Reinsurers generally are not liable for extracontractual, "bad faith" damages. Four exceptions have been recognized, and the biggest exception is where the reinsurer acts like a liability carrier in the situation at hand. It is significant as well that the reinsurance contract can provide, expressly or implicitly, that the reinsurer is basically just another liability carrier for a common insured. See 1 DENNIS J. WALL, § 6:11, Primary and Excess Insurers and Reinsurers: A Working Definition of Reinsurance--The Effect of Reinsuring Agreements or Treaties, LITIGATION AND PREVENTION OF INSURER BAD FAITH (3d edition Thomson Reuters, 2022 Supplements in process).
In a recent decision in a federal court in Illinois, the Court held that 215 Ill. Comp. Stat. (ILCS) 5/155 does not apply -- and consequently there is no statutory bad-faith claim under Illinois law -- to agents of a reinsurer under these general principles applied in a host of cases decided under Illinois law. Stonegate Ins. Co. v. Fletcher Reins. Co., No. 21 CV 3523, 2021 WL 5769528, at *7-*8 (N.D. Ill. December 6, 2021). In the words of the Court: "Given this precedent, it is clear that Section 155 does not permit a bad faith claim to be brought against a reinsurer’s agents, such as the Defendants. In other words, Stonegate cannot bring a claim against Defendants under Section 155, because Section 155 pertains only to insurance contracts – not reinsurance contracts." Stonegate, 2021 WL 5769528, at *8 (emphases by the Court).
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