2.1 Improper Claims Practices: 215 ILCS 5/154.5-154.8, Part 919 Timelines, and Section 155
Key Takeaways
An act listed in 215 ILCS 5/154.6 is an improper claims practice when an insurer commits it knowingly in violation of the Code or with such frequency that it shows a persistent tendency (215 ILCS 5/154.5).
Under 50 Ill. Adm. Code 919.40, reasonable promptness means a maximum of 15 working days to respond to a claimant's or insured's pertinent communication.
An insurer must offer payment within 30 days after affirming liability when the amount is determined and not in dispute, and must pay undisputed portions within those 30 days (50 Ill. Adm. Code 919.50(a)).
On a fire and extended coverage claim unresolved more than 75 calendar days after it is reported, or 25 days after proof of loss if sooner, the insurer must explain the delay in writing (50 Ill. Adm. Code 919.80(d)(7)(B)).
Section 155 lets a court award attorney fees and costs plus the least of 60% of the recovery, $60,000, or the excess of the judgment over the insurer's pre-suit offer for vexatious and unreasonable conduct.
Where This Fits on the Exam
Domain V.C of the Pearson outline is Unfair Claims Settlement and Trade Practices, with references to the Standard Fire Policy, 215 ILCS 5/143.1, 5/143.15, and Part 919. A public adjuster does not enforce these rules, but uses them every day: they set the clock for insurer responses, require written explanations, and define conduct the adjuster can report to the Department.
The Statutory Framework
| Section | Rule |
|---|---|
| 154.5 | It is an improper claims practice for any company to commit an act listed in Section 154.6 if it is (a) committed knowingly in violation of the Code or rules, or (b) committed with such frequency as to indicate a persistent tendency |
| 154.6 | The list of improper acts (below) |
| 154.7 | The Director serves a statement of charges and a hearing notice set at least 10 days out; failing to appear is a waiver and stipulation and immediately suspends the certificate of authority for 30 days |
| 154.8 | After a hearing, the Director orders the company to cease and desist and may suspend its certificate of authority for up to 6 months, impose a civil penalty of up to $250,000, or both; orders are subject to judicial review under Section 407 |
The Section 154.6 list (property-relevant items)
An insurer commits an improper claims practice if, without just cause and in violation of Section 154.5, it:
- (a) knowingly misrepresents relevant facts or policy provisions about the coverage at issue;
- (b) fails to acknowledge with reasonable promptness pertinent communications about claims;
- (c) fails to adopt and implement reasonable standards for prompt investigation and settlement;
- (d) does not attempt in good faith to make a prompt, fair, and equitable settlement when liability has become reasonably clear;
- (e) compels policyholders to sue by offering substantially less than the amounts ultimately recovered;
- (f)-(g) generates a disproportionate number of meritorious complaints or lawsuits;
- (h) refuses to pay without a reasonable investigation based on all available information;
- (i) fails to affirm or deny coverage within a reasonable time after proof of loss statements are completed;
- (k) tries to settle on the basis of an application altered without the insured's knowledge or consent;
- (l) makes a claim payment without identifying the coverage under which each payment is made;
- (m) delays by requiring a preliminary claim report and then formal proof of loss forms, duplicating verification;
- (n) fails, when denying or offering a compromise, to promptly give a reasonable and accurate explanation of the policy or legal basis;
- (o) fails to provide claim forms within 15 working days of a request, with explanations needed to use them; and
- (s) engages in any other act substantially equivalent to these.
Part 919: The Timelines That Make "Reasonable" Measurable
50 Ill. Adm. Code 919 defines the vague statutory words. In Part 919, "days" means calendar days unless the rule says "working days."
| Term or Duty | Part 919 Standard |
|---|---|
| Reasonable promptness (154.6(b)) | A maximum of 15 working days from receipt of a pertinent communication from a claimant or insured (919.40) |
| Pertinent communication | All correspondence, of any source or type, materially related to handling the claim (919.40) |
| Prompt investigation (154.6(c)) | Evidenced by a bona fide effort to communicate with all insureds and claimants when liability is reasonably clear within 21 working days after notification of loss (919.40) |
| Payment after liability | Affirm or deny within a reasonable time and offer payment within 30 days after affirmation of liability if the amount is determined and not disputed; tender undisputed portions within those 30 days when the payee is known (919.50(a)) |
| Lower offer or denial on a first-party claim | A reasonable written explanation within 30 days after the investigation and liability determination, citing the specific policy definition, limitation, exclusion, or condition, accompanied by the Notice of Availability of the Department of Insurance (919.50(a)(1)) |
| Undocumented statements | No denial based on a phone call or interview that is not documented in the claim file (919.50(b)) |
| One proof of loss for similar policies | A notice and proof of loss on one policy satisfies the insured's obligation under similar policies issued by the same company that the insured identifies (919.50(c)) |
Practices Part 919 forbids for all insurers (919.60)
- Marking a draft or letter "final" or "a release" unless the policy limit has been paid or there is a bona fide dispute over coverage or amount.
- Requiring an insured to complete a proof of loss in less time than the policy allows.
- Telling an insured that written notice of loss must be given within a set time or the insurer is relieved of liability, unless the statement follows the insured's unreasonable failure to give notice.
- Requiring a polygraph. Examinations under oath and sworn statements remain allowed when the policy authorizes them.
Property and casualty rules (919.80(d) and 919.90)
- Fire and extended coverage delay. An unreasonable delay exists when the median payment period exceeds 40 calendar days. If a claim remains unresolved for more than 75 calendar days after it is reported, or 25 calendar days after receipt of proof of loss, whichever is less, the insurer must give a reasonable written explanation for the delay with the Notice of Availability.
- Partial loss estimates. If the insurer settles on its written estimate, it must give the insured a copy on request. The estimate must be reasonable and allow workmanlike repair. If the insured's own written estimate is higher, the insurer must promptly review and respond in writing and either name a contractor who will do the work for its estimate or give written notice that reasonable costs above its estimate will be reimbursed.
- Actual cash value. For residential fire and extended coverage losses settled on an ACV basis, ACV is replacement cost at the time of loss less depreciation, if any, and the insurer must provide the depreciation worksheet on request (919.80(d)(8)(A)). When the suit-limitation period is tolled under 143.1, the denial letter must state how many days were tolled and how many days remain to sue (919.80(d)(8)(C)).
- Prohibited P&C practices (919.90). No denial for failure to exhibit property unless a breach is documented in the file; no refusal to settle a first-party claim because another person or insurer should pay; and no denial of storage charges on ACV fire and extended coverage losses when personal property limits are exhausted if additional living expense coverage applies.
Tip
When an insurer goes silent, cite the specific Part 919 deadline in writing: for example, "This letter is a pertinent communication; Part 919.40 requires a response within 15 working days." Precise citations usually move a file faster than general complaints.
Notice of Availability of the Department of Insurance
Part 919 requires denials, compromise explanations, and delay letters to include a Notice of Availability, at least as informative as the model text: the company must advise that the insured may take the matter up with the Illinois Department of Insurance, which keeps consumer offices in Chicago (115 S. LaSalle Street, 13th Floor) and Springfield (320 West Washington Street). A missing notice is itself a compliance problem.
Section 155: Vexatious and Unreasonable Delay
215 ILCS 5/155 is a court remedy, not an administrative rule. In a suit over an insurer's liability, the amount of loss, or an unreasonable delay in settling, if the court finds the insurer's action or delay vexatious and unreasonable, it may award reasonable attorney fees, other costs, and an additional amount not to exceed the least of:
- 60% of the amount the court or jury finds the party entitled to recover, excluding costs;
- $60,000; or
- the excess of the recovery over the amount, if any, the insurer offered to settle before the suit.
When several policies cover the same loss, the court may limit fees so that separate suits do not multiply the award. Deciding whether to sue and advising on Section 155 is legal advice; a public adjuster should refer the insured to an attorney (215 ILCS 5/1590(l)).
Applying the Rules: A Scenario
A homeowner's dwelling fire is reported on March 1, and the insured's sworn proof of loss reaches the insurer on March 20. By April 14, no payment, denial, or explanation has arrived. The 75-day mark would be May 15, but 25 days after proof of loss is April 14, which is sooner. Under 919.80(d)(7)(B), the insurer owed a written explanation for the delay, with the Notice of Availability, by that date.
A public adjuster emails an insurer a supplemental estimate. Under 50 Ill. Adm. Code 919.40, what is the maximum time the insurer has to acknowledge this pertinent communication with reasonable promptness?
5 business days
15 working days
30 calendar days
45 calendar days
After a Director's hearing finds that an insurer engaged in improper claims practices, what may the Director do under 215 ILCS 5/154.8?
Order the insurer to cease and desist and suspend its certificate of authority for up to 6 months, impose a civil penalty up to $250,000, or both
Revoke the public adjuster's license
Award the insured triple damages
Order binding appraisal of every open claim
A court finds that an insurer's delay was vexatious and unreasonable. The jury awards the insured $80,000, and the insurer offered $50,000 before suit. Apart from attorney fees and costs, what is the maximum additional amount under 215 ILCS 5/155?
$48,000
$60,000
$80,000
$30,000
The insurer and the public adjuster agree on a $38,000 partial wind loss with no coverage or amount dispute, and the policy limit is $300,000. The insurer's check is stamped "Final payment and full release of all claims." How does Part 919.60(a) treat this wording?
It is permitted because the parties agreed on the amount
It is permitted if the check exceeds 10% of the policy limit
It is improper because a payment may be marked final or a release only if the policy limit has been paid or there is a bona fide dispute over coverage or the amount payable
It is improper only if the insured has hired an attorney
Sections you finish are checked off in the contents.