Barn II, Inc. an Illinois Corporation, d/b/a Conklin Barn II Dinner Theatre v. West Bend Mutual Insurance Company
1:17-cv-01184
C.D. Ill.Jan 18, 2018Background
- Barn II, Inc. filed suit in Illinois state court against West Bend alleging four counts: improper claims practices (Count I), breach of contract, consumer fraud (Count III), and declaratory relief. Count I was voluntarily dismissed without prejudice before removal; Count III was dismissed with prejudice.
- West Bend removed the case to federal court on diversity grounds. The court set a scheduling order with an August 15, 2017 deadline to amend pleadings and discovery to close May 31, 2018.
- After depositions and discovery produced evidence Barn II contends supports a Section 155 claim (vexatious/unreasonable denial), Barn II moved (Dec. 20, 2017) for leave to file an amended complaint reinstating Count I.
- West Bend opposed, arguing Barn II knew the bases for denial from denial letters and reports, and that a bona fide coverage dispute would defeat a Section 155 claim (futility). West Bend also argued Barn II knew relevant witnesses earlier.
- The magistrate judge applied Rule 16(b)’s good-cause standard (because the amendment deadline passed), found Barn II acted diligently in seeking amendment shortly after depositions revealed supporting testimony, and concluded allowing amendment was not futile or prejudicial.
- The court granted leave to file the amended complaint and ordered the proposed amended complaint filed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether amendment is allowed after scheduling-order deadline (Rule 16 good cause) | Discovery produced new evidence post-deadline that supports reinstating Count I; Barn II was diligent in moving soon after depositions | Barn II knew denial grounds earlier from denial letters and engineer report; should have moved sooner | Court: Good cause shown; Barn II was diligent and moved promptly after discovery produced supportive testimony; amendment allowed |
| Whether Rule 15 denial factors (futility, prejudice, delay) bar amendment | Leave to amend should be freely given; allegations allege unfair investigation, failure to interview witnesses, reliance on ‘‘long term deterioration’’ theory, wrongful denial causing closure | Futility: bona fide coverage dispute defeats Section 155 claim; facts do not support bad faith/vexatious conduct | Court: On pleadings, futility not obvious; Section 155 inquiry is factual and not resolved now; Rule 15 factors do not preclude amendment |
| Whether a bona fide dispute as to coverage defeats Section 155 claim | Barn II alleges investigative and procedural failures constituting vexatious/unreasonable denial | West Bend contends there was a bona fide dispute about coverage based on reports and denial letters | Court: Bona fide dispute not so clear on pleadings to render amendment futile; factual inquiry required |
| Whether amendment would unduly prejudice West Bend or indicate bad faith/undue delay | Amendment was timely after discovery; no bad faith alleged | West Bend claims earlier awareness and potential prejudice from late reinstatement | Court: No undue prejudice, bad faith, or repeated failures to cure; amendment permitted |
Key Cases Cited
- Trustmark Ins. Co. v. Gen. & Cologne Life Re of America, 424 F.3d 542 (7th Cir.) (post-deadline amendments require Rule 16(b) good-cause showing)
- Alioto v. Town of Lisbon, 651 F.3d 715 (7th Cir.) (apply Rule 16(b) before Rule 15 analysis)
- Mintel Int’l Grp., Ltd. v. Neergheen, 636 F. Supp. 2d 677 (N.D. Ill.) (applying Rule 16(b) when amendment deadline passed)
- Bausch v. Stryker Corp., 630 F.3d 546 (7th Cir.) (Rule 15 denial factors: undue delay, bad faith, prejudice, futility)
- Med. Protective Co. v. Kim, 507 F.3d 1076 (7th Cir.) (vexatious/unreasonable conduct under totality of circumstances)
- Wheeler v. Assurant Specialty Prop., 125 F. Supp. 3d 834 (N.D. Ill.) (Section 155 barred when bona fide coverage dispute exists)
- Spearman Indus., Inc. v. St. Paul Fire and Marine Ins. Co., 138 F. Supp. 2d 1088 (N.D. Ill.) (example of granting summary judgment on Section 155 where no evidence of bad faith)