2018 IL App (2d) 170637
Ill. App. Ct.2018Background
- On August 8, 2011 a commercial building partially collapsed. Owner Charter Properties and tenant Szechwan Garden each had insurance from Rockford Mutual; Szechwan assigned its rights to Charter.
- Parties stipulated coverage but disputed amounts. Charter claimed ~$1.76M rebuild costs and lost rent; Rockford made multiple partial payments totaling $1,100,964 over time and contested the remainder.
- Charter submitted a sworn proof of loss; Rockford held it "in abeyance," requested documents, then rejected it as premature and later halted its adjuster’s inspection before a final estimate.
- A jury (December 2016) found Rockford breached the insurance contracts and awarded amounts; Rockford paid those verdicts and did not appeal.
- Charter pursued a bench trial under 215 ILCS 5/155 (unreasonable and vexatious delay). The trial court found Rockford’s delay and claims practices unreasonable and vexatious, awarding statutory penalties, attorneys’ fees, costs, and prejudgment interest; appellate court affirmed and remanded for additional fees on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rockford’s handling of the claim constituted "unreasonable and vexatious" delay under 215 ILCS 5/155 | Rockford stalled investigations, returned the proof of loss as premature, failed to complete its inspection/estimate, forced Charter to sue, and thus acted vexatiously | There was a bona fide dispute over the amount of loss and scope of coverage, so section 155 sanctions were inappropriate | Court held Rockford’s conduct was unreasonable and vexatious; sanctions under section 155 were warranted (no bona fide dispute justified the delay) |
| Whether Rockford complied with administrative requirements to explain denials or lower offers (50 Ill. Adm. Code 919.50) | Rockford failed to provide a proper written explanation or timely determination after investigation | Rockford contends its correspondence reflected ongoing investigation and dispute over amounts | Court found Rockford did not complete the investigation or provide the required written explanations, supporting the section 155 finding |
| Standard of review for section 155 award and underlying factual findings | Charter relied on abuse-of-discretion for the sanction and the bench-findings supporting it | Rockford urged manifest-weight (or other less deferential) review for factual findings and de novo for statutory interpretation | Majority reviewed ultimate sanction for abuse of discretion, bench factual findings under manifest-weight principles; concurrence argued manifestly erroneous/clearly erroneous standard for the mixed legal-factual question of bona fide dispute |
| Remedy scope: entitlement to additional appellate fees/costs under section 155 | Charter sought remand to recover fees/costs incurred defending the posttrial motion and appeal | Rockford opposed remand for appellate/posttrial fees | Court remanded for trial court to assess and award reasonable fees and costs for posttrial proceedings and this appeal |
Key Cases Cited
- Employers Insurance of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127 (1999) (section 155 awards are an extracontractual remedy; general abuse-of-discretion standard for award of fees)
- State Farm Mut. Auto. Ins. Co. v. Smith, 197 Ill. 2d 369 (2001) (section 155 inappropriate where bona fide dispute exists)
- McGee v. State Farm Fire & Casualty Co., 315 Ill. App. 3d 673 (2000) (definition of bona fide dispute as real, actual, genuine)
- Morris v. Auto-Owners Ins. Co., 239 Ill. App. 3d 500 (1993) (insurer relying reasonably on evidence that forms bona fide dispute avoids section 155 liability)
- Buckner v. Causey, 311 Ill. App. 3d 139 (1999) (section 155 relief is discretionary; factual determination reviewed for manifest weight)
- Boyd v. United Farm Mut. Reinsurance Co., 231 Ill. App. 3d 992 (1992) (whether insurer behavior is vexatious/unreasonable is a question of fact)
- Valdovinos v. Gallant Insurance, 314 Ill. App. 3d 1018 (2000) (when appellate court affirms section 155 sanctions, remand for post-judgment/appellate fee assessment is appropriate)