Garcia v. Lovellette

• Decision Date: 23 August 1994
• Docket Number: No. 2-93-0531,2-93-0531
• Citation: Garcia v. Lovellette, 265 Ill.App.3d 724, 639 N.E.2d 935, 203 Ill.Dec. 376 (Ill. App. 1994)
• Parties: , 203 Ill.Dec. 376 Michelle M. GARCIA, Plaintiff-Appellant, v. Andrea LOVELLETTE, Defendant (Aaron Tovar, Plaintiff; Horace Mann Insurance Company et al., Defendants-Appellees).
• Court: Appellate Court of Illinois

Page 935

639 N.E.2d 935

265 Ill.App.3d 724, 203 Ill.Dec. 376

Michelle M. GARCIA, Plaintiff-Appellant, v. Andrea LOVELLETTE, Defendant (Aaron Tovar, Plaintiff Horace Mann Insurance Company et al., Defendants-Appellees).

No. 2-93-0531.

Appellate Court of Illinois Second District.

Aug. 23, 1994.

John R. Weinold, Deborah J. Allen, John R. Weinold and Associates, Ltd., Aurora, for Michelle M. Garcia, Aaron Tovar.

Jerome A. Vinkler, Connelly, Mustes & Schroeder, Geneva, for Andrea Lovellette.

James T. Ferrini, Imelda Terrazino, Dominick W. Savaiano, Clausen, Miller, Gorman, Caffrey & Witous, P.C., Paul Bozych, Clausen, Miller & Gorman, Chicago, for Horace Mann Ins. Co., Gerald Shannon.

Justice McLAREN delivered the opinion of the court:

Plaintiff, Michelle M. Garcia, appeals following the circuit court's denial of her motion to reconsider the dismissal with prejudice of counts III and IV of her amended complaint which sought statutory penalties for the unreasonable and vexatious delay of defendant's insurer, Horace Mann Insurance Company (insurer) and its agent-adjuster, Gerald Shannon (agent), in paying her medical expenses. We reverse and remand for further proceedings.

On February 1, 1991, plaintiffs, Michelle M. Garcia and Aaron Tovar, filed a two-count negligence complaint against defendant Andrea Lovellette following a car accident. The complaint alleged that Lovellette negligently drove the car off the road and, as a result, Garcia sustained injuries. Plaintiffs later amended the complaint and added counts III and IV seeking penalties under section 155 of the Illinois Insurance Code (Code) (215 ILCS 5/155 (West 1992)) against defendant's insurer and Gerald Shannon, individually and as agent of the insurer, for their unreasonable and vexatious delay in paying Garcia's medical bills pursuant to a specific medical payment provision in the policy issued to defendant Lovellette by the insurer. Garcia (plaintiff) has maintained both here and in the trial court that she is an "insured" passenger or occupant of the vehicle under that policy provision and is therefore entitled to pursue the statutory remedy.

The trial court granted the motion of the insurer and the agent to dismiss counts III and IV with prejudice. After plaintiff's motion to reconsider was denied, she timely appealed. Tovar and Lovellette are not parties to this appeal.

Plaintiff argues she was a passenger, and, as a passenger, was an "insured" as defined in the medical payments section of the policy; according to plaintiff, she therefore has standing to sue the insurer under the Code for unreasonable and vexatious delay in making such payments. She relies in part on Monroe v. United States Fidelity & Guaranty Co. (1992), 237 Ill.App.3d 261, 177 Ill.Dec. 785, 603 N.E.2d 855 (passenger had standing as an "insured," as defined in policy, to bring action for declaratory relief against driver's insurer based on violation of underinsured motorist statute). The insurer argues that plaintiff is an injured third-party claimant and not an insured to whom it owes a contractual duty of good faith and fair dealing (see, e.g., Scroggins v. Allstate Insurance Co. (1979), 74 Ill.App.3d 1027, 30 Ill.Dec. 682, 393 N.E.2d 718) and that, as a third party, plaintiff cannot bring a section 155 claim against it (see Loyola University Medical Center v. Med Care HMO (1989), 180 Ill.App.3d 471, 480, 129 Ill.Dec. 360, 535 N.E.2d 1125). The insurer further argues that its insurance policy informs the named insured that it does not "[g]ive any person or organization the right to include us to any suit against you to determine your liability." According to the insurer, this is a "no direct action clause" consistent with the Illinois public policy prohibiting direct actions by an injured claimant "against the alleged tortfeasor's insurer. " (Emphasis added.) The insurer relies on Zegar v. Sears Roebuck & Co. (1991), 211 Ill.App.3d 1025, 156 Ill.Dec. 454, 570 N.E.2d 1176.

This case is one of first impression for this court. We must determine (1) whether plaintiff is an "insured" for purposes of the statutory remedy and, if so, (2) whether her "direct action" against the insurer would violate Illinois public policy. The policy issued to Lovellette initially defines an insured as "the person, persons or organization defined as insured in the specific coverage" and states that the meaning of "insured" varies in separate coverage sections. For example, in the indemnification section (I) for bodily injury "A" and property damage "B" coverages, when reference is made to the policyholder's car, "insured" is defined as:

"1. you

2. your relatives;

3. any other person while using your car if its use is within the scope of your consent; and

4. any other person or organization liable for the use of your car by one of the above insureds."

Among other things, that section provides that the insurer will pay damages for which an insured "becomes legally liable to pay" for bodily injury to others and for the destruction or loss of use of property resulting from the ownership, maintenance or use of the car and provides that the insurer will defend an "insured" for such damages.

Section II, the section in question, provides coverage "C" for medical payments and for the loss of income or services under certain conditions. Under that section, the insurer agrees to pay "to persons insured" the medical expenses "for services furnished within one year of the date of the accident." Under the rubric "PERSONS INSURED," that section states:

"We will pay Medical Payments and Loss of Income or Services benefits to:

1. a. you, and

b. your relatives.

You or your relatives have to sustain the injury:

a. while you or they operate or occupy a motor vehicle or trailer insured under Section I, or

* * * * * *

2. Any other person while occupying:

a. a motor vehicle or trailer insured under Section I, except a non-owned car. Such vehicle or trailer must be used by a person who is insured under Section I; or

b. a non-owned car. The injury must result from such non-owned car's operation or occupancy by you or your relatives.

We will reduce all payments made under other liability coverages by the amount paid under Medical Payment coverage."

Plaintiff Garcia submitted a claim for medical expenses, and the insurer eventually tendered a check in the amount of $5,000, the limit of the policy.

Section 155 of the Code provides that a court may award attorney fees and specified penalties in an action against an insurer when the court determines, in its discretion, that the insurer's delay in settling a claim was unreasonable and vexatious considering the totality of the circumstances. The remedy is available to an insured who encounters unnecessary difficulties when an insurer withholds policy benefits. (Green v. International Insurance Co. (1992), 238 Ill.App.3d 929, 935, 179 Ill.Dec. 111, 605 N.E.2d 1125.) It is designed "to protect insured parties who are forced to expend attorneys' fees where the insurer refuses to pay under the terms of the policy. " (Emphasis added.) (Stamps v. Caldwell (1971), 133 Ill.App.2d 524, 528, 273 N.E.2d 489.) A section 155 claim for an insurer's vexatious delay is intended for the protection of the insured party, or an assignee who succeeds to the same position of the insured, but is not intended for "true" third parties. (See Loyola, 180 Ill.App.3d at 480, 129 Ill.Dec. 360, 535 N.E.2d 1125 (and footnotes therein).) The insurer's duty to deal fairly with the insured arises out of the contractual relationship, and thus an insured may sue his insurer for breach of that duty. Scroggins, 74 Ill.App.3d at 1030-31, 30 Ill.Dec. 682, 393 N.E.2d 718; Cernocky v. Indemnity Insurance Co. of North America (1966), 69 Ill.App.2d 196, 207, 216 N.E.2d 198.

The penalty statute is silent regarding who is an "insured" for purposes of the remedy provided. We believe that the insured must logically be a person defined in the policy provision in question here. Since that provision expressly defines an occupant of the named insured's car as an insured, plaintiff is an insured for purposes of the statute. It was the insurer who chose to define plaintiff as an insured. A clause in an insurance contract which is clear and unambiguous will be applied as written. (Pratt v. Protective Insurance Co. (1993), 250 Ill.App.3d 612, 618, 190 Ill.Dec. 318, 621 N.E.2d 187.) A similar result was obtained in Monroe, 237 Ill.App.3d 261, 177 Ill.Dec. 785, 603 N.E.2d 855, where the reviewing court found that a passenger or occupant was an "insured" as defined in the policy for the purpose of standing to bring a declaratory action under the underinsured motorist coverage statute.

There are several other reasons which support our conclusion that plaintiff is an insured for purposes of the penalty statute and should be allowed to pursue her section 155 claim. First, the medical payment provision is not an indemnity agreement which depends on a determination of the negligence of the policyholder before the "insured" passenger may look to the insurer for payment. Rather, it is a separate agreement for direct payment to the injured passenger, the named insured, or a relative of the named insured. For a separate consideration and by the very terms of the provision, the insurer undertook an obligation to pay directly to those defined there as insureds. It amounts to a "no-fault" type of limited coverage which comes into effect upon the happening of defined events. (Cf. Zegar, 211 Ill.App.3d at 1030-31, 156 Ill.Dec. 454, 570 N.E.2d 1176 (characterized slip-and-fall plaintiff as incidental beneficiary of premises no-fault medical payment provision and as a third party barred from suing insurer directly).) Unlike the conclusion reached in Zegar in which the contractual language appears to have differed somewhat from the one here (we are unaware of the definition of the insured there), we believe that the...