JUST ANOTHER WAY INSURANCE COMPANIES TAKE ADVANTAGE OF THEIR INSUREDS

Amerisure Mut. Ins. Co. v. Global Reinsurance Corp of America, 399 Ill. App. 3d 610, 927 N.E.2d 740, 340 Ill. Dec. 1 (1^st Dist. 2010). 

Section 155 of the Illinois Insurance Code provides for penalties if an insurance company unreasonable delays in paying, or denies, a valid claim.  One of the most significant penalties under section 155 is forcing the insurance company to pay the insured’s attorney’s fees.  The insured is the person or party who purchases insurance and expects to be covered by the insurance.  In the Amerisure case, there was such a lengthy delay that the insured sought relief by taking the matter to arbitration, which was required by the reinsurance policy.  The reinsurance company, Global, was found to be unreasonable and the arbitrator awarded a little over 1.5 million plus interest and attorney’s fees of over $861,000.00.  Global paid the 1.5 million and interest but refused to pay the attorney’s fees.  Amerisure sued to enforce the arbitrator’s award of attorney’s fees.  The trial court found for Amerisure and ordered Global to pay approximately $861,000.00 in attorneys’ fees.  The appellate court reversed the decision, holding that arbitrators lack the authority to award attorney’s fees and that only a court could award such fees.  The Supreme Court of Illinois refused to hear the case.  So, in other words, the plaintiff in this case had to pay their attorneys over $861,000.00, which was over half of what they were entitled to receive, to force Global to honor its contractual obligations.

Here is my problem with this.  There is no incentive or reason for insurance companies to not put in their contracts that arbitration is required in all first party claims and then force all claims to go to arbitration.  Most people would give up long before then and the insurance companies would not have to pay off legitimate claims.  I do not think that all insurance companies would force their insureds to take them to arbitration before paying claims because this would lead to a backlash against the insurance industry.  It is foreseeable, though, that insurance companies may become more unreasonable in denying claims or delay in paying claims if the insured must take them to arbitration and then the insurer would only have to pay the amount they were contractually obligated to pay plus a little interest.  If attorney’s fees can be avoided, many people would say that it just cost too much to fight the insurance company and abandon legitimate claims.  Since the remedies provided by section 155 are the only remedies available to insureds making a claim on their own policy, I think that it is merely a question of when, as opposed to if, insurance companies will require all denials of first party claims to be arbitrated and then to deny all first party claims. 

I have successfully sued insurance companies for violation of section 155 and I am currently involved in cases against insurance companies.  If your insurance refuses to pay a claim which you believe is a legitimate claim, give me a call and I will be happy to take a look at it.  To see what areas of law I practice, visit my website at:  http://www.ellislawfirm.pro/.