It doesn't always mean that something is wrong with the coil, however. For example, on my LOTR I've had issues with the sword ramp coil not releasing balls for multiball and I've had the bad coil report. All I had to do to fix it was tighten up the whole assembly and it performed perfectly afterwards. When it gives you that bad coil warning, it could be anything from the coil itself failing to anything in the entire assembly. Basically the game is saying that the coil has been sent the signal by the CPU to activate but that the desired result hasn't occurred.
Coils very, very, rarely go bad. You're probably looking at something related to that coil, but not the coil itself.
What issues have you seen with your game that would cause it to give you that error?