Consumers can complain about insurers’ violations of the insurance code but can’t take them to court over such breaches, an appeals court in Illinois has ruled.
Presiding appellate court judge Mark A. Pheanis of the Appellate Court of Illinois Second District declared: “An aggrieved party can submit a complaint to the department of insurance, and the department can investigate violations of its rules and regulations, hold hearings, and impose penalties on those it finds in violation.”
The judgment upholds a lower court’s decision that consumers cannot initiate private legal actions against insurance companies for violating claims handling regulations and other provisions of the state’s insurance code. As indicated, the appropriate recourse would be to file a complaint with the suitable authority.
The case stems from a car accident involving State Farm Mutual Automobile Insurance Co. policyholder Giampaolo Cherubin and Denise Hopman, who sustained injuries in the crash.
Hopman sued State Farm, alleging the insurer violated state insurance regulations requiring timely claim settlements and that payments or written denial explanations be provided within 30 days.
Hopman also claimed State Farm breached its contract and failed in its statutory and regulatory obligations by not recognizing her as a third-party beneficiary of Cherubin’s policy.
State Farm sought to dismiss the case, contending there is no private right to action for insurance code violations and that Hopman was not a third-party beneficiary. Both the trial court and the appeals court sided with State Farm, resulting in the dismissal of the case.
The appeals court noted that it is well-established that insurance code violations do not allow for private causes of action, as the state’s insurance department exclusively enforces these regulations. It was pointed out that adequate remedies exist to address insurance code violations.
As for her injuries, Hopman could pursue compensation by suing Cherubin directly, which she has done in an ongoing case.
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