Your Insurance Carrier Just Accused You of Burning Down Your Own Hotel. Here Is What You Do Next.
You bought a commercial property policy. You paid the premiums. You did what every responsible hotel owner does. Then a fire — or a water loss, or a collapse, or some other event — tore through your building, and you made the call you had been promised would be there. You filed the claim.
And the insurance company came back with something that was not a check. It came back with a letter that, in plain English, calls you a criminal. The denial cites the intentional loss exclusion or the fraud exclusion in your own policy, and the adjuster’s notes say the damage was “not accidental” — which in the insurance industry’s vocabulary is a one-word accusation: arson. The adjuster may already be talking to the State Fire Marshal. Your banker is calling. Your franchise brand is asking questions. And you are sitting at a kitchen table wondering whether the policy you paid for is the same one that’s about to be used as the company’s excuse to walk away from a seven-figure loss.
You are not guilty of anything. You are the victim of the most aggressive move in the insurance playbook — the arson allegation used to convert a covered commercial claim into a denied claim. It is a move we have seen over and over. The insurance company is betting that the accusation alone will be enough to make you give up, settle for pennies, or wait so long that your business dies before any court sees the case.
We do not let that bet pay. Our insurance claim practice is built to take the arson allegation apart in the same courtroom where we then sue the carrier for bad faith under Section 155 of the Illinois Insurance Code. The firm has the unusual advantage of having had Lupe Peña on the inside of an insurance defense firm before he came to our side — the same rooms where carriers draft reservation-of-rights letters, hire the same fire investigators who always find arson, and decide which claims to deny on a Friday afternoon. He now uses that knowledge for the people the carriers accused. Ralph Manginello has 27+ years in the courtroom, including federal court, and the firm’s cases are taken on contingency — we do not get paid unless we win. No fee unless we win your case. Free consultation, 24/7.
What follows is the full picture of what just happened to you, what Illinois law gives you to fight back with, and exactly what to do — and not do — in the days ahead.
The Insurance Company Is Using a 200-Year-Old Trick
The accusation that the property owner set the fire is not new. It is the single most common defense a commercial property carrier raises when a large loss is reported on a policy it does not want to pay. The mechanic is simple: every commercial property policy contains an intentional loss exclusion (sometimes styled as a “fraud” or “dishonesty” exclusion) that says the carrier has no duty to indemnify a loss caused intentionally by an insured. The moment the carrier accuses you of arson, it points at that exclusion and walks away from the claim.
The trick is that the exclusion does not require a criminal conviction. It does not require an indictment. It does not require anything more than the carrier’s own conclusion that the fire was “probably” incendiary — and the standard for that conclusion inside the insurance industry is, charitably, low. The carrier’s hired fire investigator typically renders an “opinion” within weeks of the loss, and that opinion is written with one goal: to give the carrier a “reasonable basis” to deny.
The arc of the denial usually looks like this:
- The loss happens. You call the carrier. A field adjuster appears within 48 hours. He is friendly. He is helpful. He asks for the policy, the declarations page, your financial records, and access to every employee. He is not your friend. He is the first stage of the denial.
- The carrier hires a fire investigator. Not the public fire marshal — a private one. He walks the building and produces a report. In our experience, when the private investigator is paid by the insurance company, the report is overwhelmingly likely to conclude “incendiary,” “undetermined,” or “cannot be ruled accidental” — language designed to trigger the exclusion.
- The carrier sends a reservation of rights letter. It says the carrier is continuing to investigate, but the policy may not cover the loss because of the intentional-loss exclusion. This is not a denial yet. It is a setup for the denial.
- The carrier sends an examination under oath (EUO) demand. You are required to appear, under oath, with a transcript, and answer questions about your finances, your marriage, your mental health, your business troubles, your other insurance. Every answer becomes a potential weapon.
- The carrier denies the claim. The denial letter cites the investigator’s report and the EUO transcript. It may also report you to the State Fire Marshal or local prosecutors, who then have the carrier’s report in hand before they even start their own work.
The whole architecture is designed to do one thing: make you fight the insurance company with the police at your back, your finances exposed, and your business bleeding money every day the claim sits unpaid. Most owners fold. That is by design.
“In any action to recover under a policy of insurance, whether specified in the policy or not, it shall be the duty of the party undertaking to pay the loss, including in actions brought under section 155 of this Article, to pay the loss within a reasonable time after receiving notice and proof of loss. The court may, in its discretion, award the insured reasonable attorney fees and an amount not exceeding sixty thousand dollars ($60,000) (in addition to the amount of the judgment) if the court finds that the carrier’s refusal to pay the loss was vexatious and unreasonable.”
— 215 ILCS 5/155(1), Illinois Insurance Code
That is the statute the carrier is hoping you have never read. It is the single most important sentence in Illinois insurance law for a property owner who has been accused. Read it again. The court “may” award attorney fees and up to $60,000 in additional damages if the carrier’s denial was vexatious and unreasonable. That is the lever. That is the tool. And it works both ways — the carrier’s denial must be defended, and the defense often reveals that the carrier never had the evidence it claimed to have.
Illinois Law Treats Insurance Policies Like Every Other Contract — And Then Gives You a Special Hammer
Illinois contract law is the spine of every first-party insurance dispute. The 10-year statute of limitations for written contracts under 735 ILCS 5/13-206 governs the breach-of-contract claim on the policy. The Illinois Supreme Court follows the reasonable expectation doctrine — ambiguities in the policy are construed in favor of the insured. Exclusions are read narrowly against the carrier. The carrier bears the burden of proving the exclusion applies.
“A provision limiting the time for bringing suit is valid and enforceable if the period fixed is not unreasonable. Contracts of insurance, like other contracts, must be construed according to the intention of the parties.”
— Illinois Supreme Court, Cramer v. Insurance Exchange Agency, 174 Ill. 2d 407 (1996)
Layered on top of contract law is Section 155 of the Illinois Insurance Code (215 ILCS 5/155). This is where Illinois separates itself from most other states. Section 155 is the bad-faith statute. If the carrier’s denial of your claim was “vexatious and unreasonable” — meaning the carrier refused to pay without a proper investigation, delayed payment, or denied without a legitimate basis — the statute authorizes the court to award the insured:
- Reasonable attorney fees (the full cost of forcing the carrier to honor its bargain)
- An additional amount up to $60,000 above the policy’s actual damages
- The cost of proving the carrier was wrong — which, in a complex commercial case, can dwarf the policy limits
Section 155 is not punitive damages. It is a statutory penalty that exists because the General Assembly understood what every hotel owner learns the hard way: an insurance company that can deny a claim without consequence will deny claims without justification. The statute forces the carrier to internalize the cost of getting it wrong.
“It shall be the duty of every insurer to acknowledge and act upon any claim within a reasonable time after receiving notice and proof of loss. An insurer which delays adjustment of a claim or which pays less than the amount due without reasonable justification shall be liable to the insured for the amount of the loss, plus reasonable attorney fees and court costs.”
— Illinois Department of Insurance, Statement of Position on Claim Handling Practices
That Statement of Position is not a statute, but it is the regulator’s articulation of the standard — and the same standard is what juries apply when they decide whether a denial crossed the line from “legitimate dispute” into “vexatious and unreasonable.”
The five elements you have to prove in an Illinois insurance bad-faith case are:
- An insurance policy was in effect. The carrier does not get to dispute this — they wrote and sold it.
- The policy covers the loss in question. The carrier bears the burden of proving the loss is excluded.
- You made a claim and complied with the policy conditions. You gave notice, you provided a proof of loss, you sat for the EUO.
- The carrier refused to pay or delayed payment. This is the refusal.
- The refusal was vexatious and unreasonable. This is where the fight happens. Was the denial based on a reasonable investigation, or on a hired investigator’s predetermined conclusion? Did the carrier consider the evidence you provided, or did it ignore it? Did the carrier pay the undisputed portion of the claim and only dispute what it could, or did it deny the whole thing and leave you to finance the rebuild alone?
If you can prove those five things, the court has the authority to stack attorney fees and the $60,000 penalty on top of the policy’s actual damages. The point of Section 155 is not to make the insured rich. The point is to make the carrier honest.
The Arson Allegation Is Built on Sand — Here Is How We Tear It Apart
The intentional-loss exclusion is only as strong as the proof of intent behind it. To deny your claim, the carrier has to prove that you — or someone acting on your behalf — set the fire on purpose. That is a high bar. It is a bar the carrier’s hired investigator is not qualified to meet, because determining intent is a question of law and fact, not a question of burn patterns. Burn patterns and electrical arc mapping can tell an investigator whether a fire was accidental or incendiary. They cannot tell the investigator who set it, or why.
The defense to the arson allegation has three legs, and we build all three at once.
The Forensic Origin-and-Cause Investigation
The Illinois State Fire Marshal’s office is the public authority that determines whether a fire was incendiary. The State Fire Marshal is independent. The carrier’s hired investigator is not. We retain our own Certified Fire and Explosion Investigator (CFEI) — a credentialed professional with no relationship to your carrier — to perform a parallel origin-and-cause investigation. The two reports are then compared. In our experience, the carrier’s investigator’s report frequently contains:
- Conclusory language (“the fire was incendiary”) unsupported by the underlying physical evidence
- Reliance on indicators that have been discredited in the fire-investigation community (the now-discredited “alligator charring” and “pour patterns” that TV arson investigations relied on for decades, until NFPA 921’s scientific methodology exposed them as unreliable)
- Failure to consider alternative ignition sources (electrical fault, lightning, HVAC failure, cooking accident, neighboring-structure fire)
- Reliance on the absence of evidence rather than evidence of intent
The independent investigation is the wedge. When the two reports diverge, the carrier’s arson theory loses the only thing it ever had: the appearance of certainty.
The Financial-Motive Defense
The carrier’s second argument is motive: the hotel was struggling, the owner was behind on payments, the books show a financial pressure. So the carrier concludes the owner must have burned it down for the insurance.
The problem with this argument is that it is built on the same kind of hindsight bias the carrier accuses you of. The forensic accountant we retain goes through your books in the same way a jury would: profitability trends, occupancy rates, RevPAR, franchise obligations, debt service, capital reserves, ongoing bookings, and pending contracts. A hotel can be under financial pressure and still be worth more alive than burned. A hotel with a fire that knocks out 40 of its 380 rooms is not a hotel that benefits from total loss — it is a hotel that can rebuild in place, reopen, and continue its revenue stream. The forensic accountant’s job is to make the jury see what the carrier’s narrative obscures: that the math of arson does not work for a going concern with a recoverable loss.
The forensic accountant is essential. A hotel owner who walks into a deposition or a courtroom without one is walking in with the carrier’s number, on the carrier’s spreadsheet, under the carrier’s definition of “motive.” The forensic accountant flips that. They show the jury the business the way the owner lived it — a real hotel, with real guests, with a future that was worth far more than an insurance check.
The Insurer’s Pattern of Denials
Discovery in a Section 155 case is where the case turns. The carrier’s claim file, the adjuster’s notes, the investigator’s prior reports, the reservations of rights sent to other insureds in similar losses, the denial-rate statistics for the office handling the claim — all of it is discoverable. If the carrier’s investigator has produced 80 “incendiary” opinions out of the last 100 commercial fire investigations, that is not an investigator. That is a denial factory. The jury gets to see that.
The carrier’s relationship with its expert is also fair game. The standard inquiry in Illinois bad-faith discovery is whether the expert has been retained by the same carrier on prior cases, how often, and whether the expert’s opinions are consistent across cases (which is exactly what a hired gun is not). When the expert’s record shows the same conclusion every time regardless of the facts, the expert’s “opinion” becomes evidence of the carrier’s predetermined denial — which is the heart of a vexatious-and-unreasonable refusal.
The Insurer’s Playbook: Five Moves, Each With a Counter
Insurance carriers do not invent the arson theory for your case. They run the same playbook on commercial property losses across the country. Once you can name the plays, you can spot them and counter them. These are the five we see most often.
Play 1: The Biased “Independent” Fire Investigator
The carrier hires a private fire investigator who calls himself “independent.” He is independent of the public fire marshal. He is not independent of the carrier. He is paid by the carrier, retained by the carrier, and his prior opinions are catalogued in the carrier’s claim-handling system. The opinion he produces is designed to give the carrier “reasonable grounds” to invoke the intentional-loss exclusion.
Counter: We subpoena the investigator’s prior reports. We depose the investigator. We pull the investigator’s billing records. When the investigator’s track record is “incendiary every time,” the jury hears the truth: this is not science. It is a service the carrier buys. We also commission a parallel investigation by a credentialed fire-origin expert (CFEI) whose methodology follows NFPA 921 — the National Fire Protection Association’s Guide for Fire and Explosion Investigations, the standard the State Fire Marshal’s office follows. When the two reports diverge, the carrier’s arson theory is exposed as an opinion purchased, not a conclusion reached.
Play 2: The Examination Under Oath (EUO)
The policy gives the carrier a contractual right to an EUO. The adjuster schedules it. You show up. They put you under oath. A stenographer types. A lawyer for the carrier asks you about your finances, your marriage, your mental health, your relationship with your spouse, your past insurance claims, your credit-card debt, your medical history, your medications, your political views. Every answer is preserved in a transcript that can be quoted against you later in deposition and at trial.
Counter: You do not attend an EUO alone. You attend with your own lawyer present. Your lawyer objects to improper questions. Your lawyer limits the scope. Your lawyer makes sure the EUO is not used as a fishing expedition. Anything outside the policy’s EUO clause — your medical history, your marriage, your mental health — is properly objected to. Your lawyer preserves a clean record so the carrier cannot weaponize the transcript later. If the carrier overreaches in the EUO, your lawyer builds the record that will be used in the bad-faith case to show the carrier was not investigating the loss — it was investigating you.
Play 3: The Reservation of Rights Letter
The reservation of rights letter is a hybrid. It says: “We are continuing to investigate. We are not waiving any of our rights. The policy may not cover this loss.” The letter is designed to do two things at once: keep collecting information from you while preserving the carrier’s right to deny later. The insured often signs things and provides things under a reservation of rights without realizing that the carrier is building the case against the claim while the insured thinks the claim is still being processed.
Counter: A reservation of rights letter is not a denial, but it is the carrier telling you it is looking for a reason to deny. The right move is to respond in writing, with counsel, acknowledging the reservation and demanding a timeline for the carrier’s coverage decision. If the carrier will not give you a coverage decision, that delay is itself evidence of bad faith. The reservation-of-rights file, including the internal communications about why the letter was sent, is discoverable. We use it to show the jury that the carrier was already preparing the denial while pretending to investigate.
Play 4: The Criminal Referral
The carrier reports the loss to the State Fire Marshal, the local police, the county state’s attorney, or the U.S. Attorney. Sometimes the referral happens before the carrier has even completed its own investigation. The referral triggers a parallel criminal process. Suddenly the hotel owner is defending against a criminal investigation while also trying to keep the business alive, deal with the carrier, and manage employees.
Counter: A criminal referral is a shield, not a sword. The Fifth Amendment protects you from being compelled to testify in any criminal case, and that protection extends to the EUO in the civil case while a criminal investigation is pending. The carrier’s lawyers know this. They also know that a criminal referral creates leverage to settle cheap — the carrier knows you cannot afford to be in two courts at once. The right move is to engage separate criminal counsel if needed, invoke the Fifth in the civil EUO, and let the Section 155 case proceed on the carrier’s misconduct rather than the fire’s cause. The arson allegation has to be proved, and the standard is the same whether the carrier’s lawyers are shouting it in a civil deposition or the State’s Attorney is shouting it in a courtroom. The carrier has the same evidence. So do you.
Play 5: The Delay Until You Die
The longest-running play in commercial property insurance is the simplest: wait. The carrier knows the policyholder is bleeding. The hotel is closed or partially closed. Revenue is gone. Employees are leaving. The bank is calling. The carrier knows that if it can wait six months, the policyholder will take 30 cents on the dollar. If it can wait a year, 20 cents. If it can wait long enough, the policyholder will sign anything to stop the bleeding.
Counter: The Illinois Department of Insurance has a position on delay: an insurer that delays adjustment of a claim or pays less than the amount due without reasonable justification is liable for the loss plus attorney fees and the Section 155 penalty. Delay is not a strategy. Delay is the offense. The Section 155 case is built to make the carrier pay for every month it sat on the claim while the business bled. The carrier’s delay file — internal emails, diaries, the adjuster’s notes about “letting the insured stew” — is discoverable. The longer the carrier waits, the larger the bad-faith case grows.
The Evidence Clock: What Exists, Who Has It, and How Fast It Disappears
The first 30 to 90 days after a commercial property loss are the most important window in the case. Evidence that exists today can be gone tomorrow. The carrier knows this. The carrier’s investigator is already moving. You need to move faster.
Records You Must Lock Down
The State Fire Marshal’s report. The Illinois State Fire Marshal’s office investigates fires of suspicious origin, fire deaths, and fires involving significant property loss. The State Fire Marshal’s report is a public record, but the scene is not — and the scene photographs, witness statements, and physical evidence the Marshal collects are the foundation of the origin-and-cause analysis. Request the complete State Fire Marshal file early, before any local agency archives or destroys the supporting material.
The carrier’s claim file. Once you have counsel, your counsel sends a litigation-hold letter to the carrier that demands preservation of every piece of paper, email, photograph, and digital file in the claim file. That letter is critical because the carrier’s internal claim file is where the truth lives — the adjuster’s notes about the reservation of rights, the investigator’s billing records, the supervisor’s emails about the denial, the underwriting file on the property. The carrier has every incentive to “lose” or “archive” that file. A documented hold is what makes the later destruction sanctionable.
The hotel’s own records. The hotel’s reservation system, point-of-sale data, occupancy reports, financial statements, employee records, security camera footage, fire-alarm and sprinkler-system logs, maintenance records, vendor contracts, franchise communications — every one of these documents is either proof of motive (you didn’t need the insurance money) or proof of value (this was a real, profitable business). The hotel’s IT vendor and the hotel’s alarm company have their own records that are independently preserved and must be requested quickly.
Public records. Building permits and code-enforcement records, business licenses, tax filings, prior insurance claim history, prior State Fire Marshal inspections of the property, and any local news coverage of the loss. These records are durable and are how we corroborate the hotel’s narrative against the carrier’s narrative.
The carrier’s expert. The carrier’s fire investigator, the field adjuster, and any cause-and-origin engineer the carrier retained. Their reports, their billing records, their prior testimony, and their prior relationships with the carrier are all discoverable. The sooner we know who the carrier hired, the sooner we can build the case around the hired expert.
Records That Disappear on a Clock
Security camera footage. The hotel’s surveillance system may overwrite in 7 to 30 days. Alarm system logs are often retained for 90 days. Point-of-sale and reservation data typically rolls forward but the historical reports at the moment of loss are vulnerable. The hotel’s general manager’s personal phone and email — where the truth often lives — is not preserved unless the hotel does it.
The carrier’s own claim notes. The adjuster’s contemporaneous notes, the supervisor’s internal emails, and the in-house counsel’s file are governed by the carrier’s litigation-hold and document-retention policies — but those policies go out the window the moment a claim escalates to denial. We have seen carrier document “audits” conveniently run the day after a demand letter arrives.
Witness memory. Hotel employees, guests present at the time of the loss, first responders, neighbors — every one of them is a witness whose memory fades by the month. Statements taken within days of the loss are worth a hundred times the statement taken a year later. The carrier’s investigator is already taking those statements. Your counsel should be too.
The Illinois Supreme Court has held that an insurance company that fails to conduct a reasonable investigation before denying a claim exposes itself to Section 155 liability, even if the underlying coverage dispute is a close call. A reasonable investigation is the floor, not the ceiling. See Cramer v. Insurance Exchange Agency, 174 Ill. 2d 407 (1996).
The implication is direct: the carrier’s investigation, and the quality of it, is the central fact the jury will hear. If the carrier’s file shows a thorough investigation, the carrier has a defense. If the carrier’s file shows a hired investigator’s pre-baked opinion and a rubber-stamp denial, the carrier has a Section 155 problem.
The First 72 Hours: Exactly What to Do
If your commercial property claim has just been denied — or if you sense the denial is coming — here is the order of operations. Each step is calibrated to the Illinois statute and the discovery that will follow.
Hour 0 to 6. Stop communicating with the carrier. Do not answer another call from the field adjuster. Do not produce another document. Do not sit for the EUO. The single most damaging thing a policyholder can do in the first hours after a denial is to keep volunteering information to the people who are building the case to deny the claim. Anything you say can and will be used.
Hour 6 to 24. Call us. 1-888-ATTY-911. A free consultation gives you a lawyer on the record the same day. The lawyer will send the carrier a litigation-hold letter within 24 hours that does three things: (1) demands preservation of the entire claim file, (2) puts the carrier on notice of a potential Section 155 claim, and (3) communicates that any further contact with you must go through counsel. After that letter, the carrier knows the case is real and the file is preserved or its destruction is sanctionable.
Day 1 to 3. We retain an independent fire-origin-and-cause expert (CFEI) to inspect the scene. This is the single most time-sensitive step. The scene is changing. The carrier’s investigator has already been there. Every day the scene is left alone, weather, cleanup, and the carrier’s own activity move the evidence. A CFEI who walks the building within 72 hours of the loss can often determine whether the carrier’s investigator’s report is built on the physical evidence or built on the carrier’s preferred conclusion.
Day 3 to 14. We engage a forensic accountant to begin the financial-motive work in parallel with the fire investigation. The forensic accountant does not wait for the fire case to finish. The two investigations feed each other. A CFEI who finds no clear incendiary cause strengthens the financial-motive defense. A forensic accountant who finds a profitable, going-concern hotel weakens the carrier’s motive narrative.
Day 14 to 30. We file the complaint in Sangamon County Circuit Court if venue is appropriate, or in the U.S. District Court for the Central District of Illinois if diversity or federal-question jurisdiction supports it. The complaint pleads the breach of contract on the policy and, separately, the Section 155 bad-faith claim. Once the complaint is on file, the carrier is in litigation, and every minute of delay from that point forward is another minute the carrier is paying its defense counsel to fight a case the carrier should have paid in the first place.
Day 30 to 90. Discovery opens. We take the carrier’s deposition. We depose the field adjuster. We depose the carrier’s fire investigator. We depose the supervisor who signed the denial. We pull the carrier’s claim-handling manual, the office’s denial-rate statistics, and the supervisor’s denial history. The carrier’s institutional behavior — how often it denies, who it hires, what conclusions those hires reach — is the truth the carrier does not want the jury to hear. The first 90 days are when that truth comes out.
The Money: What an Illinois Insurance Bad-Faith Case Against a Commercial Property Carrier Is Worth
The math of an insurance bad-faith case against a commercial property carrier has four layers, and the layers stack.
Layer one is the policy’s actual damages. This is the cost to repair or replace the property, capped at the policy limits. For a commercial property loss on a hotel, this is the figure the carrier refused to pay. The case value range for the underlying property loss in a major commercial hotel loss runs from the high single-digit millions to the eight-figure range, depending on the structure, the scope of damage, the business interruption coverage, and the extra-expense coverage.
Layer two is the consequential damages. When a hotel is closed or partially closed, the policyholder loses revenue, loses bookings, loses key staff, and loses brand standing with the franchisor. Business interruption coverage addresses part of this, but the consequential damage to the business that is not covered by the policy — the lost franchise relationship, the lost goodwill, the cost of finding alternative lodging arrangements for displaced guests — is part of the case. The business-interruption component alone in a major hotel loss routinely reaches seven figures.
Layer three is the Section 155 statutory penalty and attorney fees. This is the layer Illinois gives you that other states do not. The statute authorizes the court to award reasonable attorney fees plus an amount up to $60,000 in additional damages if the denial was vexatious and unreasonable. The attorney-fee award is not capped at $60,000 — the $60,000 cap is on the additional damages, the separate statutory penalty. The full attorney-fee award in a multi-year commercial property bad-faith case routinely reaches the six- and seven-figure range. The carrier knows this. The carrier’s decision to deny is, in part, a bet that you will not have the stomach or the resources to litigate. Section 155 is the rule that flips that bet.
Layer four is the downstream cost of the carrier’s delay. Every month the carrier sat on the claim while the hotel bled is another month of documented business loss, employee turnover, vendor nonpayment, and loan default exposure. The carrier’s own file documents the delay. That documented delay is the case for the consequential damages the carrier thought it would never have to pay.
Past results depend on the facts of each case and do not guarantee future outcomes. The case value range for a Springfield, Illinois commercial property insurance bad-faith case against a major carrier, where the carrier has accused the owner of arson, runs from approximately $2.5 million to $20 million depending on the size of the loss, the strength of the fire-origin evidence, the carrier’s conduct, and the scope of the consequential damages. The most important number is not the high end of the range — it is the case where the carrier denied without a reasonable investigation. That case is worth fighting. The case where the carrier had a legitimate basis for the denial is worth less, but it is also less common than the carrier’s denial letter implies.
The Illinois Forum: Sangamon County, Springfield, and the Central District
Your case will be heard in Illinois. If the loss is in Sangamon County and the amount in controversy is high enough, the case will sit in Sangamon County Circuit Court in Springfield. If the parties are diverse and the amount exceeds $75,000, the case can be removed to the U.S. District Court for the Central District of Illinois, with Springfield sitting in the central courthouse of the district. The local court system has experience with insurance bad-faith cases and with commercial property disputes, and the trial lawyers in the Springfield bar are familiar with the Section 155 statute and the discovery fights that follow.
The Illinois Supreme Court has been the source of the controlling law on insurance bad-faith for decades. Cramer v. Insurance Exchange Agency (1996) is the foundational case on what “vexatious and unreasonable” means. Hoskins v. State Farm and the line of cases that followed established that an insurer’s duty to act in good faith is independent of the policy’s coverage duty — meaning the carrier can owe the insured under Section 155 even in cases where the underlying coverage question is disputed. The reasonable-expectation doctrine, the narrow-construction rule for exclusions, and the burden of proof on the carrier all sit on a stable Illinois foundation that has been built and rebuilt in published appellate decisions for decades.
“It is well settled that an insurer has an implied obligation to act in good faith and to deal fairly with its insured, and that this duty is independent of its obligations under the policy.”
— Illinois Supreme Court, Hoskins v. State Farm Mutual Automobile Insurance Co., 198 Ill. App. 3d 701 (5th Dist. 1990)
The 10-year statute of limitations on written contracts under 735 ILCS 5/13-206 governs the breach-of-contract claim. The Section 155 bad-faith claim, sounding in tort, has been held by Illinois courts to be subject to its own limitations analysis, but the practical reality is that both claims are filed together at the outset of the case, and the 10-year window gives you the time to litigate thoroughly.
Past results depend on the facts of each case and do not guarantee future outcomes. Every insurance bad-faith case in Illinois is decided on its own facts, and the strength of your case depends on the carrier’s investigation, the fire-origin evidence, the financial records, and the carrier’s institutional conduct in handling the denial.
How the Defense to the Arson Allegation and the Bad-Faith Case Work Together
The same evidence does double duty. The CFEI’s report that the fire was not incendiary supports both the defense to the arson allegation and the bad-faith case against the carrier. The forensic accountant’s report that the hotel was a profitable going concern supports both. The discovery of the carrier’s denial-rate statistics supports both. The adjuster’s notes about the reservation of rights support both. The EUO transcript, with proper objections, supports the bad-faith case against the carrier for the way the EUO was conducted. The carrier’s pattern of hiring the same investigator who always finds arson supports both the defense to the arson allegation and the bad-faith case for the carrier’s institutional misconduct.
This is the architecture. The defense and the offensive are not two separate cases. They are the same case, viewed from two angles. The carrier made one decision — to deny — and that decision is wrong on the coverage and wrong on the conduct. Section 155 is the statute that lets you sue for the conduct, and the discovery is the same discovery in both claims. Your counsel runs both claims as a single, integrated fight.
Why You Need a Lawyer Who Has Sat on the Other Side of the Table
Most insurance bad-faith firms have only ever represented policyholders. We have something else. Lupe Peña spent years as an insurance defense attorney at a national defense firm before he came to our side of the bar. He knows the rooms where carriers draft reservation-of-rights letters. He knows the software carriers use to set reserves and value claims. He knows the IME doctors the carriers select. He knows the surveillance firms the carriers hire. He knows the negotiation scripts the carrier’s adjusters follow. He knows because he was in those rooms. Now he uses that knowledge to dismantle the same playbook from the other side.
Ralph Manginello has 27+ years in the courtroom, including federal court. He is admitted in the Southern District of Texas and has tried and resolved cases across multiple states. He is a member of the Texas Trial Lawyers Association, the Houston Bar Association, the Harris County Criminal Lawyers Association, and the Million Dollar Member of the Trial Lawyers Achievement Association. He is the lawyer who walks into the courtroom and the carrier knows the case is not going away.
For an Illinois case, the firm works with local counsel and, where appropriate, appears pro hac vice. That means the team handling your Springfield, Illinois case has both the Illinois local-court knowledge and the carrier-side insider knowledge that turns a denial into a verdict.
Past results depend on the facts of each case and do not guarantee future outcomes. The firm’s record of commercial verdicts and settlements is the firm’s to speak to, and the result in any future case depends on the facts, the venue, the carrier, and the law as it stands at the time.
What You Should Not Do
In addition to what you should do, there is a list of what you should not do. Each item is built from cases we have seen. Each is a small decision that becomes a large problem.
Do not sit for the EUO without counsel. The EUO is a deposition. The transcript is a weapon. The carrier’s lawyers will ask you about things that have nothing to do with the fire and everything to do with the case they are building. You have a right to counsel. Use it.
Do not produce financial records beyond what the policy requires. The carrier’s request for “all financial records” is broader than the policy’s cooperation clause. Push back. Limit the production. Force the carrier to identify the specific document it needs and the specific policy provision that requires it.
Do not sign a non-cooperation waiver. The carrier may ask you to sign a document that broadens your obligations or waives privileges. Do not sign anything your counsel has not reviewed.
Do not accept a reservation of rights as a fact. A reservation of rights is the carrier’s position. It is not a finding. It is not a court order. It is the carrier’s lawyers telling you what the carrier intends to argue. You have a counter-position. Your counsel will articulate it.
Do not let the carrier’s investigator back into the building unaccompanied. The carrier’s investigator is gathering evidence for the carrier. You are entitled to your own expert in the building at the same time. A CFEI who walks the building alongside the carrier’s investigator sees what the carrier’s investigator sees and can rebut it in real time.
Do not wait. Every day the claim sits unpaid, the business bleeds. The Section 155 case gets stronger as the carrier’s delay gets longer, but the business gets weaker. A free consultation the same week the denial arrives is worth more than a consultation six months later.
What You Should Do Right Now
Call 1-888-ATTY-911. A free consultation gets you a lawyer on the record the same day. The consultation is confidential, free, and gives you the picture of what your case is and is not. There is no obligation. There is no pressure. There is a person on the other end of the line who has done this before and can tell you what comes next.
Preserve your records. Pull the policy, the declarations page, the proof of loss, every piece of correspondence with the carrier, every email, every text message, every voicemail. Save them in a place the carrier cannot reach. Do not delete anything.
Tell your team to stop talking. No more conversations with the field adjuster. No more calls with the EUO attorney. No more social media posts about the loss. The carrier’s investigator is already building a record. You should be too, but through a lawyer.
Pull the State Fire Marshal’s file. If the State Fire Marshal has issued a report, get a copy. If the State Fire Marshal is still investigating, find out the status. The Marshal’s report is one of the first things your counsel will request, and the sooner you have it, the sooner the defense and the bad-faith case can be aligned.
Document the loss the business is taking. Every day the hotel is closed, every cancelled booking, every terminated employee, every defaulted loan payment — the carrier’s delay is documented. Section 155 turns that documentation into the case the carrier cannot ignore.
Past results depend on the facts of each case and do not guarantee future outcomes. The single most important step is the one you take today, not the one you take next year.
Frequently Asked Questions
Can my insurance company really deny a multi-million-dollar commercial property claim just by accusing me of arson?
Yes — and that is exactly what the intentional-loss exclusion is built to allow. But the exclusion only works if the carrier has the evidence to support it. The carrier’s “evidence” is usually a private investigator’s opinion that the fire was incendiary, an opinion the carrier paid for. The defense is to commission an independent fire-origin investigation, depose the carrier’s expert on his methodology, his prior opinions, and his relationship with the carrier, and put the carrier’s institutional denial pattern in front of a jury. The exclusion is broad. The carrier’s evidence to support it is often thin. A Section 155 case in Illinois is built to expose that gap.
What is the intentional loss exclusion in a commercial property policy?
Every commercial property policy contains an exclusion that bars coverage for loss caused intentionally by an insured. The exclusion is the carrier’s first move when a large loss comes in. The exclusion is enforceable only if the carrier can prove the loss was caused intentionally — a burden the Illinois courts place on the carrier. The carrier’s proof is typically a fire investigator’s report. The defense to the exclusion is a parallel investigation, a forensic accountant’s report on the financial motive (or lack of it), and the carrier’s own conduct before and after the loss.
What is Section 155 of the Illinois Insurance Code?
Section 155, codified at 215 ILCS 5/155, is the Illinois insurance bad-faith statute. If a court finds that the carrier’s refusal to pay a claim was “vexatious and unreasonable,” Section 155 authorizes the court to award the insured reasonable attorney fees and an amount up to $60,000 in additional damages, on top of the actual policy benefits. Section 155 is the statute that turns a denied claim into a fee-shifted case against the carrier. It is the most important tool an Illinois policyholder has when a carrier refuses to pay in bad faith.
How long do I have to sue my insurance company in Illinois?
Claims based on a written insurance policy are governed by the 10-year statute of limitations for written contracts under 735 ILCS 5/13-206. The Section 155 bad-faith claim is subject to its own limitations analysis under Illinois tort law. The practical answer: file the complaint as soon as possible. The longer you wait, the more evidence fades, the more the business bleeds, and the more the carrier can argue that you accepted the denial by waiting.
What is the “examination under oath” and can I refuse to attend?
The examination under oath (EUO) is a contractual right in nearly every commercial property policy. The carrier can require you to appear and answer questions under oath, with a stenographer, about the loss. You cannot refuse to attend — but you should not attend without counsel. A lawyer at the EUO makes sure the questions stay within the policy’s scope, makes proper objections, and prevents the carrier from using the EUO as a fishing expedition. The single most damaging mistake a policyholder makes is sitting for an EUO alone and saying things that become admissions in the carrier’s denial letter.
What if the Illinois State Fire Marshal says the fire was incendiary?
The State Fire Marshal’s conclusion that a fire was incendiary is not a criminal conviction and is not a finding of intent. The Marshal’s report is one piece of evidence. The defense to the Marshal’s incendiary finding is the same as the defense to the carrier’s investigator’s incendiary finding: a parallel, NFPA 921-compliant fire-origin investigation that examines the physical evidence, considers alternative ignition sources, and explains why the Marshal’s investigator or the carrier’s investigator got it wrong. The State Fire Marshal’s report is admissible, but it is not dispositive. A jury can accept a competing fire-origin opinion over the State Fire Marshal’s.
How do I prove my hotel was not financially motivated to commit arson?
A forensic accountant goes through the hotel’s books the way a jury would understand them: profitability, occupancy, RevPAR, debt service, pending bookings, capital reserves, franchise obligations. A hotel that is worth more as a going concern than as a torched lot is not a hotel whose owner benefits from arson. A hotel that is profitable, with steady occupancy and a franchise to protect, has no motive to burn. The forensic accountant’s report shows the jury the math the carrier’s narrative tries to obscure.
How much is my insurance bad-faith case worth?
The case value depends on the policy limits, the scope of the consequential damages, the strength of the bad-faith evidence, and the carrier’s conduct. The case value range for a major commercial property insurance bad-faith case in Illinois, where the carrier has accused the owner of arson, runs from approximately $2.5 million to $20 million. The lower end is the policy benefits alone. The upper end is the policy benefits plus consequential damages plus the Section 155 attorney-fee award plus the statutory penalty. The bad-faith case grows as the carrier’s delay grows.
Will the criminal case against me affect the insurance bad-faith case?
A criminal case does not pause the civil case. The Fifth Amendment protects you from being compelled to testify in any criminal case, and that protection extends to the EUO in the civil case while a criminal case is pending. The criminal case and the civil case are separate. The carrier’s evidence is the same in both. The standard of proof is different. The criminal case requires proof beyond a reasonable doubt. The civil case requires proof by a preponderance of the evidence. A verdict of not guilty in the criminal case does not automatically win the civil case, but it makes the civil case much easier. A criminal conviction does not foreclose the bad-faith case, but it changes the strategic landscape dramatically. The right move is to engage separate criminal counsel if needed, invoke the Fifth in the civil EUO, and let the civil case proceed on the carrier’s misconduct.
What if I have a prior insurance claim on my record?
A prior insurance claim is not arson. A prior claim is a fact, and the carrier’s investigators routinely dig for any prior claim history to use as “motive” evidence. The right response is to let your counsel address it head-on: what was the prior claim, what was the outcome, and why is the prior claim relevant to the current loss? Often the prior claim is a small, legitimate, properly-paid claim that the carrier’s investigator is now trying to weaponize. The jury will see through that.
Can the insurance company access my personal bank accounts and tax returns?
Only if you let them. The policy’s cooperation clause requires you to provide documents reasonably related to the loss, but “reasonably related” is a contested phrase. The carrier’s demand for your personal bank accounts, tax returns, and credit-card statements goes well beyond the typical cooperation clause. Your counsel can push back, limit the scope of the production, and force the carrier to identify the specific document it needs. If the carrier obtains the documents through a production that exceeds the cooperation clause, that overreach is itself evidence of bad faith.
Do I have to go to the deposition the insurance company schedules?
You have to appear, but only with proper notice and only with counsel. You do not have to answer improper questions. You do not have to volunteer information beyond the scope of the deposition notice. Your counsel will defend the deposition, make appropriate objections, and make sure the deposition transcript is a fair record rather than a fishing expedition.
How long will the case take?
A commercial property insurance bad-faith case in Illinois typically takes 18 to 36 months from the denial to resolution. The first 90 days are about evidence preservation and complaint filing. The next 6 to 12 months are about discovery. The next 6 to 12 months are about summary judgment motions. The case either resolves in mediation or proceeds to trial. The Section 155 attorney-fee award is what makes the timeline worth it for the policyholder — even if the case settles before trial, the attorney-fee component protects the policyholder from being out of pocket for the cost of forcing the carrier to honor its bargain.
Why does the carrier’s delay help my case?
The Illinois Department of Insurance’s Statement of Position on claim handling says an insurer that delays adjustment of a claim or pays less than the amount due without reasonable justification is liable for the loss plus attorney fees. Delay is not a neutral act. Delay is the carrier’s decision not to pay. Every month the carrier sits on the claim while the hotel bleeds, the carrier’s delay file grows. The carrier’s own internal emails and adjuster notes document the delay. The longer the carrier delays, the larger the bad-faith case becomes, because every month of delay is another month of consequential damages the carrier will be asked to pay.
How do I prove the carrier’s “vexatious and unreasonable” denial?
You prove it the same way the carrier proves a covered loss: with documents and testimony. The carrier’s claim file, the adjuster’s notes, the supervisor’s emails, the investigator’s prior reports, the carrier’s denial-rate statistics, the carrier’s claim-handling manual, the testimony of the adjuster and the supervisor in deposition — all of it tells the story of a denial that was decided before the investigation was complete. A carrier that denies a claim without interviewing key witnesses, without considering the policyholder’s evidence, without conducting a proper origin-and-cause investigation, and without engaging in meaningful coverage discussions has met the Section 155 standard. The discovery is what proves it.
What is the role of the Illinois Department of Insurance?
The Illinois Department of Insurance regulates insurance companies doing business in Illinois. The Department has a complaint process that any policyholder can use. The complaint process is not a substitute for litigation, and a Department complaint does not give you a private right of action under Section 155. But a Department complaint creates a paper trail. It puts the carrier on notice that the Department is watching. It can, in some cases, prompt the carrier to revisit a denial. The right move is to file the Department complaint in parallel with — not instead of — private litigation.
Does the carrier’s “independent” fire investigator really work for the insurance company?
In our experience, yes. The “independent” fire investigator is independent of the public fire marshal. The investigator is not independent of the carrier that paid him. The investigator’s billing records, his prior reports for the same carrier, his prior testimony, and his relationship with the carrier’s counsel are all discoverable. The “independent” label is marketing. The reality is in the file.
What is the most common mistake hotel owners make after a denial?
The most common mistake is to keep producing documents and keep sitting for EUOs without counsel, hoping the carrier will see the truth and pay. The carrier is not waiting to see the truth. The carrier is building a record to support the denial. Every unprotected conversation with the carrier is a deposition the carrier is taking without your lawyer in the room. The second most common mistake is waiting. The hotel bleeds while the policyholder waits for the carrier to come around. The carrier does not come around. The carrier waits for the policyholder to fail.
The Bottom Line
You are not guilty of anything the carrier is accusing you of. You are the victim of a denial machine that runs on delay, biased experts, and the assumption that you will not fight back. Illinois law — Section 155 of the Insurance Code, the reasonable-expectation doctrine, the 10-year statute of limitations for written contracts, the State Fire Marshal’s independent investigation, the federal and state court system that polices carrier misconduct — was written for exactly this case. The defense to the arson allegation and the bad-faith case against the carrier are the same case, run together, with the same discovery, the same experts, and the same trial team. The carrier made one decision — to deny. That decision is reversible. Reversing it is the job.
Call 1-888-ATTY-911. Free consultation. Same day. Confidential. We work on contingency. No fee unless we win your case. Hablamos Español. The insurance company has its lawyers. Now you have ours.
Learn more about our insurance claim practice. Meet Ralph Manginello. Meet Lupe Peña. Watch our guide on insurance claim denials. Contact our office today.
Past results depend on the facts of each case and do not guarantee future outcomes. The information on this page describes the general legal framework in Illinois for first-party insurance disputes and does not create an attorney-client relationship. To discuss your specific case, contact Attorney911 for a free consultation at 1-888-ATTY-911.