YOU GOT TO HAVE (GOOD) FAITH:Handling Claims in Illinois Without Committing Bad

Faith

Donald Patrick EcklerPretzel & Stouffer, Chartered

One South Wacker Drive, Suite 2500Chicago, Illinois 60606

312-578-7653

Statutes and Regulations Related to Good Faith Conduct

• 215 ILCS 5/2-155 - applies to litigation only

• 215 ILCS 5/2-154.5

• 215 ILCS 5/2-154.6

• Illinois Administrative Code, Title 50, Chapter 1, Subchapter 1, Part 919

• Essentially, these are all the Golden Rule.

The Estoppel Doctrine• The cornerstone of Illinois coverage law is the estoppel doctrine. Employers

Insurance of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127, 150 (1999)

• It is a doctrine that is unique to Illinois.

• In denying coverage, an insurer must file a declaratory judgment action, defend under a reservation of rights, or do both.

• If that is not done, the insurer may be estopped from arguing any policy defenses.

• If you are going to take a coverage position, doing nothing, or simply denying coverage is not an option in Illinois.

What is bad faith under Section 155?

• In determining whether an insurance company has been vexatious and unreasonable the court looks to the totality of the circumstances and not a single factor but it is “the attitude of the defendant which must be examined.” Green v. International Insurance Company, 238 Ill. App. 3d 929, 935 (2nd Dist. 1992) (emphasis added).

• An attitude by an insurer which is not only vexatious, but “irritating, exasperating, and provoking” support relief under Section 155. Deverman v. Country Mutual Insurance Company, 56 Ill .App. 3d 122, 124 (4th Dist. 1978).

• In dealing with insureds on first-party claims or claimants and claimants’ counsel on third-party claims, you can disagree, but you can’t be disagreeable.

Manner to Handle Claims

• Analyze the claim material to determine available coverage positions, conduct the necessary investigation promptly.

• Be responsive to inquiries from claimants and counsel. If you do not have an answer immediately, send correspondence that you are investigating or analyzing their position and then get back to them.

• Irrespective of the disagreement, be courteous.

• Document. Document. Document.