Smith v. State Farm Ins. Companies, Inc.

• Decision Date: 28 November 2006
• Docket Number: No. 1-06-0519.,1-06-0519.
• Parties: Mary Alice SMITH, Plaintiff-Appellant, v. STATE FARM INSURANCE COMPANIES, INC., Defendant-Appellee.
• Court: United States Appellate Court of Illinois

861 N.E.2d 183

308 Ill.Dec. 118

Mary Alice SMITH, Plaintiff-Appellant, v. STATE FARM INSURANCE COMPANIES, INC., Defendant-Appellee.

No. 1-06-0519.

Appellate Court of Illinois, First District, Second Division.

November 28, 2006.

Christopher J. Agrella, Chicago, for Appellant.

Frank C. Stevens, Taylor Miller Sprowl Hoffnagle & Merletti, Chicago, for Appellee.

Justice SOUTH delivered the opinion of the court:

This appeal arises from an order of the circuit court which granted summary judgment in favor of defendant, State Farm Insurance Companies (State Farm), and against plaintiff, Mary Alice Smith, on the grounds that she had released her right to bring a claim for State Farm's alleged vexatious and unreasonable delay in handling her uninsured motorist claim by virtue of the parties' arbitration agreement.

In December 2001, plaintiff was involved in an accident wherein she was struck and injured by a hit-and-run driver. She was insured by State Farm under an $100,000 uninsured motorist policy and subsequently filed a claim. On or about August 15, 2003, State Farm offered to settle her claim under her uninsured motorist policy for $13,000. She rejected that offer and retained an attorney, who on December 9, 2003, demanded arbitration pursuant to State Farm's insurance policy requirements for uninsured motorist coverage. On or about October 25, 2004, plaintiff's attorney forwarded to State Farm a complete "specials package," which included a copy of the crash report, a list of medical personnel who treated her following the accident, copies of her medical records, reports, and bills, and releases signed by her authorizing State Farm to verify or secure further medical information as needed. All of the medical records indicated that plaintiff's injuries were causally connected to the accident.

Plaintiff subsequently demanded the $100,000 uninsured motorist policy limits from State Farm, which it refused. Instead, State Farm tendered $25,000 as an interim payment to plaintiff without prejudice against any final settlement or award and promised to negotiate in good faith after it had additional time to review the package. Plaintiff made a demand for arbitration of her uninsured motorist claim, and the parties agreed to employ a single arbitrator through A.D.R. Systems of America, LLC. The agreement included a high-low agreement wherein the plaintiff could receive no less than $25,000 and no more than $105,000, which was the policy limits subject to a set-off credit for the $25,000 previously paid her by State Farm. The agreement also stated that the arbitration award would be "final and binding and not subject to appeal or motion for reconsideration by either party." Additionally, the agreement stated in pertinent part:

"When the decision is rendered, the matter is resolved, any award arising from this agreement shall operate as a bar and complete defense to any action or proceeding in any court or tribunal that may arise from the same incident upon which the arbitration hearing is based."

On or about February 14, 2005, plaintiff again requested to settle the uninsured motorist claim, reducing her demand to $75,000 of the remaining $80,000 of the policy. She also enclosed a copy of a report from Dr. Laurence Hogstrom, her primary care physician, wherein he linked her injuries to the accident and stated that her medical treatment was necessary and appropriate. Once again, State Farm rejected the offer.

Plaintiff again offered to settle with State Farm on June 14, 2005, for the $80,000 balance of the policy. The settlement offer included plaintiff's intent to pursue further legal action in a subsequent lawsuit for State Farm's willful and vexatious claims' practice if State Farm forced the matter to go to arbitration. State Farm again refused the settlement offer.

The matter then proceeded to a formal arbitration hearing on July 12, 2005, at which time plaintiff's "90(c) package" (166 Ill.2d R. 90(c)) was entered into evidence. Plaintiff testified and offered additional documents and data into evidence. However, State Farm did not appear at the hearing and, therefore, did not present any evidence or contest the extent of plaintiff's injuries or their causation by the accident. The arbitrator awarded plaintiff $124,823.99 and found she had no comparative fault. State Farm subsequently paid her the remaining $80,000 balance under her uninsured motorist policy.

Plaintiff filed a one-count complaint against State Farm, claiming damages under section 155 (215 ILCS 5/155 (West 2004)) of the Insurance Code for its willful and vexatious refusal to properly evaluate and settle her uninsured motorist claim. The complaint alleged that State Farm had almost three years prior to counsel's October 2004 policy demand in which to investigate the claim and an additional four months after receiving plaintiff's specials package to investigate before she made her second settlement demand in February 2005, and a final chance to settle prior to the arbitration, but did not, and that there was never a bona fide dispute concerning coverage. The complaint further alleged the existence of the statutory violation and that State Farm's actions constituted vexatious and unreasonable delays in refusing to settle the claim. Plaintiff sought a finding that State Farm's actions constituted a vexatious and unreasonable refusal to settle; an award of her reasonable attorney fees and costs; and one of the following additional amounts: 60% of the amount which the court or jury found she would be entitled to recover against State Farm; or $60,000; or the excess of the amount which the court or jury found she would be entitled to recover over the amount that State Farm offered to pay in settlement of the claim prior to the action.

State Farm filed a motion to dismiss plaintiff's complaint with prejudice pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619(6) (West 2004)), contending that the arbitration agreement acted as a complete bar to her section 155 cause of action.

Plaintiff countered that the arbitration agreement only related to the car crash and the amount, if any, she should be compensated under the uninsured motorist policy with respect to her injuries and that the arbitration award did not extend to bar a separate claim relating to State Farm's handling of the claim. Plaintiff further contended that State Farm should be collaterally estopped, as a matter of public policy, from alleging that the arbitration agreement acted as a bar. This contention was based on State Farm's opposite position in another case where the plaintiff had filed a section 155 action prior to arbitration. In that case, Inman v. State Farm (No. 04 L 012713), State Farm alleged that the plaintiff had filed prematurely because he filed prior to binding arbitration taking place, asserting that an aggrieved policyholder could only file a section 155 action after the arbitration was completed.

The circuit court entered a written order on November 8, 2005, in which it addressed State Farm's motion as a motion for summary judgment (735 ILCS 5/2-1005 (West 2004)) rather than as a section 2-619 motion to dismiss. The order stated in pertinent part:

"Plaintiff claims that she never released her right to bring a claim for vexatious delay * * *. Regardless, her allegations pertain to a vexatious and unreasonable refusal to settle. The arbitration agreement provides the opposite. The parties did come to terms on their `high/low' agreement. As there is no proof of a vexatious or unreasonable delay in settling (as both parties agreed to be bound to the finding of the arbitrator and the extent of the arbitration agreement), Plaintiff's claim cannot continue. Accordingly, this Court grants Defendant's motion for summary judgment."

Plaintiff's subsequent motion for reconsideration was denied.

On appeal, plaintiff contends the trial court erred in granting defendant's motion and specifically in holding that the arbitration agreement bars her section 155 claim. She first argues that her complaint states a cause of action for vexatious delay. She also contends that her complaint is not barred by the arbitration agreement because the arbitration agreement, when read as a whole, unambiguously defines the scope of the agreement as relating solely to the car crash, the physical injuries sustained by plaintiff and the amounts due from defendant under the uninsured motorist coverage.

The purpose of summary judgment is to facilitate litigation and expedite trial procedure. LaMonte v. City of Belleville, 41 Ill.App.3d 697, 702, 355 N.E.2d 70 (1976). Because the resulting dismissal of the cause of action is a drastic measure, summary judgment should be awarded with caution. LaMonte, 41 Ill.App.3d at 702, 355 N.E.2d 70.

Review of the trial court's ruling on a motion for summary judgment or a motion to dismiss under section 2-619 is de novo. Landeros v. Equity Property and Development, 321 Ill.App.3d 57, 63, 254 Ill.Dec. 351, 747 N.E.2d 391 (2001); Pavlik v. Kornhaber, 326 Ill.App.3d 731, 737-38, 260 Ill.Dec. 331, 761 N.E.2d 175 (2001). Summary judgment is proper when the pleadings, depositions, and affidavits on file, construed in the light most favorable to the nonmoving party, establishes that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Landeros, 321 Ill.App.3d at 63-64, 254 Ill.Dec. 351, 747 N.E.2d 391. The purpose of the summary judgment procedure is not to decide the facts but to ascertain whether a factual dispute exists. Landeros, 321 Ill.App.3d at 64, 254 Ill.Dec. 351, 747 N.E.2d 391. If reasonable persons could draw different inferences from the undisputed facts, summary judgment should be denied. Atlantic Mutual Insurance Co. v. American Academy of Orthopaedic Surgeons, 315 Ill. App.3d 552, 559, 248 Ill.Dec. 342, 734 N.E.2d 50 (2000).

Here, the trial court found that plaintiff had...