Urfer v. Country Mut. Ins. Co.

• Decision Date: 02 June 1978
• Docket Number: No. 14489,14489
• Citation: 60 Ill.App.3d 469,17 Ill.Dec. 744,376 N.E.2d 1073
• Parties: , 17 Ill.Dec. 744 Delmar URFER, Plaintiff-Appellant, v. COUNTRY MUTUAL INSURANCE CO., Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1073

376 N.E.2d 1073

60 Ill.App.3d 469, 17 Ill.Dec. 744

Delmar URFER, Plaintiff-Appellant, v. COUNTRY MUTUAL INSURANCE CO., Defendant-Appellee.

No. 14489.

Appellate Court of Illinois, Fourth District.

June 2, 1978.

Rehearing Denied June 29, 1978.

Harlan Heller, Ltd., Mattoon, for plaintiff-appellant; Harlan Heller, Mattoon, of counsel.

William F. Meehling and Richard J. Bernardoni Miller & Meehling, Marshall, for defendant-appellee.

TRAPP, Justice.

Plaintiff appeals from the order of the circuit court entered April 29, 1977, which dismissed his second amended complaint, denied an oral motion for leave to file an amended complaint, and entered judgment in bar.

Plaintiff was insured by a policy issued upon his motor vehicle. The complaint alleged a breach of the insurance contract arising from defendant's failure to pay hospital and medical bills up to $2000 incurred within one year of the date of injury and income continuation payments up to $150 per week for 52 weeks.

The insuring agreement recites that coverage was provided:

"In accordance with Article XXXV of the Illinois Insurance Code ('no fault insurance').",

effective January 1, 1972. That Article (Ill.Rev.Stat.1971, ch. 73, par. 1065.150, et seq.) was declared unconstitutional on April 17, 1972. Grace v. Howlett (1972), 51 Ill.2d 478, 283 N.E.2d 474.

Plaintiff suffered injuries on September 19, 1972, as a result of a collision with a school bus. His answer to interrogatories discloses that he sued the school district on August 13, 1974, that he received $50,000 in settlement and that that action was dismissed on February 17, 1976. This action was filed on January 5, 1976. Plaintiff's answers to interrogatories states that he first tendered a medical report to defendant on December 19, 1975.

An amended complaint filed March 23, 1976, sought damages under the provisions of Illinois Revised Statutes 1971, chapter 73, paragraph 1065.153, which provided for payments under "no fault" coverage within 30 days after "(R) easonable proof of the fact and amount of expense incurred * * *." That statute further provided that:

"In the event the company fails to pay such benefits when due, the person entitled to such benefits may bring an action in contract to recover them. In the event the company is required by such action to pay any overdue benefits, the company must, in addition to the benefits received, be required to pay the reasonable attorney's fees incurred by the other party. In the event of a wilful refusal of the company to pay such benefits, the company must pay to the other party, in addition to other amounts due the other party, an amount which is three times the amount of unpaid benefits in controversy in the action."

That complaint sought recovery upon the quoted provision of the statute but was dismissed upon motion of defendant suggesting the decision in Grace v. Howlett.

The amended complaint at issue on appeal described in the court's order as "the Second Amended Complaint" did not seek recovery upon a theory of breach of contract, but sounded only in tort for compensatory and punitive damages alleging a wilful refusal to pay.

The order of the trial court provided that:

"(S)aid Amended Complaint is stricken on the grounds that said complaint is substantially insufficient in law, and the action is hereby dismissed."

The order denied "(T)he oral motion of Plaintiff for leave to file a Third Amended Complaint.", and entered a judgment in bar of action.

Plaintiff argues that the amended complaint states a cause of action within the principles stated in Ledingham v. Blue Cross Plan for Hospital Care, etc. (1975), 29 Ill.App.3d 339, 330 N.E.2d 540. The Supreme Court (64 Ill.2d 338, 1 Ill.Dec. 75, 356 N.E.2d 75) had occasion to review only an issue of the taxing of costs.

In Ledingham, the insured sued to recover payments for medical and hospital expenses alleged to be payable under a policy of health insurance. In separate counts, the complaint claimed actual and punitive damages for "(W)ilful and wanton conduct" in refusing to pay and compensatory damages for breach of contract. The jury verdict was in an amount indicating an award on each count. The opinion stated:

"The issue to be decided in this case is whether punitive damages may properly be awarded in an action brought by a policyholder of a health insurance plan where the insurance company allegedly wrongfully denied benefits to the insured * * *." (29 Ill.App.3d 339-42, 330 N.E.2d 540-42)

The opinion found the following principles applicable in Illinois:

"1) Punitive damages may not be awarded generally in an action on a contract.

2) However, the breach of a contract itself may constitute an 'unusual case where an independent willful tort will be found.'

3) In the life and health insurer-insured relationship there is a duty upon both parties to act in good faith and deal fairly with the other party to the contract.

4) Breach of this duty implied by law is both a breach of the contract and a tort. " (Emphasis supplied). (29 Ill.App.3d 339-50, 330 N.E.2d 540-48) That opinion reversed the award of punitive damages for the reason that the record disclosed a good faith denial of the claim.

Ledingham noted that in Krutsinger v. Illinois Casualty Co. (1957), 10 Ill.2d 518, 141 N.E.2d 16, an insurer owed a duty in the context:

"An insurer who undertakes the defense of a suit against the insured, where the damages sought are in excess of policy limits, cannot arbitrarily refuse a settlement within policy limits. And the insured can recover the amount of the judgment rendered against him, including the amount in excess of policy limits, when the insurer has been guilty of bad faith in failing to effect a settlement for a smaller sum." (10 Ill.2d 518-27, 141 N.E.2d 16-21)

That opinion does not discuss the liability imposed as a tort but is an action for failure to satisfy a judgment obtained against the insurer. Such would appear to be an action upon the insurance contract.

Ledingham also noted Eckenrode v. Life of America Insurance Co., 470 F.2d 1 (7th Cir. 1972), as finding a duty of good faith and fair dealing between the insurer and the widow beneficiary of a life insurance policy and determined that a deliberate refusal of payment when it was known to the insurer that the widow was in utter want and compelled to seek charity showed a breach of duty which could be the basis of tort liability. Eckenrode acknowledged the privilege of the insurer to "(I)nsist upon his legal rights in a permissible way".

Ledingham examined a series of cases in the Supreme Court of California including Fletcher v. Western National Life Insurance Co. (1970), 10 Cal.App.3d 376, 89 Cal.Rptr. 78 and Gruenberg v. Aetna Insurance Co. (1973), 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032. The latter case determined that there was an implied duty imposed by law to act fairly and in good faith in discharging its contractual responsibilities with its insured and that the duty was separate and apart from the duties under the insurance contract. It further held that a breach of that duty may give rise to a cause of action in tort.

Fletcher was framed as an action in tort for the intentional infliction of emotional distress arising from the alleged breach of the implied duty to deal in good faith. The court, in Ledingham, found that the opinion in Knierim v. Izzo (1961), 22 Ill.2d 73, 174 N.E.2d 157, had determined that punitive damages were not available in an action for the intentional infliction of emotional distress. Ledingham concluded, however, that punitive damages as in tort may be awarded upon a theory other than an intentional infliction of emotional distress and quoted Fletcher to hold that:

" '(T)hreatened and actual bad faith refusals to make payments under the policy, maliciously employed by defendants in concert with false and threatening communications directed to the policyholder for the purposes of causing him to surrender his policy or disadvantageously settle a nonexistent dispute constitutes a tortious interference with a protected property interest of its insured for which damages may be recovered.' " (29 Ill.App.3d 339-51, 330 N.E.2d 540-49)

This complaint contains no allegations of fact purporting to show wilful, vexatious or unreasonable conduct within the context of that statement.

The order of the trial court determined that the complaint as amended "(I)s substantially insufficient in law" and so entered judgment in bar. We must examine the allegations of this complaint to ascertain whether plaintiff has stated a cause of action in tort upon the theory contained in Ledingham.

Section 31 of the Civil Practice Act states that "(S)ubstantial averments of fact (are) necessary to state any cause of action". The complaint at issue alleges as substance that plaintiff made proof of his loss and complied with all terms and conditions of the policy but that defendant failed and refused to pay. In Pollack v. Marathon Oil Co. (1976), 34 Ill.App.3d 861, 341 N.E.2d 101, it was held that an allegation that a contract was made and entered into was a legal conclusion not admitted by a motion to dismiss and affirmed the trial court's dismissal of the complaint. The plaintiff's allegations of performance in this case are not more factual than the allegations in Pollack and are properly deemed insufficient as conclusions.

The complaint alleges "The acts of the Defendant * * * were willful and malicious". In Bergfeld v. Stork (1972), 7 Ill.App.3d 486, 288 N.E.2d 15, plaintiff sought compensatory punitive damages upon an allegation that defendant wilfully and maliciously interfered with plaintiff's contract to sell a business. The reviewing court affirmed dismissal by the trial court saying "(A) mere averment that an act was done with a certain purpose or intent, without a statement of the facts showing such purpose or intent, is a conclusion of law", and the court determined that...