Spitz v. Starr Indem. & Liab. Co.

• Decision Date: 02 September 2021
• Docket Number: 21 C 1044
• Court: U.S. District Court — Northern District of Illinois
• Parties: EASTER RANDY SPITZ, an individual, as Assignee of NANCY AGUILAR, an individual, and REAL TRUCKING, INC., a corporation, Plaintiff, v. STARR INDEMNITY & LIABILITY COMPANY, INC., a corporation, Defendant.

EASTER RANDY SPITZ, an individual, as Assignee of NANCY AGUILAR, an individual, and REAL TRUCKING, INC., a corporation, Plaintiff, v. STARR INDEMNITY & LIABILITY COMPANY, INC., a corporation, Defendant.

No. 21 C 1044

United States District Court, N.D. Illinois, Eastern Division

September 2, 2021

OPINION AND ORDER

Sara L. Ellis, Judge

Plaintiff Randy Spitz, as assignee of Nancy Aguilar and Real Trucking Inc. (“RTI”), brings this suit against Defendant Starr Indemnity & Liability Company, Inc. (“Starr”), alleging Starr breached its duty to settle an underlying lawsuit Spitz brought against Aguilar and RTI (Starr's insured) to recover damages caused by Aguilar in a car crash (the “Underlying Lawsuit”). Specifically, Spitz alleges: (1) Starr breached its duty to settle the claims against Aguilar and RTI in good faith during pretrial negotiations with Spitz (2) in the alternative, Starr was negligent in not negotiating a settlement within the policy limits; and (3) Starr was vexatious in settlement negotiations and unreasonably delayed payment of the policy, entitling Spitz to damages under 215 Ill. Comp. Stat. 5/155. Starr now moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that (1) the failure to settle claims are unripe because appeals in the Underlying Lawsuit are ongoing and (2) the Section 155 claim is improper because Section 155 does not apply to failure to settle claims. Because the judgment in the Underlying Lawsuit is not yet final and therefore the failure to settle claims are not yet ripe for adjudication, the Court dismisses these claims without prejudice. The Court also dismisses Spitz's Section 155 claim without prejudice because additional allegations may allow Spitz to sufficiently plead that the statute entitles him to damages.

BACKGROUND^[1]

RTI, an Illinois company, had a liability insurance policy with Starr. The policy provided, among other things, $1 million of liability coverage for damages that result from a car crash and required that Starr handle litigation and settlement negotiations resulting from any liability created by a company employee. On February 23, 2016, Aguilar, an RTI truck driver, crashed into Spitz's car. Spitz sustained serious injuries in the crash and required extensive medical care thereafter. Aguilar was acting as an agent of RTI at the time of the crash, rendering RTI vicariously liable for her conduct.

Spitz brought the Underlying Lawsuit against Aguilar and RTI in Oklahoma state court to recover damages for his injuries. Ahead of the trial, Spitz made numerous offers to settle the lawsuit for an amount within the $1 million policy limit, but the parties did not reach an agreement. The subsequent trial resulted in a jury award of over $2.2 million in damages to Spitz, a sum that exceeds the limit in RTI's policy with Starr. Therefore, Aguilar and RTI face approximately $1.2 million in personal liability. Starr, on Aguilar and RTI's behalf, appealed the judgment in the Underlying Lawsuit. In Oklahoma, a party can post a supersedeas bond to stay execution of a judgment pending appeal. Okla. Stat. Ann tit. 12, § 990.4 (West 2021). After Starr's attempts to lower the bond amount, the supersedeas bond was set at $2.7 million. The parties have not posted the bond, but the appeal remains pending before the Oklahoma Court of Civil Appeals. Because Starr refused to pay the excess judgment Aguilar and RTI assigned their rights to sue Starr for failure to settle the Underlying Suit within the policy limits to Spitz.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed.R.Civ.P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Kubiak v. City of Chicago, 810 F.3d 476, 480-81 (7th Cir. 2016). To survive a Rule 12(b)(6) motion, the complaint must assert a facially plausible claim and provide fair notice to the defendant of the claim's basis. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Adams v. City of Indianapolis, 742 F.3d 720, 728-29 (7th Cir. 2014). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

ANALYSIS

I. Ripeness of Failure to Settle Claims

First, Starr argues that Spitz's failure to settle claims are not ripe while an appeal is pending in the Underlying Lawsuit because an appeal outcome in Aguilar and RTI's favor would render an essential element of Spitz's claims in this suit moot. In response, Spitz argues that Starr's failure to post the supersedeas bond rendered the judgment in the Underlying Lawsuit enforceable against Aguilar and RTI while the appeal is pending and therefore, the failure to settle claim is ripe for adjudication. For a claim to be ripe, an actual injury must have occurred that results in a valid case or controversy. Church of Our Lord & Savior Jesus Christ v. City of Markham, 913 F.3d 670, 676 (7th Cir. 2019) (“The ripeness doctrine arises out of the Constitution's case-or-controversy requirement, as claims premised on uncertain or contingent events present justiciability problems.”); Lehn v. Holmes, 364 F.3d 862, 867 (7th Cir. 2004) (“Ripeness doctrine is based on the ‘central perception . . . that courts should not render decisions absent a genuine need to resolve a real dispute.'” (alteration in original) (citation omitted)). In evaluating a claim for ripeness, courts consider “both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.” Sweeney v. Raoul, 990 F.3d 555, 560 (7th Cir. 2021) (citation omitted). “Plain and simple, ripeness is ‘peculiarly a question of timing.'” Id. (citation omitted). Courts must avoid decisions that are merely advisory in nature that “would [inappropriately] consume judicial time in order to produce a decision that may turn out to be irrelevant.” Lear Corp. v. Johnson Elec. Holdings Ltd., 353 F.3d 580, 583 (7th Cir. 2003). If a claim is unripe, the Court must dismiss it because “[f]ederal courts lack jurisdiction to consider an unripe claim.” Kathrein v. City of Evanston, 636 F.3d 906, 915 (7th Cir. 2011); see Med. Assur. Co. v. Hellman, 610 F.3d 371, 375 (7th Cir. 2010) (noting dismissal without prejudice was correct remedy for unripe duty-to-indemnify claim as opposed to staying the claim pending resolution of the underlying state court proceedings). Because Spitz has failed to allege an actual injury and any decision on his failure to settle claims at this time would be advisory in nature, the Court dismisses the claims without prejudice.

Spitz alleges that Starr breached its duty to settle the Underlying Lawsuit in good faith and/or with ordinary care towards the interests of Aguilar and RTI. “An insurer's duty to settle in good faith on behalf of its insured, which is well-settled in Illinois, arises from the covenant of good faith and fair dealing implied in an insurance contract.” Iowa Physicians' Clinic Med. Found. v. Physicians Ins. Co. of Wis., 547 F.3d 810, 812 (7th Cir. 2008) (citations omitted). The duty “arises because the policyholder has relinquished defense of the suit to the insurer, ” Cramer v. Ins. Exch. Agency, 174 Ill.2d 513, 525 (1996), and “yet the insurer's interest in defeating the claim may conflict with the insured's interest in avoiding a judgment that exceeds the amount of the policy limits, ” Voyles v. Sandia Mortg. Corp., 196 Ill.2d 288, 296 (2001). Therefore, the duty “does not arise until a third party demands settlement within policy limits.” Haddick v. Valor Ins., 198 Ill.2d 409, 417 (2001). If an insurer breaches the duty, it must pay the entire judgment, irrespective of the policy limit. Cramer, 174 Ill.2d at 525. To bring a claim for breach, “the policyholder must establish: ‘[1] the duty to settle arose; [2] the insurer breached the duty; and [3] the breach caused injury to the insured.'” Surgery Ctr. at 900 N. Mich. Ave., LLC v. Am. Physicians Assurance Corp., 922 F.3d 778, 785 (7th Cir. 2019) (alterations in original) (quoting Haddick, 198 Ill.2d at 416).

While there is no Seventh Circuit precedent for when alleged breaches of the duty to settle are ripe for adjudication, other courts have addressed the question. In the Eleventh Circuit, a claim for failure to settle in good faith is not ripe until the underlying judgment that created the insured's liability in excess of the policy limit is final. See, e.g., Romano v. Am. Cas. Co. of Reading, 834 F.2d 968, 970 (11th Cir. 1987) (upholding dismissal of a failure to settle action because the appeal of the underlying judgment that created excess liability was ongoing). These courts reason that because a bad faith failure to settle claim is contingent on liability in excess of the policy limit, the claim is not ripe until that liability is final. See, e.g., Rohee v. Garrison Prop. & Cas. Ins. Co., No. 14-cv-81037, 2014 WL 12479277, at *1-2 (S.D. Fla. Dec. 17, 2014) (dismissing bad faith failure to settle claim without prejudice as unripe because the final judgment of damages, an essential element of the claim, had not yet been determined).

At least two courts within the Seventh Circuit have followed this reasoning. See, e.g., Dennerline v ProNational Ins. Co., No. 05-cv-1564, 2006 WL 8446411, at *2 (S.D. Ind. Apr. 17, 2006) (holding that because the underlying case remained pending and therefore the insured could not yet...