Illinois Court Reaffirms: No Tort of Bad Faith Under Illinois Law

In Kroutil v. State Farm, the Illinois Appellate Court once again upheld that there is no separate tort of bad faith for first party insurance losses. The focus of the Kroutil case was whether an action for vexatious refusal under Section 155 argument could exist separate and  apart from a breach of contract case.

In the underlying matter, in Kroutil, coverage was decided by arbitration. The insured then tried to bring a separate action under Section 155 for the insured’s alleged delay and vexatious refusal to pay. The Appellate Court firmly held that the Section 155 claim could not survive without a proper breach of contract action.

In its argument, plaintiff cited to Kramer v. Insurance Exchange Agency for the proposition that an insurer’s conduct could give rise to a separate independent tort action. The Appellate Court rejected this argument and found that the Supreme Court of Illinois had found definitively that bad faith is “not a separate independent tort action under Illinois Law.” The court further stated that Section 155 is the recognized extracontractual remedy to address policyholder’s concerns.

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