Court Nixes Bad-faith Claim Absent Successful Action on Auto Policy

By Don R. Sampen, published, Chicago Daily Law Bulletin, July 7, 2026

The 1st District Appellate Court recently held that an insured does not have a bad-faith claim against an insurer in the absence of a successful action on the policy.

The case is Becker-Othman v. State Farm Mutual Automobile Insurance Co., 2026 IL App (1st) 250037. The insured, Nancy Becker-Othman, was represented by Sinson Law Group and State Farm was represented by Amundsen Davis LLC.

Becker-Othman was injured in a car accident, accepted a payment of $25,000 from the at-fault driver and then sought $75,000 in underinsured motorist coverage from State Farm (her insurer), representing the balance of her $100,000 limit. She demanded arbitration of her claim, to which State Farm agreed.

In the meantime, Becker-Othman sought medical care from a doctor who eventually recommended surgery for her injury. State Farm retained a doctor to review her medical records and that physician initially concluded that her injury was not related to the car accident.

However, after receiving further information, the doctor acknowledged that if the accident caused the injury, surgery may be required.

About three years after the accident, State Farm agreed to pay the full $75,000 underinsured coverage balance and canceled the arbitration.

Becker-Othman then sued State Farm. She alleged (a) breach of contract for failing to adjust and pay her claim in a timely manner; (b) bad faith for vexatious delay under 215 ILCS 5/155 of the Insurance Code; and (c) violation of an Illinois Administrative Code provision, 50 Ill. Adm. Code 919.50(a). That section requires an insurer to determine liability on a claim within a reasonable time and then pay the claim within 30 days.

During discovery, she took the deposition of the State Farm physician, who agreed to testify only if Becker-Othman paid his $700 per hour fee. She objected but apparently paid. She also deposed several State Farm employees, but then sought to re-depose them on certain matters, which the trial court disallowed.

State Farm then moved for summary judgment, following which Becker-Othman sought additional discovery, which the trial court denied. The court also granted State Farm summary judgment, and she appealed.

Analysis

In an opinion by Justice Michael B. Hyman, the 1st District affirmed. The judge initially addressed Becker-Othman’s breach of contract claim and observed that her policy contained no language requiring State Farm to adjust her claim within a specified time frame. She did not disagree but argued that the implied covenant of good faith required timely payment.

However, Hyman stated that the covenant of good faith did not impose actionable obligations but functioned only as a rule of construction. As such, it helps ensure that a party does not exercise contractual discretion in a manner that defeats the contract’s purpose. Imposing a specific timing requirement for adjusting a claim would nonetheless amount to rewriting the contract.

The judge also rejected Becker-Othman’s “reasonable expectations” position, stating that the reasonable expectations doctrine applies only where the policy language is ambiguous, and this policy was not.

Regarding her claim for vexatious and unreasonable delay under section 155, Hyman wrote that section 155 does not create an independent cause of action. He cited case law for the proposition that such a bad-faith claim requires a successful action on the policy.

In this case, Becker-Othman’s breach of contract action did not qualify because the policy specified no time frame for payment. In addition, State Farm’s payment of the underinsured motorist claim did not constitute success in an action on the policy.

Turning to the administrative code claim, Hyman stated that the requirement of a reasonable time frame for adjustment and payment under the code could only be enforced by the Illinois Department of Insurance.

In sum, the code did not create a private cause of action but rather vested the department with the task of regulating the actions of insurance companies.

Hyman also found against Becker-Othman on her discovery issues. The judge ruled that she had not adequately complied with Supreme Court Rule 191(b) in seeking further discovery following the filing of State Farm’s summary judgment motion.

And he held that State Farm was not required to pay its physician for his deposition. The reason was that State Farm hired the physician to address medical issues. But once State Farm paid the underinsured limit, the only issues remaining involved insurance claims practices and procedures, as to which the physician was not qualified to speak.

The court therefore affirmed in favor of State Farm.

Key Points

• The implied covenant of good faith does not impose actionable obligations but functions only as a rule of construction.
  
• Section 155 of the Illinois Insurance Code may be invoked only if the insured successfully proves a claim against the insurer on the policy.
  
• The Illinois Administrative Code requirements for the adjustment and payment of claims do not give rise to a private cause of action.