In a recent decision (August 9, 2023) issued by the Illinois Appellate Court, First District, the court confirmed that an insured who had made a claim for underinsured motorist (UIM) benefits could not assert an independent claim to recover attorney fees, costs and statutory damages for vexatious and unreasonable delay after she settled her UIM claim with her insurance carrier. After resolving her claim with the tort carrier, the claimant made a demand for UIM benefits to Farmers. When she was unable to resolve the UIM claim with Farmers, the claimant filed a lawsuit asserting a claim for breach of contract and bad faith under Section 155. The claimant specifically alleged that Farmers had breached the policy by refusing to timely participate in and follow the policy’s arbitration provision. One year into the lawsuit, the parties settled the UIM claim outside of arbitration. The claimant signed a release whereby, in exchange for payment, she agreed to release Farmers “from any and all rights, claims, demands and damages of any kind with respect to the personal injuries received and the causes of action for those injuries arising from the automobile accident of July 18, 2016, at or near Chicago, IL.”
After the UIM claim was resolved, Farmers moved to dismiss the claimant’s bad faith claim. Farmers argued that the plaintiff had released any claim to attorney fees and costs and could not maintain a stand-alone Section 155 claim in the absence of a successful breach of contract claim. The plaintiff contended that the release was silent as to her Section 155 claim and that she could proceed on that claim because Farmers acted with unreasonable delay in settling her underinsured motorist claim. The trial court denied Farmers’ motion to dismiss, finding that the release did not reference the Section 155 claim and permitting the claimant to pursue a stand-alone Section 155 claim. The parties then filed cross-motions for summary judgment, both of which were denied. The case proceeded to trial on the Section 155 claim alone. At the close of evidence, the trial court granted Farmers’ motion for a directed finding holding that the claimant could not recover Section 155 attorney fees, costs and statutory damages without a successful action on the policy. The claimant then appealed.
On appeal, the court upheld the trial court’s motion for a directed finding. The court explained that “Section 155 allows a plaintiff to recover attorney fees, costs and statutory damages from an insurer that unreasonably delayed or denied payment of an insurance claim.” The court noted that Section 155 does not, create an independent tort for which an insurance company can be held liable. In other words, “in order for the claimant to recover under Section 155, she must also succeed in the action on the policy,” i.e., her breach of contract claim. Because the breach of contract claim was dismissed and never reinstated, that claim could not support the claimant’s Section 155 claim for relief. Since the claimant and Farmers settled her claim for UIM benefits and the claimant voluntarily dismissed the breach of contract claim, she could not recover under Section 155.
The court noted that “Section 155 is essentially a fee-shifting provision that rewards a prevailing party for successful litigation against a vexatious insurance defendant.” Since the claimant did not prevail on her Section 155 claim, the fee-shifting mechanism of Section 155 did not come into play. Accordingly, the court concluded that the dismissal of the breach of contract claim and the claimant’s failure to pursue any other action on her insurance policy rendered relief under Section 155 unavailable as a matter of law.
The case, titled Moles v. Illinois Farmers Insurance Company, 2023 IL App (1st) 220853 has not yet been released for publication.
Jamie practices both insurance defense and coverage litigation. She has experience litigating first and third-party claims, construction defect liability and coverage claims, subrogation claims and complex insurance claims. She has obtained favorable outcomes through dispositive motion practice in cases involving both coverage and liability issues. Jamie has successfully litigated declaratory judgment actions and bad faith claims in state and federal courts in Illinois, Colorado and Wyoming. She also provides guidance to insurance clients regarding their coverage obligations under various types of personal and commercial policies. Prior to joining Tressler, Jamie practiced insurance defense and coverage litigation in Colorado and Wyoming.