An Illinois appeals court has ruled that consumers can complain about insurance companies’ violations of insurance law but cannot sue them over such violations.

“An aggrieved party can file a complaint with the Department of Insurance, and the Department can investigate violations of its rules and regulations, hold hearings, and impose penalties on those it finds to be in violation,” said Appellate Court Judge Mark A. Finis of the Illinois Second Circuit Court of Appeals.

The ruling upholds a lower court’s decision that consumers cannot bring private lawsuits against insurance companies for violating claims handling rules and other provisions of state insurance law. As we noted, the proper remedy is to file a complaint with the appropriate authority.

The case stems from a car accident involving State Farm Mutual Insurance Company policyholder Giampaolo Cherubin and Denise Hopman, who was injured in the accident.

Hopman sued State Farm, alleging that the insurer violated state insurance regulations that require timely settlement of claims and written payment or denial explanations within 30 days.

Hopman also alleged that State Farm breached its contract and failed to meet its legal and regulatory obligations by failing to recognize her as a third-party beneficiary of Cherubin’s policy.

State Farm sought to have the case dismissed, claiming that there was no private right of action for insurance law 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 case being dismissed.

The Court of Appeals noted that it was well established that violations of the Insurance Act did not allow for special causes of action, since the State Insurance Department exclusively enforced those regulations. It noted that there were sufficient remedies to address violations of the Insurance Act.

As for her injuries, Hopman could seek compensation by suing Cherubin directly, which she has done in an ongoing case.

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