Rasho v. Member Select Insurance Company
1:24-cv-03336
| N.D. Ill. | Jul 18, 2025Background
- Plaintiffs Zaia Rasho and Rosemary Moro purchased a homeowners’ insurance policy from MemberSelect Insurance Company, paid all premiums, and claimed damage on April 5, 2023, allegedly caused by wind and water infiltration due to storm activity.
- MemberSelect denied the claim, asserting that the wind damage fell below the deductible and the water damage was excluded by policy language referencing flood and surface water exclusions.
- Plaintiffs obtained their own inspection reports, but MemberSelect’s denial letter and an affiliated adjuster’s forensic report attributed the basement water damage to sump pump failure, not storm damage.
- Plaintiffs amended their complaint after an initial dismissal, reasserting a claim under Illinois Insurance Code Section 155, alleging MemberSelect’s claim practices were vexatious and unreasonable.
- MemberSelect moved to dismiss the amended Section 155 claim under Rule 12(b)(6), citing a genuine, good-faith dispute regarding coverage.
- The court reviewed the pleadings and attached documents, accepting factual allegations as true for purposes of the motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Section 155 bad faith claim | MemberSelect acted vexatiously and unreasonably in denying coverage and failing to consider plaintiffs’ evidence | Denial was based on reasonable interpretation of policy and evidence, showing a bona fide dispute | Bona fide dispute exists; dismissal required |
| Sufficiency of amended complaint | Amended complaint corrects earlier deficiencies | No new facts plausibly support vexatious/unreasonable conduct | Complaint still insufficient; claim dismissed |
| Effect of bona fide dispute | Dispute about cause of damage does not preclude bad faith claim | Bona fide dispute forecloses Section 155 remedy | Bona fide dispute precludes Section 155 claim |
| Opportunity to present evidence | MemberSelect ignored or failed to consider plaintiffs’ inspections | Defendant relied on their own inspection/forensic report | Consideration of contrary evidence not enough |
Key Cases Cited
- Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017 (7th Cir. 2013) (Section 155 provides an extracontractual remedy only if the insurer's denial is vexatious and unreasonable)
- Cramer v. Ins. Exch. Agency, 174 Ill. 2d 513 (Ill. 1996) (outlines standard for Section 155 bad faith claims under Illinois law)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (complaint must state a claim that is plausible on its face)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (details pleading standard for plausible claims sufficient to survive a 12(b)(6) motion)
- Gibson v. City of Chicago, 910 F.2d 1510 (7th Cir. 1990) (motion to dismiss standard requires factual allegations to be taken as true)