Delatorre v. Safeway Insurance Co., 2013 IL App (1st) 120852, 989 N.E.2d 268
Alexander v. Bothsworth, 26 Cal.App. 589 (1915) 147 P. 607 . “Party cannot be bound by contract that he has not made or authorized. Free consent is an indispensable element in making valid contracts.”
(215 ILCS 5/429) (from Ch. 73, par. 1036)
Sec. 429. Procedure as to unfair methods of competition and unfair or deceptive acts or practices which are not defined.
(1) Whenever the Director shall have reason to believe (a) that any person engaged in the business of insurance is engaging in this State in any method of competition or in any act or practice in the conduct of such business which is not defined in Section 424, as an unfair method of competition or an unfair or deceptive act or practice or that any person domiciled in or resident of this State engaged in the business of insurance is engaging in any other state, territory, province, possession, country, or district in which he or she is not licensed or otherwise authorized to transact business in any method of competition or in any act or practice in the conduct of such business which is not defined in Section 424, as an unfair method of competition or an unfair or deceptive act or practice, and (b) that such method of competition is unfair or that such act or practice is unfair or deceptive, or (c) that such unfair method of competition or such unfair or deceptive act or practice violates any of the provisions of this Code or any other law of this State, or (d) that a proceeding by him or her in respect thereto would be to the interest of the public, he or she may issue and serve upon such person a statement of the charges in that respect and a notice of a hearing thereon to be held at a time and place fixed in the notice, which shall not be less than 10 days after the date of the service thereof. Each such hearing shall be conducted in the same manner as the hearings provided for in Section 426. The Director shall, after such hearing, make a report in writing in which he or she shall state his or her findings as to the facts, and he or she shall serve a copy thereof upon such person.
(2) If such report charges a violation of this Article and if such method of competition, act, or practice has not been discontinued, the Director may, through the Attorney General of this State, at any time after the service of such report cause a complaint to be filed in the Circuit Court of Sangamon County or in the Circuit Court of this State within the county wherein the person resides or has his principal place of business, to enjoin and restrain such person from engaging in such method, act, or practice. The court shall have jurisdiction of the proceeding and shall have power to make and enter appropriate orders in connection therewith and to enter such orders as are ancillary to its jurisdiction or are necessary in its judgment to prevent injury to the public pendente lite.
(3) A transcript of the proceedings before the Director including all evidence taken and the report and findings shall be filed with such complaint. If either party shall apply to the court for leave to adduce additional evidence and shall show, to the satisfaction of the court, that such additional evidence is material and there were reasonable grounds for the failure to adduce such evidence in the proceedings before the Director the court may order such additional evidence to be taken before the Director and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Director may modify his or her findings of fact or make new findings by reason of the additional evidence so taken, and he or she shall file such modified or new findings with the return of such additional evidence.
(4) If the court finds (a) that the method of competition complained of is unfair or that the act or practice complained of is unfair or deceptive, or (b) that such unfair method of competition or such unfair or deceptive act or practice is in violation of this Code or any other law of this State and (c) that the proceeding by the Director with respect thereto is to the interest of public and (d) that the findings of the Director are supported by the evidence, it shall enter an order enjoining and restraining the continuance of such method of competition, act, or practice.
(Source: P.A. 100-863, eff. 8-14-18.)
(215 ILCS 5/430) (from Ch. 73, par. 1037)
Sec. 430. Judicial review by intervenor. If the report of the Director does not charge a violation of this Article, then any party in interest who was an intervenor in the proceedings before the Director may within 35 days after the service of such report, cause a complaint to be filed in the Circuit Court of Sangamon County for a review of such report. Upon such review, the court shall have authority to issue appropriate orders and judgment in connection therewith, including, if the court finds that it is to the interest of the public, orders enjoining and restraining the continuance of any method of competition, act or practice which it finds, notwithstanding such report of the Director, constitutes a violation of this Article.
(Source: P.A. 79-1362.)
The elements of a private cause of action under the Consumer Fraud and Deceptive Business Practice Act are: (1) a deceptive/fraudulent act or practice by the defendant; (2) the defendant intended the plaintiff to rely on the deception/fraud; (3) the deception/fraud occurred in the course of conduct involving trade or commerce; and (4) actual damages to the plaintiff proximately caused by the deception/fraud.
One federal statute defines commerce as: “the exchanging, buying, or selling of things having economic value between two or more entities, for example goods, services, and money. Commerce is often done on a large scale, typically between individuals, businesses, or nations.” See: 15 U.S.C. §1127
In law, proximately means in a way that directly causes damage, loss, or injury to someone.
The Act provides for civil and criminal liability, and a private cause of action to all persons who suffer damage as a result of a violation of the Act. Ashkanazy v. I. Rokeach & Sons, Inc., 757 F. Supp. 1527 (1977); Bank One Milwaukee v. Sanchez, 336 Ill. App. 3d 319 (2d Dist. 2003).
The Illinois Supreme Court has narrowly defined the common-law cause of action for “bad faith.” As this Court has recognized, “to sustain a successful claim for bad faith, TSC must prove that: (1) a duty to settle existed; (2) the insurer breached that duty; and (3) the breach caused injury to the insured.” (Doc. 304 at 5.) “The duty [to settle] does not arise at the time the parties enter into the insurance contract, nor does it depend on whether or not a lawsuit has been filed.” Haddick ex rel. Griffith v. Valor Ins., 763 N.E.2d 299, 304 (Ill. 2001). The duty also does not arise until a third party demands settlement within limits. Id. at 305. Even when a demand is made, the duty arises only if there is “a reasonable probability of a finding of liability against the insured.” Id. at 304 (emphasis added). Consistent with its plain meaning, a “reasonable
probability” means “at least more likely than not.” Powell v. Am. Serv. Ins. Co., 2014 IL App (1st) 123643, ¶ 36, 7 N.E.3d 11 (emphasis added); Hana v. Illinois State Med. Inter-insurance Exch. Mut. Ins. Co., 2018 IL App (1st) 162166, ¶ 35, – N.E.3d – (affirming these standards for a failure-to-settle claim).
See Waste Management, Inc. v. International Surplus Lines Insurance Co., 144 Ill. 2d 178 (1991). So, if a lawyer has represented an insured and an insurer in attempting to defeat litigation brought against the insured, and the insured later sues the insurance company to cover the underlying judgment, either party may be able to discover each other’s communications with the lawyer concerning the underlying lawsuit.
So v. Suchanek, 670 F.3d 1304, 1310–11 (D.C. Cir. 2012) (rejecting as irrelevant the lawyer’s subjective belief that no conflict existed in a joint representation; rather, the analysis depended on whether an objective observer with the lawyer’s knowledge of the circumstances would have reasonably doubted his ability to undertake the joint representation); Robertson v. Wittenmyer, 736 N.E.2d 804, 807–08 (Ind. Ct. App. 2000) (finding that the lawyer could not have reasonably believed that the representation of one client against another was permissible).
In the insurance defense context, a defense lawyer’s conflict of interest arising out of the representation of multiple insureds may entitle the insureds to independent counsel at the insurer’s expense. See, e.g., Univ. of Miami v. Great Am. Ins. Co., 112 So. 3d 504, 508 (Fla. Dist. Ct. App. 2013) (“[I]n defense of both co-defendants, Great American’s counsel would have had to argue conflicting legal positions, that each of its clients was not at fault, and the other was, even to the extent of claiming indemnification and contribution for the other’s fault. . . . [T]his legal dilemma clearly created a conflict of interest . . . sufficient to qualify for indemnification for attorney’s fees and costs for independent counsel.”
Iowa Sup. Ct. Att’y Disciplinary Bd. v. Willey, 889 N.W.2d 647, 653–54 (Iowa 2017) (“The key questions a lawyer must ask are whether it is likely a difference of interests will occur between the clients and, if so, whether that difference in interests will interfere with the lawyer’s ability to offer independent, professional judgment to each client.” (citation omitted)); Commonwealth v. Cousin, 88 N.E.3d 822, 834–38 (Mass. 2018) (discussing situations that may present Rule 1.7(a)(2) conflicts); State ex rel. Union Planters Bank, N.A. v. Kendrick, 142 S.W.3d 729, 736 (Mo. 2004) (noting that this kind of conflict of interest “in effect forecloses alternatives that would otherwise be available to the client”).
Ashkanazy v. I. Rokeach & Sons, Inc., 757 F. Supp. 1527 (1977); Bank One Milwaukee v. Sanchez, 336 Ill. App. 3d 319 (2d Dist. 2003) “The Act provides for civil and criminal liability, and a private cause of action to all persons who suffer damage as a result of a violation of the Act”. / (815 ILCS 505/2) (from Ch. 121 1/2, par. 262)
“A defendant's good faith in making a representation to another is irrelevant; even an innocent misrepresentation is actionable” per Duran v. Leslie Oldsmobile, Inc., 229 Ill. App. 3d 1032 (1992). / (815 ILCS 505/2) (from Ch. 121 1/2, par. 262) See also Priebe v. Autobarn, Ltd., 240 F.3d 584 (7th Cir. 2001). / (815 ILCS 505/2) (from Ch. 121 1/2, par. 262)
(805 ILCS 5/13.10) (from Ch. 32, par. 13.10) Sec. 13.10. Powers of foreign corporation. No foreign corporation shall transact in this State any business which a corporation organized under the laws of this State is not permitted to transact.
The provisions of the Business Corporation Act apply to all foreign corporations. Foreign corporations enjoy the same, but no greater, rights and privileges as Illinois corporations and are subject to the same duties, restrictions, penalties, and liabilities imposed upon Illinois corporations of like character. (Guide for Qualifying Foreign Corporations published November 2023 and printed/distributed with the authority of the Illinois Secretary of State)
A corporation qualifies as "doing business" in Illinois if its business activity in the state is fairly permanent and continuous—not just occasional or casual. (Hendry v. Ornda Health Corp., Inc., 318 Ill.App.3d at 853 (2000).)
The Court concluded that if a parent company directly participated in creating conditions that led to the injury, the parent company could be liable under the direct participant theory of liability. The Court, after finding direct participant liability viable in Illinois, remanded the case back to the trial court to determine the issue of direct participant liability. In order to establish a cause of action for direct liability against a parent corporation, a plaintiff must prove either:
a parent corporation’s “specific direction or authorization” to its subsidiary to perform a negligent activity; or that the parent corporation “mandate[d] an overall course of action” and then “authorize[d] the manner in which specific activities contributing to that course of action are undertaken.”
Under either scenario, the “direction or authorization” at issue must lead to “foreseeable injuries.”
A parent corporation “specifically directs the actions of its subsidiary” when it uses its ownership interest to “command rather than merely cajole.” Thus, a parent’s direct participation must supersede the discretion and interest of the subsidiary and create conditions leading to the activity complained of.
A plaintiff must establish that “the conduct complained of occurred while the officers/directors [at ] [issue] were acting in their capacity as officers/directors of the parent, rather than of the subsidiary.” In other words, the plaintiff must overcome the presumption that “that directors are wearing their ‘subsidiary hats,’ rather than their ‘parent hats,’ when acting for the subsidiary.” To overcome the presumption, the plaintiff must prove that the dual director or officer’s action was “plainly contrary to the interests of the subsidiary yet nonetheless advantageous to the parent.”
The duty of an insurance carrier to settle typically arises when a third party makes a claim against the insured and there is (1) a reasonable probability of recovery in excess of policy limits; and (2) a reasonable probability that the court will find the insured liable for the claim. Haddick v. Valor Insurance, 198 Ill. 2d 409, 417, 763 N.E.2d 299, 304 (2001).
Some exceptions exist to the general principle that there must be a demand to settle within policy limits before the good faith duty by the carrier is triggered. When the probability of an adverse finding on liability is great, and the amount of probable damages would greatly exceed the policy limits, an insurer is obligated to initiate settlement negotiations. See Adduci, 98 Ill. App. 3d at 478.
The Illinois Supreme Court has narrowly defined the common-law cause of action for “bad faith.” As this Court has recognized, “to sustain a successful claim for bad faith, TSC must prove that: (1) a duty to settle existed; (2) the insurer breached that duty; and (3) the breach caused injury to the insured.” (Doc. 304 at 5.) “The duty [to settle] does not arise at the time the parties enter into the insurance contract, nor does it depend on whether or not a lawsuit has been filed.” Haddick ex rel. Griffith v. Valor Ins., 763 N.E.2d 299, 304 (Ill. 2001). The duty also does not arise until a third party demands settlement within limits. Id. at 305. Even when a demand is made, the duty arises only if there is “a reasonable probability of a finding of liability against the insured.” Id. at 304 (emphasis added). Consistent with its plain meaning, a “reasonable probability” means “at least more likely than not.” Powell v. Am. Serv. Ins. Co., 2014 IL App (1st) 123643, ¶ 36, 7 N.E.3d 11 (emphasis added); Hana v. Illinois State Med. Inter-insurance Exch. Mut. Ins. Co., 2018 IL App (1st) 162166, ¶ 35, – N.E.3d – (affirming these standards for a failure-to-settle claim).
Thomas Organ Co. v. Jadranska Slobondna Plovidba, 54 F.R.D. 367 (N.D. Ill. 1972), documents prepared in ordinary course of business and not compiled for an attorney or requested by an attorney could not be protected by the work product privilege.
Wikel v. Wal-mart Stores, Inc., 197 F.R.D. 493 (N.D. Okla 2000), documents prepared as part of defendant’s routine claims investigation before injured party informed the adjuster that he would get an attorney if the medical bills were not paid were not prepared in anticipation of litigation.
Thiele Dairy, LLC, v. Earthsoils, Inc., 2008 WL 2309454 (D. Neb. 2008), documents prepared by agronomist consultants retained by insurer prior to the denial of the insurance claim were not protected by work product but documents prepared after denial of claim were protected.
S.D. Warren Company v. Eastern Electric Corp., 201 F.R.D. 280 (D. Maine 2001), determined that insurer failed to meet its threshold burden of proving documents in claims file were prepared in anticipation of litigation even though alleged claim was for 1.5 million dollars. Court was given insufficient information as to the validity of the claim actually being for 1.5 million dollars and any supporting information that the insurer anticipated litigation.
SUBSTANTIAL NEED/ UNDUE HARDSHIP FOR ORDINARY WORK PRODUCT-A finding that a document is prepared in anticipation of litigation or for trial does not end the inquiry because it can be overcome by a showing that the party has substantial need for the document and the party is unable to obtain the substantial equivalent without undue hardship. Fed. R. Civ. P. 26(b)(3)(a)(ii). The burden is on the requesting party to show the relevance and importance of the document and the inability to obtain the facts from other sources. A party may be required to take a deposition of a witness before seeking privileged documents. National Union Fire Ins. V. Murray Sheet Metal, 967 F.2d , 980, 985 (4th Cir. 1992). when accident scene has been changed photographs ordered produced. Reedy v. Lull Egn’g Co., 137 F.R.D. 405, 407-408 (M.D. Fla. 1991)
St. Paul Reinsurance Company, Ltd., CNA v. Commercial Financial Corp., 197 F.R.D. 620, 639 (N.D. Iowa 2000), because the insurer is the only party with the information as to what it knew at the time it denied a claim, the insured has met its burden of establishing substantial need for all of the insurance investigative file. Citing to Mission Nat’l Ins. Co. v. Lilly, 112 F.R.D. 160, 164 (D. Minn. 1986),
failure to produce relevant evidence because it was destroyed prior to filing a lawsuit can be sanctioned because of the duty a potential litigant owes to preserve relevant and material evidence. Shimanovsky v. General Motors Corporation, 181 Ill.2d 112, 692 N.E.2d 286, 229 (1998).
It has been held that under Rule 14(a) the plaintiff need not amend his complaint to state a claim against such third party if he does not wish to do so. Satink v. Holland Township (D.N.J. 1940) 31 F.Supp. 229, noted (1940) 88 U.Pa.L.Rev. 751; Connelly v. Bender (E.D.Mich. 1941) 36 F.Supp. 368; Whitmire v. Partin v. Milton (E.D.Tenn. 1941) 5 Fed.Rules Serv. 14a.513, Case 2; Crim v. Lumbermen's Mutual Casualty Co. (D.D.C. 1939) 26 F.Supp. 715; Carbola Chemical Co., Inc. v. Trundle (S.D.N.Y. 1943) 7 Fed.Rules Serv. 14a.224, Case 1; Roadway Express, Inc. v. Automobile Ins. Co. of Hartford, Conn. v. Providence Washington Ins. Co. (N.D.Ohio 1945) 8 Fed.Rules Serv. 14a.513, Case 3. In Delano v. Ives(E.D.Pa. 1941) 40 F.Supp. 672, the court said: “. . . the weight of authority is to the effect that a defendant cannot compel the plaintiff, who has sued him, to sue also a third party whom he does not wish to sue, by tendering in a third party complaint the third party as an additional defendant directly liable to the plaintiff.” Thus impleader here amounts to no more than a mere offer of a party to the plaintiff, and if he rejects it, the attempt is a time-consuming futility. See Satink v. Holland Township, supra; Malkin v. Arundel Corp. (D.Md. 1941) 36 F.Supp. 948; also Koenigsberger, Suggestions for Changes in the Federal Rules of Civil Procedure , (1941) 4 Fed.Rules Serv. 1010. But cf. Atlantic Coast Line R. Co. v. United States Fidelity & Guaranty Co. (M.D.Ga. 1943) 52 F.Supp. 177. Moreover, in any case where the plaintiff could not have joined the third party originally because of jurisdictional limitations such as lack of diversity of citizenship, the majority view is that any attempt by the plaintiff to amend his complaint and assert a claim against the impleaded third party would be unavailing. Hoskie v. Prudential Ins. Co. of America v. Lorrac Real Estate Corp. (E.D.N.Y. 1941) 39 F.Supp. 305; Johnson v. G. J. Sherrard Co. v. New England Telephone & Telegraph Co. (D.Mass. 1941) 5 Fed.Rules Serv. 14a.511, Case 1, 2 F.R.D. 164; Thompson v. Cranston (W.D.N.Y. 1942) 6 Fed.Rules Serv. 14a.511, Case 1, 2 F.R.D. 270, aff'd (C.C.A.2d, 1942) 132 F.(2d) 631, cert. den. (1943) 319 U.S. 741; Friend v. Middle Atlantic Transportation Co. (C.C.A.2d, 1946) 153 F.(2d) 778, cert. den. (1946) 66 S.Ct. 1370; Herrington v. Jones (E.D.La. 1941) 5 Fed.Rules Serv. 14a.511, Case 2, 2 F.R.D. 108; Banks v. Employers’ Liability Assurance Corp. v. Central Surety & Ins. Corp. (W.D.Mo. 1943) 7 Fed.Rules Serv. 14a.11, Case 2; Saunders v. Baltimore & Ohio R. Co. (S.D.W.Va. 1945) 9 Fed.Rules Serv. 14a.62, Case 2; Hull v. United States Rubber Co. v. Johnson Larsen & Co. (E.D.Mich. 1945) 9 Fed.Rules Serv. 14a.62, Case 3. See also concurring opinion of Circuit Judge Minton in People of State of Illinois for use of Trust Co. of Chicago v. Maryland Casualty Co. (C.C.A.7th, 1942) 132 F.(2d) 850, 853. Contra: Sklar v. Hayes v. Singer (E.D.Pa. 1941) 4 Fed.Rules Serv. 14a.511, Case 2, 1 F.R.D. 594. Discussion of the problem will be found in Commentary, Amendment of Plaintiff's Pleading to Assert Claim Against Third-Party Defendant (1942) 5 Fed.Rules Serv. 811; Commentary, Federal Jurisdiction in Third-Party Practice (1943) 6 Fed.Rules Serv. 766; Holtzoff, Some Problems Under Federal Third-Party Practice(1941) 3 La.L.Rev. 408, 419–420; 1. Moore's Federal Practice (1938) Cum.Supplement §14.08. For these reasons therefore, the words “or to the plaintiff” in the first sentence of subdivision (a) have been removed by the amendment; and in conformance therewith the words “the plaintiff” in the second sentence of the subdivision, and the words “or to the third-party plaintiff” in the concluding sentence thereof have likewise been eliminated.
Under policies like those here involved, the insurer and the insured owe to each other the duty to exercise the utmost good faith. While the insurance company, in determining whether to accept or reject an offer of compromise, may properly give consideration to its own interests, it must, in good faith, give at least equal consideration to the interests of the insured[,] and if it fails to do so[,] it acts in bad faith.' " Cernocky, 69 Ill. App. 2d at 208, 216 N.E.2d at 204-05 (quoting Ballard, 196 F.2d at 102, and American Fidelity & Casualty Co. v. G.A. Nichols Co., 173 F.2d 830, 832 (10th Cir. 1949)).
For instance, in Illinois there is a specific set of statutes (see, e.g., 215 Ill. Comp. Stat. 5/155 (“Section 155”)), that determines the rights and remedies for victims of bad faith actions by an insurance company where the carrier drags its heels about settling the case.
This law covers bad faith insurance cases that arise in Illinois. There is not a separate common law tort claim for insurance bad faith in Illinois because the Illinois legislature has acted to create laws that control this issue. See, Cramer v. Insurance Exchange Agency, 675 N.E.2d 897, 174 Ill. 2d 513, 221 Ill. Dec. 473 (1996).
This law includes a provision that allows for attorneys’ fees to be paid by the insurance company who has been found guilty of bad faith in refusing to settle in order to help victims of bad faith get justice (by making the bad faith carrier pay their legal expenses as part of the award). See, Cramer at pp. 520-521.
Section 155 states, in part, that:
(1) In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:
(a) 60% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;
(b) $60,000;
(c) the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action.
Communication with the insured, keeping her fully aware of the claimant's willingness to settle for the amount of coverage, is a factor to be considered. Bailey v. Prudence Mutual Casualty Co., 429 F.2d 1388, 1390 (7th Cir. 1970).
Under policies like those here involved, the insurer and the insured owe to each other the duty to exercise the utmost good faith. While the insurance company, in determining whether to accept or reject an offer of compromise, may properly give consideration to its own interests, it must, in good faith, give at least equal consideration to the interests of the insured[,] and if it fails to do so[,] it acts in bad faith.' " Cernocky, 69 Ill. App. 2d at 208, 216 N.E.2d at 204-05 (quoting Ballard, 196 F.2d at 102, and American Fidelity & Casualty Co. v. G.A. Nichols Co., 173 F.2d 830, 832 (10th Cir. 1949)).
A refusal to negotiate is a factor to be considered. Cernocky v. Indemnity Insurance Co. of North America, 69 Ill. App. 2d 196, 208, 216 N.E.2d 198, 205 (1966).
The advice of defense counsel is a factor to be considered. Olympia Fields Country Club v. Bankers Indemnity Insurance Co., 325 Ill. App. 649, 674-75, 60 N.E.2d 896, 906-07 (1945).
A substantial prospect of an adverse verdict is a factor to be considered. Phelan v. State Farm Mut. Auto. Ins. Co, 114 Ill. App. 3d at 104, 448 N.E.2d at 585.
The potential for damages to exceed the policy limits is a factor to be considered. Mid-America Bank & Trust Co., 224 Ill. App. 3d at 1087, 587 N.E.2d at 84.
it has been held that an insurer is liable for the full amount of a judgment or settlement, even if it exceeds the policy limits, if the insurer acted in bad faith by refusing to defend its insured. (Reis v. Aetna Casualty & Surety Co. (1978), 69 Ill. App. 3d 777; 7C Appleman, Insurance Law and Practice sec. 4689 (1979).
Nevertheless, damages for a breach *398 of the duty to defend are not inexorably imprisoned within the policy limits, but are measured by the consequences proximately caused by the breach." (Reis v. Aetna Casualty & Surety Co. (1978), 69 Ill. App. 3d 777, 790; cf. 7C Appleman, Insurance Law and Practice sec. 4689, at 209 (1979) (damages are measured by the "additional loss legally traceable to the breach")
"[w]hile the wrongful refusal of the insurer to conduct the defense of an action based upon a claim within the coverage of the policy makes it liable, the insurer is not exposed to a greater liability to the insured than the limit of the amount stated in the policy. The failure to defend, however, does expose the defendant to the additional liability for the cost and expense which plaintiff was put to by reason of defendant's breach of the contract and embraces reasonable attorney fees." Gould v. Country Mutual Casualty Co. (1962), 37 Ill. App. 2d 265, 290; accord Reis v. Aetna Casualty & Surety Co. (1978), 69 Ill. App. 3d 777
"`By its unjustified refusal to defend an action against the insured, an automobile liability insurer becomes subject to the following new and positive obligations: (1) liability for the amount of the judgment rendered against the insured or of the settlement made by him; (2) liability for the expenses incurred by the insured in defending the suit; (3) liability for any additional damages traceable to its refusal to defend. Sims v. Illinois National Casualty Co. (1963), 43 Ill. App. 2d 184, 194-95:
The first and most obvious of these positive obligations created by an insurer's unjustified refusal to defend is its obligation to pay the amount of the judgment rendered against the insured or of any settlement made by the insured of the action brought against him by the injured party.'" (43 Ill. App. 2d 184, 194-95, quoting from 7 Am.Jur.2d Automobile Insurance sec. 167 (now 7 Am.Jur.2d Automobile Insurance sec. 396 (1980).) Sims v. Illinois National Casualty Co. (1963), 43 Ill. App. 2d 184, 194-95:
court held that general estoppel, unlike equitable estoppel, applies when an insurer wrongfully refuses to defend its insured against a covered action for damages. Thornton, 74 Ill. 2d at 144.
Employers Ins. v. Ehlco Liquidating Trust, the court noted the “deep roots” of general estoppel in Illinois jurisprudence and stated “[general estoppel] arose out of the recognition that an insurer’s duty to defend under a liability policy is so fundamental an obligation that a breach of that duty constitutes a repudiation of the contract.” 186 Ill. 2d 127, 151 (1999) (citing Kinnan v. Charles B. Hurst Co., 317 Ill. 251, 257 (1925)
Essex Insurance Company v. Blue Moon Lofts Condo Association 927 F.3d 1007 (7th Cir. 2019), the Seventh Circuit analyzed the theories of equitable and general estoppel under Illinois law. There, Essex filed a complaint for declaratory judgment seeking a declaration that it had no duty to indemnify Blue Moon, the insured’s assignee, for a 2009 default judgment against the insured, TSS. Essex, 927 F.3d at 1012. Blue Moon filed a counterclaim alleging that Essex was estopped from denying coverage, waived its coverage defenses, and was liable for the judgment for acting in bad faith by failing to pursue settlement with Blue Moon. Id. The district court granted summary judgment for Essex. Id.
Section 215 ILCS 5/154.5 - Improper Claims Practices
It is an improper claims practice for any domestic, foreign or alien company transacting business in this State to commit any of the acts contained in Section 154.6 if:
(a) it is committed knowingly in violation of this Act or any rules promulgated hereunder; or(b) It has been committed with such frequency to indicate a persistent tendency to engage in that type of conduct.
215 ILCS 5/154.5
P.A. 80-926.
(215 ILCS 5/154.6) (from Ch. 73, par. 766.6)
Sec. 154.6. Acts constituting improper claims practice. Any of the following acts by a company, if committed without just cause and in violation of Section 154.5, constitutes an improper claims practice:
(a) Knowingly misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue;
(b) Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies;
(c) Failing to adopt and implement reasonable standards for the prompt investigations and settlement of claims arising under its policies;
(d) Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear;
(e) Compelling policyholders to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them;
(f) Engaging in activity which results in a disproportionate number of meritorious complaints against the insurer received by the Insurance Department;
(g) Engaging in activity which results in a disproportionate number of lawsuits to be filed against the insurer or its insureds by claimants;
(h) Refusing to pay claims without conducting a reasonable investigation based on all available information;
(i) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
(j) Attempting to settle a claim for less than the amount to which a reasonable person would believe the claimant was entitled, by reference to written or printed advertising material accompanying or made part of an application or establishing unreasonable caps or limits on paint or materials when estimating vehicle repairs;
(k) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured;
(l) Making a claims payment to a policyholder or beneficiary omitting the coverage under which each payment is being made;
(m) Delaying the investigation or payment of claims by requiring an insured, a claimant, or the physicians of either to submit a preliminary claim report and then requiring subsequent submission of formal proof of loss forms, resulting in the duplication of verification;
(n) Failing in the case of the denial of a claim or the offer of a compromise settlement to promptly provide a reasonable and accurate explanation of the basis in the insurance policy or applicable law for such denial or compromise settlement;
(o) Failing to provide forms necessary to present claims within 15 working days of a request with such explanations as are necessary to use them effectively;
(p) Failing to adopt and implement reasonable standards to verify that a repairer designated by the insurance company to provide an estimate, perform repairs, or engage in any other service in connection with an insured loss on a vehicle is duly licensed under Section 5-301 of the Illinois Vehicle Code;
(q) Failing to provide as a persistent tendency a notification on any written estimate prepared by an insurance company in connection with an insured loss that Illinois law requires that vehicle repairers must be licensed in accordance with Section 5-301 of the Illinois Vehicle Code;
(r) Failing to pay the replacement vehicle use or occupation tax, title, and transfer fees required by Section 154.9 of this Code;
(s) Engaging in any other acts which are in substance equivalent to any of the foregoing.
(Source: P.A. 102-69, eff. 7-1-22.)
TITLE 50: INSURANCE
CHAPTER I: DEPARTMENT OF INSURANCE
SUBCHAPTER l: PROVISIONS APPLICABLE TO ALL COMPANIES
PART 919 IMPROPER CLAIMS PRACTICE
SECTION 919.90 IMPROPER PRACTICES OR PROCEDURES – PROPERTY AND CASUALTY COMPANIES
Section 919.90 Improper Practices or Procedures – Property and Casualty Companies
a) A claim shall not be denied on the basis of failure to exhibit property unless there is documentation of breach of the policy provisions in the claim file.
b) No company shall make any statement, written or oral, requiring a liability claimant to complete a proof of loss form, accident description, or release of claim for damages, which indicates that the claimant's rights may be impaired if such forms are not completed within a specified time, unless such statement is given for the purpose of notifying the claimant of the provisions of the statute of limitations.
c) No company shall advise liability claimants to make claims under their own policies in cases where liability is reasonably clear.
d) No company shall fail to effect settlement on first party claims on the basis that responsibility for payment should be assumed by other persons or insurers.
e) No company issuing a motor vehicle insurance policy covering damages to a motor vehicle shall abandon the salvage of a motor vehicle to a towing service and/or storage yard service in lieu of the towing and storage charges, without the agreed permission of the towing service or storage yard service.
f) No company shall deny a claim for storage charges on actual cash value fire and extended coverage losses when the personal property limits have been exhausted, if coverage exists under additional living expense.
(Source: Amended at 13 Ill. Reg. 1204, effective January 11, 1989)
AUTHORITY: Implementing Sections 154.5 and 154.6 of the Illinois Insurance Code [215 ILCS 5/154.5 and 154.6] and authorized by Section 401 of the Illinois Insurance Code [215 ILCS 5/401], Section 10 of the Voluntary Health Services Plans Act [215 ILCS 165/10], Section 25 of the Dental Service Plan Act [215 ILCS 110/25] and Section 5-3 of the Health Maintenance Organization Act [215 ILCS 125/5-3].
SOURCE: Filed June 17, 1974, effective July 1, 1974; amended at 2 Ill. Reg. 22, p. 77, effective May 22, 1978; new rules adopted at 3 Ill. Reg. 31, p. 93, effective August 4, 1979; old rules repealed 3 Ill. Reg. 32, p. 42, effective August 6, 1979; emergency amendment and codified at 7 Ill. Reg. 2755, effective February 28, 1983, for a maximum of 150 days; amended and codified at 7 Ill. Reg. 11489, effective October 1, 1983; amended at 10 Ill. Reg. 5125, effective March 17, 1986; amended at 13 Ill. Reg. 1204, effective January 11, 1989; amended at 26 Ill. Reg. 11915, effective July 22, 2002; amended at 27 Ill. Reg. 19287, effective December 10, 2003; amended at 28 Ill. Reg. 9253, effective July 1, 2004; amended at 38 Ill. Reg. 15600, effective July 2, 2014.
NEW INSURANCE LAW
Sec. 154.9. Payment of applicable use or occupation tax, title, and transfer fees on a private passenger total loss
claim.
(a) When an insurer determines that an insured's or third-party claimant's private passenger automobile is a total
loss that is covered under the terms of a personal automobile policy issued or renewed on or after July 1, 2022 by the
insurer, the insurer shall pay any use or occupation tax imposed by the State or a unit of local government and title
and transfer fees as provided for in this Section. As used in this Section, "private passenger vehicle" means a private
passenger motor vehicle, station wagon, or any other 4-wheeled motor vehicle with a load capacity of 1,500 pounds or
less that is not used in the occupation, profession, or business of the insured or third-party claimant, not used as a public
or livery conveyance for passengers, nor rented to others.
(b) If the insurer elects to replace the insured vehicle, the insurer shall pay any use or occupation tax imposed by the
State or a unit of local government tax and title and transfer fees on the replacement vehicle.
(c) If a cash settlement is provided for the total loss private passenger vehicle, the insurer shall reimburse the
insured or third-party claimant for any use or occupation tax imposed by the State or a unit of local government and title
and transfer fees if the replacement vehicle is purchased or leased within 30 days after the receipt of the cash settlement
by the insured or third-party claimant and the insured or third-party claimant substantiates such purchase and the
payment of such taxes and fees by submission of appropriate documentation to the insurer within 33 days after the receipt
of the settlement or receipt of the required reimbursement form from the insurer, whichever is later.
(1) With respect to leased vehicles, use or occupation taxes and title and transfer fees shall be deemed to be
incurred by the insured or the third-party claimant at the time the lease is entered into, but only if such use or
occupation taxes and title and transfer fees are included in the cost of the lease or are paid directly by the
insured or third-party claimant.
(2) The insurer is not required to reimburse the insured or third-party claimant for any use or occupation taxes and title
or transfer fees in excess of the amount payable based on the value of the total loss vehicle at the time of the loss or for
taxes and title or transfer fees not actually paid by the insured or third-party claimant.
(3) In lieu of this reimbursement procedure, the insurer may directly pay the required amount of any use or occupation
taxes and title and transfer fees to the claimant at the time of settlement.
(4) If an insurer requires a particular form be used to apply for reimbursement of any use or occupation taxes and title
or transfer fees, the form must be delivered to the insured or third-party claimant at or before the time of settlement.
(d) The Department may adopt rules establishing uniform standards for implementation of this Section, including, but
not limited to, prescribing the method of determining the market value of the insured's or third-party claimant's vehicle.
Section 99. Effective date. This Act takes effect July 1, 2022.
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