Corbin v. Allstate Corp.
| Decision Date | 29 January 2019 |
| Docket Number | NO. 5-17-0296,5-17-0296 |
| Citation | 2019 IL App (5th) 170296,140 N.E.3d 810,435 Ill.Dec. 760 |
| Parties | Jeffrey A. CORBIN, Margaret A. Corbin, and Anna Tryfonas, Plaintiffs-Appellees, v. The ALLSTATE CORPORATION, Allstate Insurance Company, Allstate Indemnity Company, Allstate Property and Casualty Company, and Allstate Fire and Casualty Company, Defendants-Appellants. |
| Court | United States Appellate Court of Illinois |
¶ 1 Plaintiffs—Jeffrey A. Corbin, Margaret A. Corbin, and Anna Tryfonas—filed a class action complaint against defendants—The Allstate Corporation, Allstate Insurance Company, Allstate Indemnity Company, Allstate Property and Casualty Company, and Allstate Fire and Casualty Company (collectively "Allstate")—in the circuit court of Madison County. Plaintiffs alleged that Allstate engaged in deceptive and unfair business practices in violation of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) ( 815 ILCS 505/1 et seq. (West 2012) ) and was unjustly enriched by charging its longtime, loyal customers higher auto insurance premiums than other customers based on undisclosed, non-risk-based factors. Allstate filed a motion to dismiss and argued, in part, that plaintiffs' claims were barred by the filed rate doctrine and the primary jurisdiction doctrine. The circuit court denied Allstate's motion to dismiss but granted its subsequent motion to certify the following questions for interlocutory review under Illinois Supreme Court Rule 308(a) (eff. Jan. 1, 2016): (1) "Whether Plaintiffs' claims regarding automobile insurance rates filed with the Illinois Department of Insurance are barred by the filed rate doctrine" and (2) "Whether the Illinois Department of Insurance and its Director have primary jurisdiction to determine if the complained of conduct by a regulated automobile insurance company constitutes unfair or deceptive trade practice." Allstate filed an application for leave to appeal under Rule 308, and this court granted interlocutory review. For reasons that follow, we answer the certified questions in the negative.
¶ 3 Allstate sells property and casualty insurance, including private passenger automobile insurance (auto insurance), to consumers in Illinois. The named plaintiffs are Illinois residents and consumers who have purchased auto insurance from Allstate for two decades or more. According to the complaint, Allstate collected and analyzed data and determined that loyal, longtime policyholders were willing to pay higher premiums than the risk they presented. Plaintiffs claimed that since 2012, Allstate has considered its policyholders' willingness to tolerate premium increases as a factor in calculating auto insurance rates. Plaintiffs further claimed that Allstate began charging its longtime policyholders higher premiums than it charged new customers who presented the same risk but were less willing to tolerate a price increase. This practice is referred to as "elasticity of demand" or "price optimization." Plaintiffs alleged that Allstate used this non-risk-based factor in calculating its premium rates for auto insurance, but did not disclose its use of this factor in its rate filings with the Illinois Department of Insurance (Department) and in its communications with existing customers regarding renewal of their auto policies. In count I, it is alleged that Allstate has engaged in unfair and deceptive practices in developing rating methodologies and in advertising, marketing, and selling their auto insurance products, and thereby violated the Consumer Fraud Act. Count II was also brought under the Consumer Fraud Act and alleged that Allstate's failure to disclose its use of price optimization is unethical, oppressive, unscrupulous, and offends public policy. In count III, it is alleged that Allstate has unjustly enriched itself by employing hidden price optimization practices. Plaintiffs' prayer for relief includes money damages, equitable and/or injunctive relief, and restitution or disgorgement of ill-gotten gains from unjust enrichment.
¶ 4 Allstate filed a motion to dismiss plaintiffs' complaint, arguing in part that the action was barred by the filed rate doctrine and the primary jurisdiction doctrine. Allstate acknowledged that Illinois is unique because it had decided to maintain a free market system for most property and casualty insurance, including auto insurance, and that except for a broad and general prohibition against discriminatory pricing based on race, color, religion, physical disability, and national origin, Illinois allows auto insurers to select their own rates based on their business and market objectives. Allstate noted that it is required to file its rates and underwriting manuals, as well as any rate changes, with the Director of the Department of Insurance (Director) and that it is required to calculate and charge premiums in accordance with the filed rates. Allstate acknowledged that the Director has no authority to approve or disapprove the filed rates. Allstate argued that the Director is vested with general oversight of the insurance industry, including automobile insurance rates ( 215 ILCS 5/401 (West 2012) ), and authorized to evaluate and declare that an insurer's trade practices constitute unfair methods of competition or deceptive practices ( 215 ILCS 5/429 (West 2012) ).
¶ 5 Following a hearing, the circuit court denied Allstate's motion to dismiss. In its order, the court determined that Allstate failed to establish that plaintiffs' complaint should be dismissed at the pleading stage under either the filed rate doctrine or the primary jurisdiction doctrine. The court noted that Illinois is unique in that insurers may select their own rates and merely inform the Department of Insurance of their selection. The court found that none of the cases cited indicated that the Department has the authority to review and disapprove of the filed rates. Subsequently, the court granted Allstate's motion to certify two questions pursuant to Rule 308. This court granted interlocutory review of those questions.
¶ 7 Illinois Supreme Court Rule 308(a) (eff. Feb. 26, 2010) provides for an interlocutory appeal from an order not otherwise appealable if the trial court finds that "the order involves a question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation," and the appellate court, in its discretion, permits an appeal from that order. Generally, the scope of review in a Rule 308 appeal is limited to the questions of law identified by the trial court. Rozsavolgyi v. City of Aurora , 2017 IL 121048, ¶ 21, 421 Ill.Dec. 881, 102 N.E.3d 162. A court of review will decline to answer a certified question where the answer is dependent upon the underlying facts of a case or where the question calls for an answer that is advisory or provisional. Rozsavolgyi , 2017 IL 121048, ¶ 21, 421 Ill.Dec. 881, 102 N.E.3d 162 ; Dowd & Dowd, Ltd. v. Gleason , 181 Ill. 2d 460, 469, 230 Ill.Dec. 229, 693 N.E.2d 358, 364 (1998). A certified question presents a question of law subject to de novo review.
Rozsavolgyi , 2017 IL 121048, ¶ 21, 421 Ill.Dec. 881, 102 N.E.3d 162.
¶ 8 The first question certified by the circuit court asks whether plaintiffs' claims regarding automobile insurance rates filed with the Illinois Department of Insurance are barred by the filed rate doctrine. The filed rate doctrine protects public utilities and other regulated entities from civil actions if the entity is required to file its rates with the governing regulatory agency and the agency has the authority to set, approve, or disapprove the rates. Adams v. Northern Illinois Gas Co. , 211 Ill. 2d 32, 55, 284 Ill.Dec. 302, 809 N.E.2d 1248, 1263 (2004) ; Cohen v. American Security Insurance Co. , 735 F.3d 601, 607 (7th Cir. 2013). Under the doctrine, any filed rate that is approved by the governing regulatory agency is per se reasonable and unassailable in judicial proceedings brought by rate payers. Adams , 211 Ill. 2d at 55, 284 Ill.Dec. 302, 809 N.E.2d 1248. The two companion principles at the core of the filed rate doctrine are (a) the need to prevent carriers from engaging in price discrimination as between ratepayers and (b) the preservation of the exclusive role of agencies in setting and approving uniform rates, as there is a historical aversion to rate setting by courts. Arsberry v. Illinois , 244 F.3d 558, 562 (7th Cir. 2001) ; Wegoland Ltd. v. NYNEX Corp. , 27 F.3d 17, 19 (2d Cir. 1994).
¶ 9 The Illinois Administrative Code requires companies who write specific types of insurance, including private passenger automobile insurance, to file their rates, along with underwriting manuals containing rules for applying rates, with the Illinois Department of Insurance no later than 10 days after the stated effective date of the rate. 50 Ill. Adm. Code 754.10, 754.40 (2018). The Department of Insurance, however, has not been given explicit authority to approve or disapprove the rates charged, either prior or subsequent to the filing of the rates.
¶ 10 Prior to 1969, Illinois required "prior approval" of insurance rates by the Illinois Department of Insurance. Ill. Rev. Stat. 1949, ch. 73, § 1065.1 et seq. In 1969, the Illinois General Assembly enacted an open competition rating law, which went into effect on January 1, 1970. See Pub. Act 76-943 (eff. Jan. 1, 1970) (adding Ill. Rev. Stat. 1969, ch. 73, § 1065.18-1 et seq. ). The purpose of the legislation was to "promote the public welfare by regulating insurance rates" as provided therein, in order that the rates "shall not be excessive, inadequate or unfairly discriminatory." Ill. Rev. Stat. 1969, ch. 73, § 1065.18-1. The express intent of the legislation was to permit and encourage competition between companies to the...
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