Unconscionable Provisions in Insurance Contracts
Policyholders — health, disability, property, etc. — may sometimes find that the insurer has an unreasonable amount of power over them, perhaps more than they anticipated when they purchased the policy years before. This is unsurprising. Insurers often design and execute unfair contracts that are designed to put the policyholder in a distinctively weakened position comparatively.
If you’ve had your claim denied or mishandled due to an underlying contract provision that you believe is unreasonably oppressive, then you may have a right to bring a lawsuit against your insurance carrier on the basis of “unconscionability.”
Let’s explore how unconscionable contracts are defined under Illinois law.
What Contractual Provisions Qualify as Unconscionable?
If you’re looking to have an Illinois court define an element or provision of your insurance contract as “unconscionable,” then it’s important to understand the doctrine of unconscionability as it applies to contracts. Simply put, Illinois courts will only find that a particular element, clause, or provision in a contract is unconscionable I it is both procedurally and substantively unconscionable.
Procedural unconscionability is generally found where there was some impropriety, imbalance of power, or other problem during the contract formation process that prevented either party from making a meaningful choice. For example, if the insurance company actively misrepresented one of the provisions of the contract — say, one of the disability coverage exclusions — then that would likely be considered procedurally unconscionable, as the policyholder did not have the understanding necessary to make an informed and meaningful choice.
Substantive unconscionability relates to situations where a clause, term, or provision in a contract is allegedly one-sided or overly harsh. This generally is a problem in contracts where the provision itself is “obviously” oppressive, even without context. For example, if an insurance contract charges a substantial fee to submit a claim for benefits, then that requirement might be deemed substantively unconscionable (as it limits the ability of a financially burdened policyholder to receive benefits they’re owed).
Consequences for the Insurance Policy
In the event that a particular provision or term of the insurance policy is deemed unconscionable under Illinois law, the courts will typically enforce the underlying insurance contract and will ignore application of the problematic contract provision. In other cases, the contract will be modified in a manner that is favorable to the policyholder so as to maintain consistency (if necessary).
For example, if the insurance contract includes a mandatory, binding arbitration provision that is deemed unconscionable, then the court may — depending on the circumstances surrounding the contract and how it was entered — ignore the mandatory arbitration provision entirely and refuse to impose its demands or may modify the provision so as to allow the parties to voluntarily enter binding arbitration, or even to engage in non-binding arbitration to resolve their conflicts.
Contact an Experienced Chicago Insurance Attorney for Guidance
Here at Bryant Legal Group, P.C., our attorneys have decades of experience advocating on behalf of insurance policyholders in disputes with their insurance carriers, from disability insurance conflicts to bad faith issues and more.
We have a fundamentally client-oriented disposition. Unlike some of our competitors, we work closely with clients through every stage of representation to ensure that we have all the information we need to act decisively and take advantage of litigation opportunities as they present themselves. This highly-engaged, comprehensive approach to handling insurance litigation — which includes the use of staff medical experts, and other experts — has helped us achieve substantial results for our clients over the years.
If you’re ready to speak to an experienced Chicago insurance attorney about your claims, we encourage you to call 312-634-6415 or send us a message through our Contact Us page to request a meeting today.