American Service Ins. Co. v. Passarelli

• Decision Date: 22 June 2001
• Docket Number: No. 1-00-2543.,1-00-2543.
• Citation: 256 Ill.Dec. 755,323 Ill. App.3d 587,752 N.E.2d 635
• Parties: AMERICAN SERVICE INSURANCE COMPANY, Plaintiff-Appellant, v. Stephen S. PASSARELLI, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

752 N.E.2d 635

323 Ill. App.3d 587

256 Ill.Dec. 755

AMERICAN SERVICE INSURANCE COMPANY, Plaintiff-Appellant, v. Stephen S. PASSARELLI, Defendant-Appellee.

No. 1-00-2543.

Appellate Court of Illinois, First District, Sixth Division.

June 22, 2001.

Rehearing Denied August 14, 2001.

Wein & Associates, P.C. (Grace E. Wein, of counsel), Chicago, for Appellant.

John E. Passarelli, P.C, (John E. Passarelli, of counsel), Schaumburg, for Appellee.

Justice GALLAGHER delivered the opinion of the court:

Plaintiff American Service Insurance Company (American) appeals from the trial court's granting of defendant Stephen S. Passarelli's motion for summary judgment. At issue is whether defendant can seek recovery of damages for bad faith under section 154.6 and attorney fees and costs under section 155 of the Illinois Insurance Code (the Code) (215 ILCS 5/154.6, 155 (West 1996)) as part of the arbitration of his car accident claim. Because we hold that defendant cannot recover such damages in arbitration, we reverse the trial court's award of summary judgment to defendant and remand the case for further proceedings consistent with this opinion.

Defendant was involved in a car accident with an uninsured motorist on August 14, 1995. Defendant had an automobile insurance policy with American, and attempts between defendant and American to settle defendant's claim were unsuccessful. This appeal centers upon the scope of the language of an exclusion to the uninsured motorist coverage provisions of defendant's policy that the policy does not apply to "any claim against the Company where an insured has failed to make a written demand for Arbitration."

Defendant filed a demand for arbitration, contending that he should be compensated under the uninsured motorist provision of his policy with American. Defendant later filed an amendment to his arbitration demand in which he sought arbitration of his claims against American for alleged violations of section 154.6 and attorney fees and costs pursuant to section 155. In the demand, defendant stated that he sought arbitration of those claims "in light of the decision of the First District Appellate Court in Marcheschi v. Illinois Farmers Insurance Co., 298 Ill. App.3d 306, 232 Ill.Dec. 592, 698 N.E.2d 683 (1998)."

American filed an amended complaint stating that defendant's insurance policy did not cover claims for violations of section 154.6 or section 155 of the Code. American sought a declaratory judgment that defendant's claims under those two sections could not be arbitrated and asked that the arbitration proceedings be stayed. In defendant's answer to American's complaint, defendant asserted as an affirmative defense that his claims under sections 154.6 and 155 arose "out of and in the context of his demand for settlement of his uninsured motorist claim under the uninsured motorist coverage provisions of his policy" with American. He asserted that the language of American's policy did not limit the types of claims that could be arbitrated to only include claims made under the policy's uninsured motorist provisions, but that the language expanded the basis for making any claim against American dependent on a demand for arbitration for that claim.

American again moved to stay the arbitration proceedings. Defendant moved for summary judgment pursuant to section 2 1005(b) of the Code of Civil Procedure (735 ILCS 5/2-1005(b) (West 1998)), again arguing that under the language of American's policy, he was required to bring his claims for bad faith and attorney fees in the arbitration proceeding. The trial court granted defendant's motion based on the language of American's policy, namely, that the policy does not apply "to any claim against the Company where an insured has failed to make a written demand for arbitration." The trial court found that "this language encompasses Defendant's claims for a finding of bad faith and for attorney's fees."

On appeal, American contends that the only issues that can be determined in an arbitration proceeding are the liability of the uninsured motorist and the damages due to the insured as a result of the uninsured motorist's negligence, citing State Farm Fire & Casualty Co. v. Yapejian, 152 Ill.2d 533, 178 Ill.Dec. 745, 605 N.E.2d 539 (1992). American asserts that section 154.6 does not allow a private action for bad faith or improper claims practices. American also argues that the correct procedure to recover damages for attorney fees under section 155 is for defendant to file suit in the trial court.

We note that, subsequent to the filing of American's appeal, American filed a motion to stay the arbitration proceeding, which this court denied. In addition, defendant has filed a motion to strike American's reply brief, which we have taken with the case and which we deny.

This court reviews the trial court's award of summary judgment de novo. Jones v. Chicago HMO Ltd., 191 Ill.2d 278, 291, 246 Ill.Dec. 654, 730 N.E.2d 1119, 1127 (2000)

. Summary judgment is proper where the pleadings and other materials on file, when viewed in the light most favorable to the nonmoving party, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Jones, 191 Ill.2d at 291,

246 Ill.Dec. 654,

730 N.E.2d at 1127. Moreover, summary judgment is a drastic remedy that should be allowed only when the right of the moving party is clear and free from doubt. Jones, 191 Ill.2d at 291,

246 Ill. Dec. 654,

730 N.E.2d at 1127.

Section 143a(1) of the Code requires the arbitration of "any dispute with respect to" uninsured motorist coverage. 215 ILCS 5/143a(1) (West 1998). In State Farm, 152 Ill.2d at 537, 178 Ill.Dec. 745, 605 N.E.2d at 540-41, the supreme court defined the scope of that language when it reversed an appellate court's ruling that section 143a(1) unambiguously required arbitration of all disputes relating to uninsured motorist coverage. The court stated that the language could be construed broadly, to require arbitration of all matters relating to uninsured motorist coverage, or narrowly, to limit arbitration of disputes concerning covered claims, once coverage had been established. State Farm, 152 Ill.2d at 541, 178 Ill.Dec. 745, 605 N.E.2d at 542. Having reviewed principles of statutory construction and the legislative history of section 143a(1), the supreme court concluded that section 143a(1) should be interpreted narrowly to limit the matters submitted to arbitration, noting that such a limitation would allow the resolution of a number of issues in the courts and contribute to the body of case law on the subject of uninsured motorist coverage, as opposed to having those issues submitted to and resolved via arbitration. State Farm, 152 Ill.2d at 543-44, 178 Ill.Dec. 745, 605 N.E.2d at 543-44. Based upon the supreme court's interpretation of the scope of section 143a, as well as the sections of the Code pertinent to defendant's claim, we conclude that the trial court erred in granting defendant's motion for summary judgment.

Section 154.6 lists acts committed by an insurance company that constitute improper claims practices if, according to section 154.5, they are committed knowingly or "with such frequency to indicate a persistent tendency to engage in that type of conduct." 215 ILCS 5/154.5 (West 1996). However, section 154.5 et seq. does not give rise to a private remedy or cause of action by a policyholder against an insurer but is instead regulatory in nature. Purlee v. Liberty Mutual Fire Insurance Co., 260 Ill.App.3d 11, 31, 197 Ill.Dec. 430, 631 N.E.2d 433, 448 (1994); Van Vleck v. Ohio Casualty Insurance Co., 128 Ill.App.3d 959, 961, 84 Ill.Dec. 159, 471 N.E.2d 925, 927 (1984). Section 154.7 vests the State Director of Insurance with the authority to charge a...