Illinois Founders Insurance Company v. Williams
2015 IL App (1st) 122481
| Ill. App. Ct. | 2015Background
- In 1997 Felicia Williams died and her son Dellvonte Gibson (a minor) was injured in a car crash; Williams was driving a vehicle owned by Julius Moore and was uninsured. Defendant Deloise Williams (administrator/guardian) claimed the crash was a hit-and-run; Founders insured Moore.
- Founders disputed hit-and-run coverage and filed a declaratory-judgment action in 1999 denying duties because it lacked competent evidence of physical contact with a second vehicle. Arbitration of the hit-and-run claim was stayed.
- Evidence before Founders included police reports and officer depositions indicating a blown tire/loss of control and front-only damage; a witness (James Harris) reported Williams said “somebody ran her off the road.”
- After procedural delays and interlocutory rulings (including an earlier appellate remand), defendant asserted a section 155 counterclaim alleging Founders acted vexatiously and unreasonably in contesting coverage, delaying settlement, failing to negotiate, and refusing arbitration.
- The trial court granted Founders summary judgment on the section 155 claim as to the hit-and-run theory, finding Founders had a bona fide dispute; later a bench trial resulted in judgment for defendant on the declaratory claim but the court denied defendant’s motion to reconsider and denied leave to file a second amended counterclaim. Defendant appealed.
Issues
| Issue | Founders' Argument | Williams' Argument | Held |
|---|---|---|---|
| Whether Founders acted vexatiously/unreasonably (§155) by disputing hit-and-run coverage | Founders had a bona fide dispute based on police reports, officer testimony, owner statements about brake/tire problems, and lack of contact evidence | Founders’ litigation and delay were vexatious; witness statements and later trial evidence supported hit-and-run | Held for Founders: summary judgment affirmed — evidence supported a real, reasonable dispute, so no §155 relief as a matter of law |
| Whether Founders vexatiously delayed the uninsured-motorist (UM) claim | Founders repeatedly stated it did not contest UM coverage and would arbitrate UM claims; any delay is unsupported in record | Williams contends Founders delayed UM resolution and thus acted vexatiously | Not reviewed on merits: record incomplete as to disposition; appellate court declines relief and construes omissions against Williams |
| Whether seeking/staying arbitration of hit-and-run claim was vexatious | Filing declaratory action and obtaining a stay was proper when coverage was disputed; courts must stay arbitration pending coverage resolution | Williams argued staying/arbitration refusal was delay tactic to pressure settlement | Held for Founders: seeking stay and litigating coverage was lawful and not vexatious |
| Whether trial court abused discretion by denying leave to file second amended counterclaim after final judgment | Post-judgment amendment was improper; new evidence would not have overcome the bona fide dispute shown earlier | Williams sought leave based on alleged new trial evidence (fresh left-rear damage) to replead §155 claim | Held for Founders: denial affirmed — record incomplete and amendment post-final-judgment/after summary judgment was barred or properly refused |
Key Cases Cited
- Employers Ins. of Wausau v. Ehlco Liquidating Trust, 186 Ill. 2d 127 (1999) (standards and review for §155 and appellate review when fees denied via dispositive motion)
- Cramer v. Ins. Exchange Agency, 174 Ill. 2d 513 (1996) (§155 provides extracontractual remedy to policyholders)
- State Farm Mut. Auto. Ins. Co. v. Smith, 197 Ill. 2d 369 (2001) (no §155 recovery when bona fide coverage dispute exists)
- Hall v. Henn, 208 Ill. 2d 325 (2003) (summary judgment standard and de novo review)
- McGee v. State Farm Fire & Casualty Co., 315 Ill. App. 3d 673 (2000) (definition of bona fide dispute)
- Morris v. Auto-Owners Ins. Co., 239 Ill. App. 3d 500 (1993) (insurer not unreasonable when it reasonably relies on evidence forming a bona fide dispute)
- Foutch v. O’Bryant, 99 Ill. 2d 389 (1984) (appellate presumption in favor of trial-court order when record on appeal is incomplete)
- Estate of Price v. Universal Cas. Co., 322 Ill. App. 3d 514 (2001) (court required to stay arbitration pending resolution of coverage dispute)
- West Bend Mut. Ins. v. Norton, 406 Ill. App. 3d 741 (2010) (an insurer’s unsuccessful challenge to coverage does not, by itself, violate §155)