Marcheschi v. Illinois Farmers Ins. Co.

• Decision Date: 03 August 1998
• Docket Number: No. 1-97-0273,1-97-0273
• Citation: 698 N.E.2d 683,298 Ill.App.3d 306
• Parties: , 232 Ill.Dec. 592 Angelo MARCHESCHI, Jr., Plaintiff-Appellee and Cross-Appellant, v. ILLINOIS FARMERS INSURANCE COMPANY, Defendant-Appellant and Cross-Appellee.
• Court: United States Appellate Court of Illinois

Page 683

698 N.E.2d 683

298 Ill.App.3d 306, 232 Ill.Dec. 592

Angelo MARCHESCHI, Jr., Plaintiff-Appellee and Cross-Appellant, v. ILLINOIS FARMERS INSURANCE COMPANY, Defendant-Appellant and Cross-Appellee.

No. 1-97-0273.

Appellate Court of Illinois First District, First Division.

Aug. 3, 1998.

Querrey & Harrow, Ltd., Chicago (Michael Resis and Victor J. Piekarski, of counsel), for Defendant-Appellant and Cross-Appellee.

Rabens, Formusa & Glassman, Ltd., Chicago (B. Joseph Formusa, of counsel), for Plaintiff-Appellee and Cross-Appellant.

Justice FROSSARD delivered the opinion of the court:

Plaintiff Angelo Marcheschi brought this action under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 1996)) alleging that defendant Illinois Farmers Insurance Company vexatiously and unreasonably refused to settle an uninsured motorist claim arising from an automobile accident in which plaintiff was injured. Defendant filed a motion to dismiss under section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 1996)) based on its claim the appropriate statute of limitations had expired. Defendant's motion was denied. In a bench trial, the trial court awarded plaintiff $18,750 as permitted by section 155, $8,075 in attorney fees related to the arbitration of the uninsured motorist claim, and $7,968.75 in prejudgment interest. The trial court denied plaintiff attorney fees in the prosecution of the present action. From these orders, defendant appeals and plaintiff cross-appeals.

The issues on appeal are: (1) whether the trial court properly determined that section 155 of the Insurance Code is not a statutory penalty to which a two-year statute of limitations must apply; (2) whether the trial court correctly determined that defendant unreasonably and vexatiously delayed the settlement of plaintiff's uninsured motorist claim under section 155; and (3) whether the trial court properly awarded prejudgment interest to plaintiff. On cross-appeal, the issue is whether the trial court acted within its discretion in awarding limited attorney fees to plaintiff and in its denial of plaintiff's petition for fees in the present action.

We answer the above in the affirmative and affirm the trial court's decision on appeal.

FACTS

On December 22, 1992, plaintiff filed a complaint against defendant seeking recovery under section 155 of the Insurance Code based on defendant's refusal to settle his claim for uninsured motorist benefits within the applicable policy limits. Following the accident, which occurred on December 9, 1983, defendant promptly paid plaintiff $25,000, which was the limit of his uninsured motorist coverage. However, plaintiff was a member of a class action lawsuit in which his insurance policy was reformed and the uninsured motorist coverage limit was increased from $25,000 to $100,000.

Following the class action, plaintiff demanded $75,000, or the remainder of the policy limits from defendant. In August 1988, defendant offered $40,000 in settlement, and in December of 1988, plaintiff made a counteroffer of $40,000 plus prejudgment interest. When defendant failed to accept this counteroffer, it expired and plaintiff again made a demand for $75,000 plus prejudgment interest. After plaintiff underwent a physical examination, defendant made an offer of $50,000 on June 21, 1989, which plaintiff declined. Testimony at trial indicated that, shortly thereafter, defendant was given settlement authority in the amount of $75,000, which was not extended to plaintiff prior to arbitration.

The arbitration hearing took place on January 3, 1990. The panel assessed plaintiff's damages in the amount of $215,000 and found defendant liable for the $75,000 policy limit.

In his complaint, plaintiff sought to recover attorney fees for the arbitration, arbitrator's fees and other litigation expenses, prejudgment interest, and 25% of the difference between the amount defendant offered in settlement and the amount plaintiff recovered via arbitration pursuant to section 155.

In its answer, defendant admitted plaintiff was a member of the class action, that the policy limits had been increased and that plaintiff demanded $75,000. However, defendant sought to strike a portion of the pleadings as being argumentative and improperly pleading details of evidence. The answer also admitted defendant had offered $40,000 on October 26, 1988, and that following arbitration it promptly paid the remaining $75,000 to plaintiff. Defendant's answer denied breaching any duty to plaintiff and denied liability under section 155.

ANALYSIS

I

Defendant first challenges the trial court's denial of its section 2-619 motion to dismiss and asserts that plaintiff's section 155 claim was a statutory penalty that was not brought within the applicable two-year statute of limitations. Plaintiff argues that relief under section 155 does not constitute a "statutory penalty" for purposes of the two-year statute of limitations set forth in section 13-202 of the Code of Civil Procedure (735 ILCS 5/13-202 (West 1996)), and that the five-year statute of limitations applicable to "all civil actions not otherwise provided for" is appropriate in this case. See 735 ILCS 5/13-205 (West 1996).

A motion to dismiss under section 2-619 admits both the truth of the facts alleged in support of the claim and the legal sufficiency of the claim, but it raises an affirmative matter which it asserts defeats the claim. Barber-Colman Co. v. A & K Midwest Insulation Co., 236 Ill.App.3d 1065, 177 Ill.Dec. 841, 603 N.E.2d 1215 (1992). Here that affirmative matter is the statute of limitations.

The statute of limitations that defendant claims should apply reads as follows:

" § 5/13-202. Personal injury--Penalty. Actions for damages for an injury to the person, or for false imprisonment, or malicious prosecution, or for a statutory penalty, * * * shall be commenced within 2 years next after the cause of action accrued * * *." 735 ILCS 5/13-202 (West 1996).

At issue in defendant's motion to dismiss is whether section 155 constitutes a "statutory penalty," as defendant contends, or a remedial action, as plaintiff asserts. This is an issue of first impression in Illinois; however, this court has previously addressed the factors to be considered when determining whether a statute constitutes a "statutory penalty" under Illinois law.

In McDonald's Corp. v. Levine, 108 Ill.App.3d 732, 64 Ill.Dec. 224, 439 N.E.2d 475 (1982), the court addressed whether the "civil remedies" provided for in the eavesdropping act (720 ILCS 5/14-1 (West 1996)) constituted statutory penalties for purposes of the statute of limitations in section 13-202. The court found that the statute did not contain a statutory penalty but a codification of traditional common-law remedies. McDonald's, 108 Ill.App.3d at 738, 64 Ill.Dec. 224, 439 N.E.2d 475. Although the statute at issue in McDonald's and facts involved are not analogous to the case at bar, the case provides important discussion of what constitutes a statutory penalty, or a penal statute, and what constitutes a remedial statute. The opinion contrasts the two types of statutes as follows:

"A statute is a statutory penalty if it imposes automatic liability for a violation of its terms and the amount of liability is predetermined by the act and imposed without actual damages suffered by the plaintiff. [Citation.] A statute is remedial when it gives rise to a cause of action to recover compensation suffered by the injured person. [Citation.]"

McDonald's, 108 Ill.App.3d at 738, 64 Ill.Dec. 224, 439 N.E.2d 475.

The court further noted that a statute is remedial and not penal where it imposes liability only when actual damage results from a violation. In such a case, liability is contingent upon damage being proven by the plaintiff. Under a penal statute, liability is not contingent but imposed automatically when a violation of the statute is established. McDonald's, 108 Ill.App.3d at 738, 64 Ill.Dec. 224, 439 N.E.2d 475.

Applying the factors outlined in McDonald's, we agree with the trial court's denial of defendant's motion to dismiss and find that section 155 does not constitute a statutory penalty. Therefore the two-year statute of limitations in section 13-202 does not apply.

First, section 155 does not impose automatic liability for a violation of its terms. The statute reads as follows:

" § 155. Attorney fees. (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) 25% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;

(b) $25,000;

(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." 215 ILCS5/155 (West 1996).

It is important to note that the court has discretion whether or not to assess the above attorney fees, costs and the additional amount provided for, as the statute contains permissive rather than mandatory language. The statute does not require the court to provide such relief even in the face of the most unreasonable and vexatious delay by an insurance company in settling a claim, but permits the court to award such attorney fees, costs and the additional amount to be assessed against the offending insurance company at its discretion. Therefore, there is no automatic liability under the statute as required for a statute to be considered a statutory penalty...