No Bad Faith for Insurance Company’s Delay in Payment to Insured – Pryor v. United Equitable Insurance Company

It is common knowledge that insurance companies tend to drag their feet when it comes to paying out on insurance policies. Therefore, there are laws in place to prevent insurance companies from acting in bad faith and requiring them to uphold their end of the bargain. However, in the lawsuit of Kevin Pryor v. United Equitable Insurance Company, No. 1-11-0544 (2011), the appellate court found that the insurance company had actually not acted in bad faith. Rather, it was the insured client who had jumped the gun and filed an unnecessary lawsuit.

The case arose out of a claim the plaintiff, Kevin Pryor, filed after being involved in a 2009 car crash. While Pryor had car insurance, the other driver did not. Therefore, Pryor filed an uninsured motorist claim with his own insurance company, United Equitable Insurance Company.

On January 21, 2010, Pryor entered into a binding arbitration agreement with United Equitable for an award of $9,775. On January 27, 2010, Pryor signed a release and trust agreement regarding that award. On February 5, 2010, Pryor signed a release of the physician’s lien, thereby completing his part of the arbitration agreement. United Equitable was to pay out Pryor’s award within 30 days of receiving his release. However, when it had still failed to pay out by March 2, 2010, Pryor brought an insurance malpractice lawsuit against United Equitable.

In his complaint, Pryor asked the court to award him damages in excess of the arbitration award based on United’s bad faith in handling and executing his claim. However, within ten days of the insurance lawsuit being filed, United paid Pryor the full amount of the arbitration award. It then filed a motion to dismiss Pryor’s claim on the basis that the arbitration had in fact been paid and that his bad faith claim was unsubstantiated.

After reviewing the case facts, the trial judge dismissed all of Pryor’s claims against United, a decision which Pryor then appealed to the Illinois Appellate Court. In its review of Pryor, the First District Illinois Appellate Court examined the plaintiff’s claim that United had acted unreasonably and vexatiously by “refusing to pay the arbitration award in derogation of 919.50 of the Illinois Insurance Regulations.”
That provision of the insurance Act provides that insurers “shall affirm” or deny liability on claims within a reasonable time and shall offer payment within 30 days after affirmation of liability, if the amount of the claim is determined and not in dispute. 50 Ill.Adm. Code 919.50(a).

The court held that Pryor’s complaint did not plead facts sufficient to show that United had violated that provision of the Insurance Act. Here the arbitration award settled any issues of liability or amount of loss, so the only remaining issue was the delay in payment and whether or not it was “unreasonable.”
After examining the case facts, the Illinois Appellate Court found that there was no error in dismissing the insured’s lawsuit for bad faith given the fact that the insurance company’s delay in payment was not vexatious or unreasonable. This was in part based on its finding that United had not done deliberately intended to delay the payment. To this end, the court pointed out that United had made the payment just 35 days after the arbitration award was finalized.

Under the Illinois Uniform Arbitration Act allowed that United had 90 days in which to appeal the award. And given that Pryor’s lawsuit was filed within the time in which United was still allowed to file an appeal, and that payment had also been made within that 90 day range, that there was nothing to suggest that Pryor needed to file a lawsuit in order to recover his award. Therefore, the court held that United had not acted unreasonably and affirmed the trial court’s dismissal of Pryor’s insurance lawsuit.

Kreisman Law Offices has been handing Illinois personal injury matters for individuals and families for more than 35 years in and around Chicago, Cook County, and surrounding areas, including Tinley Park, Flossmoor, Crete, Palos Hills, and Park Ridge.

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