Neiman v. Economy Preferred Insurance Co.

Citation: Not availableDocket: 1-04-0774 Rel

Court: Appellate Court of Illinois; May 20, 2005; Illinois; State Appellate Court

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Plaintiffs Kenneth M. Neiman and Janice K. Neiman filed a lawsuit against Economy Preferred Insurance Company for breach of contract and bad faith due to the company's failure to pay a claim related to an insurance policy for their property. After arbitration favored the plaintiffs, and the defendant paid the awarded amount, the plaintiffs again alleged bad faith in a subsequent suit. They amended their complaint to include several affiliates of the defendant.

The trial court partially granted the defendant's motion to dismiss, allowing the claim against the primary defendant to continue while dismissing the affiliates. The defendant then successfully moved for summary judgment, which the plaintiffs contested. They sought to reverse the summary judgment, vacate the dismissal of the affiliates, disqualify a law firm, and remand the case for trial.

The background details include that the plaintiffs' property sustained damage due to rain on July 23, 1999, leading to an insurance claim. Following partial payments from the defendant, the plaintiffs sued for the remaining balance of $8,740 and additional damages due to delayed payment. An arbitration ruling awarded the plaintiffs this amount. However, the defendant failed to provide payment by the agreed date, prompting the plaintiffs to file another suit for bad faith and delay in payment, seeking $25,000 each in damages. The defendant requested additional information from the plaintiffs to issue the payment, citing federal tax law requirements. The appellate court affirmed the trial court’s decisions.

On October 29, 2001, the defendant informed the plaintiffs about a previous conversation where the plaintiffs declined to provide Edwin Neiman's tax identification number or a lien waiver. Instead, the defendant planned to use Neiman's social security number obtained from a deposition and was preparing to pay the judgment from August 3, 2001, including associated costs and interest. On October 20, 2001, the defendant paid $8,938.72, leaving a remaining balance of $288, which was paid on November 13, 2001, thus fully satisfying the judgment. The plaintiffs signed a full satisfaction of payment and release the following day. 

In May 2002, the plaintiffs amended their complaint against the defendant, including its affiliates and alleging violations of section 155 of the Code. A joint motion to dismiss was filed by the defendant and affiliates, but a hearing revealed that the defendant had improperly filed and served the plaintiffs, leading to an adjournment. After reconvening, the defendant moved to substitute the judge, which was granted, and the case was reassigned to Judge Michael Hogan. He partially granted the motion, dismissing the affiliates due to their non-party status to the original judgment but retaining the defendant.

Subsequently, the defendant filed an emergency motion for summary judgment, which was granted by Judge Donald Devlin, while the plaintiffs' cross-motion was denied. Judge Devlin determined that section 155 did not apply as it pertains to delays in settling claims, not in paying a judgment where liability was already established. Consequently, he ruled that the plaintiffs' complaint lacked merit. 

On appeal, plaintiffs raised several issues, particularly contesting the dismissal of the affiliates and the granting of summary judgment to the defendant. They also challenged procedural decisions made by Judge Zwick regarding the substitution of judges and Judge Conlon's denial of a disqualification motion. The defendant countered with procedural objections, asserting that the plaintiffs' brief failed to adhere to Illinois Supreme Court Rule 341(e), citing missing elements such as a summary statement, introductory paragraph, statement of issues, and required appendices.

Plaintiffs failed to comply with certain procedural requirements in their appellate brief, notably not including an appendix and not labeling some items separately. Despite these shortcomings, the court recognized that the issues and judgments were generally clear and chose to review the case at its discretion. However, the court agreed with the defendant's argument that only the orders from Judges Hogan and Devlin were subject to review, as the plaintiffs' notice of appeal specifically referenced these two orders without mentioning those from Judges Zwick and Conlon. According to Supreme Court Rule 303(b)(2), the appellate court lacks jurisdiction to review judgments not specified in the notice of appeal, unless those judgments are part of the procedural progression leading to the specified judgments, which was not the case here. The orders from Judges Zwick and Conlon were deemed ancillary and unrelated to the substantive orders being appealed. Consequently, the court will only consider the plaintiffs' claims regarding the orders from Judges Hogan and Devlin.

Judge Hogan's order dismissed the affiliates of the defendant from the case, with plaintiffs arguing that the affiliates were improperly excluded as they were allegedly jointly and severally liable under the insurance policy. Plaintiffs asserted that various affiliates were referenced in the insurance policy and related financial documents, implying their liability. However, Judge Hogan ruled that the plaintiffs' complaint was not legally sufficient, as the allegations failed to support a cause of action under section 155 of the Code of Civil Procedure, which addresses vexatious delay in payment. The court highlighted that the plaintiffs had only pursued their case against the defendant, obtaining a judgment solely against it, and had not named the affiliates in the underlying suit. Consequently, the failure to include the affiliates in the initial claim led to their proper dismissal from the subsequent action. The court emphasized that not naming a party results in the dismissal of claims against that party, affirming the correctness of Judge Hogan's decision. The summary judgment granted to the defendant by Judge Devlin on the section 155 claim was also noted as a subsequent issue for review.

Plaintiffs argue that the court's ruling was erroneous, claiming their complaint adequately stated a claim for relief under section 155 due to the defendant's bad faith and vexatious conduct in delaying payment of a judgment from August 3, 2001. They allege that the defendant took several months to pay the judgment without reasonable justification and failed to pay the full amount at once, forcing them to initiate a lawsuit to recover the remaining balance. In contrast, the defendant maintains that the trial court's order was correct, asserting that the circumstances do not fall under the provisions of section 155, thereby precluding the plaintiffs from recovery.

The court affirms the defendant's position, stating that summary judgment is appropriate when the evidence shows no genuine dispute over material facts and the moving party is entitled to judgment as a matter of law. Summary judgment serves as a means to efficiently resolve cases where the moving party's entitlement is clear. The appellate review of such judgments is de novo, with reversals occurring only if a genuine issue of material fact is identified.

The interpretation of statutory provisions is guided by legislative intent, primarily determined by the statute's plain language. Section 155 addresses situations involving insurance liability or unreasonable delays in claim settlements, allowing courts to award reasonable attorney fees and other costs in cases deemed vexatious or unreasonable. The statute specifies recovery limits based on a percentage of the judgment, a fixed amount, or the difference between the awarded amount and any pre-litigation settlement offer.

In this section, the court clarifies the applicability of 215 ILCS 5/155, which allows for monetary remedies in specific insurance-related cases. The statute pertains to situations where three issues are unresolved: insurer liability, the amount owed under a policy, or unreasonable delays in settling claims. Here, the plaintiffs incorrectly believed they were entitled to relief under this statute. The court agrees with Judge Devlin that section 155 does not apply because the underlying judgment had already established the insurer's liability and the amount owed prior to the plaintiffs filing their suit. The only potential relevance of section 155 could be related to an unreasonable delay in settling a claim. However, the court finds that by the time the plaintiffs filed their suit, there was no claim to settle, as a judgment had been rendered and paid. The plaintiffs' contention that a "claim" and a "judgment" are equivalent is rejected, as legal definitions demonstrate they are distinct concepts. A "claim" is a demand for payment, whereas a "judgment" is the court's final decision on a dispute between parties. Thus, the plaintiffs' arguments do not align with the statutory requirements.

A judgment is deemed outcome determinative when it resolves a claim, which involves a contest needing a final decision. Section 155 is intended to address unreasonable delays in settling claims, yet in this case, a judgment had already been entered before the plaintiffs initiated a section 155 suit, and the defendant had fully paid the claim. Consequently, no claim remained to be settled, leading to the conclusion that section 155 is inapplicable.

The case referenced, Price, involved a plaintiff whose claim was mishandled by the defendant-insurer, who avoided arbitration and delayed payment. The court in Price determined that section 155 was relevant because the claim had not yet been resolved when the plaintiff sought damages. In contrast, the current case involved an already entered judgment and full payment by the defendant, which plaintiffs accepted. They later pursued section 155 damages only after the claim was fully settled, indicating that the delay pertained to a judgment already made rather than an unresolved claim. Thus, the circumstances do not warrant application of section 155.

Section 155 of the relevant statute explicitly addresses the behavior of insurance companies during the claims process, particularly before a claim reaches court. Judge Devlin highlighted that the legislature intended to deter insurers from delaying settlements by allowing insured parties to sue for damages if they encounter unreasonable and vexatious delays. This interpretation aligns with the rationale established in the case of Estate of Price v. Universal Casualty Co., where the court found the insurer's refusal to arbitrate and settle a claim to be vexatious. The court emphasized that section 155 applies to insurers' actions that unjustifiably delay or deny legitimate claims, aiming to hold them accountable for costs incurred by the insured in pursuing claims, while discouraging exploitation of their financial leverage.

In the current case, the plaintiffs had already completed their claim and received a judgment paid by the defendant before filing under section 155. The statute specifically refers to "an unreasonable delay in settling a claim," not "an unreasonable delay in paying a judgment." The court noted that there are separate legal mechanisms for collecting judgments and that section 155 is focused on pre-judgment conduct. The absence of language regarding payment delays in the statute suggests the legislature did not intend for section 155 to apply in such circumstances. Consequently, the court affirmed the dismissal of the affiliates and the summary judgment favoring the defendant.