

Aggressive Discovery Tactics Support Fraud Claim Against Property Insurer

Summary: Insured owners of a shopping mall brought a fraud claim against CGL Insurer after the insurer denied coverage and filed a declaratory judgment suit in which they aggressively went after the insured. General Ins. Co. of America (“GICA”) filed a declaratory judgment action against its insured Clark Mall Corporation (“Clark”). Clark then brought a counterclaim for fraud against GICA alleging that GICA issued the property insurance policy but had no intention of honoring it. GICA moved to dismiss the fraud claim alleging that under holding of the US Supreme Court case of Bell Atlantic Corp. v Twombley, 127 S.Ct. 1955 (2009), the claim did not contain sufficient factual matter to state a claim for relief.

Bad Faith Blog
March 7, 2011

Court Takes Insurer’s Side When Coverage Defense is Bona Fide

West Bend Mut. Ins. v. Norton, 940 N.E.2d 1176 (Ill. App. 3 Dist. 2010) An Illinois Appellate Court recently upheld summary judgment in favor of an insurer on the insured’s vexatious refusal to settle claim. The insured driver, Wanda Norton, was involved in a vehicle collision with Karyn Patterson. Norton was insured by West Bend and Patterson was insured by American Family. Norton hired counsel and filed suit against Patterson. Norton’s counsel sent a demand letter to American Family to settle for approximately $18,000. In response, American Family offered to settle Norton’s claim for $7,800. Norton rejected the settlement offer and filed suit.