State Farm beat a bad faith lawsuit despite taking three years to pay an injured driver's underinsured motorist claim, an Illinois appeals court ruled.
The court sided with the insurer on May 29, 2026, with a useful reminder for carriers: paying a claim, even late, is not the same as losing a lawsuit over the policy.
Here is what happened. Nancy Becker-Othman hurt her shoulder when another driver rear-ended her at a red light. The at-fault driver paid $25,000. Becker-Othman then turned to her own insurer, State Farm, for the $75,000 balance of her $100,000 in underinsured motorist coverage.
While State Farm investigated, she demanded arbitration. The insurer sent her $4,721.36 as an initial offer and agreed to arbitrate the rest. It hired a law firm and brought in Dr. Mark Hutchinson to review her medical records.
Hutchinson's view shifted across four reports. At first he said her shoulder injury was unrelated to the crash, leaning on what he thought was the absence of an early shoulder complaint. He later acknowledged her deposition showed she did complain of shoulder pain at the emergency room the day of the accident, and that his third report wrongly said otherwise. His fourth report dropped that line and recognized the early onset pointed to a more significant injury. He still believed the injury was unrelated, but said that if the crash caused it, her surgical outlook was good.
About two weeks after that final report, in September 2021, roughly three years after the accident, State Farm paid the full $75,000 and cancelled the arbitration.
Becker-Othman sued anyway. She claimed breach of contract, bad faith delay under section 155 of the Illinois Insurance Code, and a right to sue under the state Administrative Code for failing to give a written explanation within 30 days. She wanted $4,522.85 in costs from the cancelled arbitration, plus fees, penalties, and interest.
The trial court tossed all three claims. The appellate court agreed.
On breach of contract, the point that matters to insurers is simple. Nothing in the policy required State Farm to adjust or pay within any set timeframe, and Becker-Othman did not dispute that finding. Her arguments about an implied duty of good faith and the reasonable expectations doctrine went nowhere, because reading a deadline into the policy would rewrite the deal.
The section 155 claim is where the decision earns its keep. That law lets a policyholder recover fees, costs, and penalties when an insurer unreasonably delays or denies a claim. But it is not a standalone claim. To win under section 155, a plaintiff must also succeed in an action on the policy. Her contract claim had already failed, so there was nothing for the delay claim to attach to.
She argued she had effectively prevailed because State Farm paid the limits. The court said no, leaning on two recent decisions, Moles and Kroutil. Simply paying the insured, or settling a dispute out of court, does not count as winning on the policy. State Farm agreed to pay before arbitration, so there was no contract judgment to support a delay penalty.
The court also confirmed that neither title 50 of the Administrative Code nor section 154.6 of the Insurance Code lets policyholders sue directly. The Illinois Department of Insurance enforces those rules, and an unhappy insured's remedy is to file a complaint with the department.
Two procedural rulings sealed the win. The court upheld the denial of more discovery, including State Farm's communications with its outside law firm, which stayed protected by attorney-client privilege. And it upheld the order making Becker-Othman pay Dr. Hutchinson's $700 hourly deposition fee, since State Farm did not plan to call him as a trial expert on the bad faith claim and she had noticed the deposition.
The court framed the dispute as routine, calling it a good faith determination to pay the claim after a reasonable investigation under the terms of the State Farm policy.
For carriers, the lesson is practical. A real, documented dispute over whether an injury is even related to a covered event, backed by an expert review, supports a good faith investigation, even one that runs for years. And paying the claim to end that dispute does not hand the insured a delay penalty.
