Gaston v. Founders Insurance Co.

FIRST DIVISION
March 13, 2006
(Nunc pro tunc February 14, 2006)
No. 1-04-2110
CECELIA GASTON, individually and on ) Appeal from the
behalf of all others similarly ) Circuit Court of
situated, ) Cook County.
)
Plaintiff-Appellant, )
)
v. )
)
FOUNDERS INSURANCE COMPANY, ) Honorable
) Peter J. Flynn,
Defendant-Appellee. ) Judge Presiding.
JUSTICE BURKE delivered the opinion of the court:
Plaintiff Cecelia Gaston appeals from the circuit court's
grant of summary judgment in favor of defendant Founders Insurance
Company on plaintiff's complaint, in which plaintiff alleged that
defendant's automobile claims procedures were unreasonable. On
appeal, plaintiff contends that the trial court misconstrued the
insurance policy at issue; misconstrued section 919.80(d)(6) of the
Illinois Department of Insurance Regulations; erred in striking the
testimony of its expert witness; erred in not finding that
defendant's settlement practices violate section 155 of the
Illinois Insurance Code; and erred in denying class action
treatment of her claim. For the reasons set forth below, we
affirm.
STATEMENT OF FACTS
1-04-2110
This case arose as a result of a disagreement concerning
defendant's procedures for handling automobile collision claims.
The relevant portion of plaintiff's policy, issued by defendant, is
as follows:
"Coverage E - Collision. To pay for loss
caused by collision to the owned automobile but
only for the amount of each such loss in excess
of the deductible amount stated in the
declarations as applicable hereto. *** [T]he
company shall have the following options: (1)
Payment to the insured of the actual cash value
of the vehicle minus the deductible stated in
the policy declarations; or (2) Replacement of
the vehicle with other of like kind and
quality; or (3) Payment of the amount the
company would have paid for a replacement
vehicle (including all applicable taxes and
license fees), in the event the insured elects
a cash settlement instead of such replacement
vehicle; or (4) Repair or rebuild the
automobile.
***
Limit of Liability. The Company's limit of
liability for all losses under Part III shall
not exceed the smallest of the following:
2
1-04-2110
(a) the actual cash value of stolen or
damaged property or part thereof at the time of
the loss;
(b) the amount necessary to repair the
damaged property at the time of the loss;
(c) the amount necessary to replace the
stolen or damaged property at the time of the
loss with like kind and quality property less
depreciation; or,
(d) the applicable value, if any, stated
in the declarations. ***
Condition 11 - Part III: The company may pay
for the loss in money; or may repair or replace
the damaged or stolen property."
On July 13, 2002, plaintiff's car was involved in an accident
and sustained body damage. On the day of the accident, plaintiff
phoned defendant, her insurance company. Defendant informed
plaintiff that it would send its own collision appraiser out to
create an estimate on the amount of repair work her vehicle needed
and that it would not pay any amount above that estimate. Defendant
informed plaintiff that, under her policy, she could take her car to
a body shop that participated in defendant's direct repair program
(DRP) or to any other shop of her liking. If she chose a DRP shop,
she was told, then her only cost for all repairs and storage would
be her $500 deductible. If she chose another shop, she would be
3
1-04-2110
responsible for her deductible as well as for any cost above what
was deemed necessary by defendant, including daily storage fees.
Defendant then gave plaintiff a list of Chicago-area DRP shops and
suggested Elar Auto Rebuilders, which was nearby.
On July 17, 2000, plaintiff spoke with defendant's claims
adjuster and informed her that she had taken her car to West Loop
Auto Body (West Loop). The claims adjuster informed plaintiff that
West Loop was not a DRP shop and outlined the financial consequences
to plaintiff if she had her car repaired there. She then offered to
arrange to have plaintiff's car towed, free of charge, to Import
Auto, a nearby DRP shop that did body work on all types of cars,
including those from Loeber Motors.
On July 20, 2000, defendant's appraiser inspected plaintiff's
car and prepared an estimate of $610.23. This estimate was made
using a labor rate of $22 per hour for body work, $11 per hour for
paint work, and $35 per hour for mechanical work, which was the rate
defendant had negotiated with its DRP shops. By this time, West
Loop had also prepared an estimate of the damage to plaintiff's car
in the amount of $1,190.93. This estimate was made using a labor
rate of $38 per hour for paint and body work and $79 per hour for
mechanical work.
On July 24, 2000, defendant sent plaintiff a letter to again
explain the costs she would be responsible for if she had the car
repaired at West Loop, including the $50 per day storage fee she was
already incurring. Two days later, defendant called plaintiff, told
4
1-04-2110
her that defendant would pay only $610.23 toward the repair of her
car and again offered to pay for a tow of her car to a nearby DRP
shop which would store and repair her car without any additional
cost to plaintiff. Plaintiff then informed defendant that she
wished to have her car repaired at West Loop. Defendant told
plaintiff that it should be notified and allowed to re-inspect her
car if West Loop found any damage beyond that contained in its
original estimate.
On August 1, 2000, defendant spoke with Bill Passaglia, an
owner of West Loop, who confirmed that he was charging plaintiff $50
per day in storage fees. During this conversation, Passaglia
demanded that defendant pay the entire amount he was charging for
repairs on plaintiff's car and threatened a lawsuit if payment was
not made. Defendant then called plaintiff again to outline the
consequences of having her car repaired at West Loop as opposed to a
DRP shop.
Records indicate that plaintiff's car was repaired at West Loop
from July 13 to August 2, 2000, and that plaintiff's bill for repair
was $3,097.64, with an additional $900 charged for storage. On
August 22, defendant spoke again with Passaglia and told him that,
by custom, he was required to notify defendant if he found any
additional damage to plaintiff's car and to cease any additional
repairs until defendant's appraiser arrived to create his own
estimate. Defendant was not told that plaintiff's car had already
been repaired or that two additional estimates and repair orders had
5
1-04-2110
been issued on it. Specifically, West Loop had billed plaintiff for
work on her car's sub-frame, steering components, and transmission
that was not included on either West Loop's or defendant's original
estimates. The record indicates that plaintiff ultimately paid West
Loop $2,993.11 for repairs and storage and that defendant tendered
$110.23 to plaintiff, which represented the amount of defendant's
estimate less plaintiff's $500 deductible.
In September 2000, plaintiff complained to the Illinois
Department of Insurance concerning this matter and was told, in a
letter, that defendant had not violated either the Illinois
1
Insurance Code or any insurance regulations. On December 5,
plaintiff filed a class action complaint against defendant, as well
as a motion for class certification. Plaintiff claimed that
defendant (1) breached the contract of the insurance policy at
issue; (2) violated section 155 of the Illinois Insurance Code (215
ILCS 5/155 (West 2000)); and (3) violated section 505 of the
Consumer Fraud and Deceptive Trade Practices Act (815 ILCS 505/1
(West 1999)). Shortly thereafter, defendant issued a check to
plaintiff in the amount of $3,527.33, which represented the full
amount of plaintiff's West Loop bill, plus interest compounded from
July 13, 2000. Defendant expressed a desire to settle this claim
and any other claims including attorney fees, as a separate matter,
in a letter that accompanied the check. Plaintiff refused the
1
While the response letter from the Department of Insurance
is contained in the record, plaintiff's original correspondence
is not.
6
1-04-2110
tender.
Defendant then filed a motion to dismiss plaintiff's complaint,
which was granted. In the same order, the trial court also granted
plaintiff leave to file an amended complaint, struck the class
action aspect of the complaint under section 155 of the Insurance
Code, and ordered that the motion to certify the class was to be
held in abeyance.
A series of motions, responses, and replies followed over the
next two years, resulting in an amended class action complaint,
containing the same three causes of action as the original
complaint. Defendant's subsequent motion to dismiss was granted as
to the class action allegations under section 155 of the Insurance
Code and the Consumer Fraud Act claim. Defendant was then directed
to answer the remaining portions of the complaint, which it did.
During the course of this litigation, defendant attempted to
arrange an inspection of the subject car by an independent agency
several times, succeeding only when it obtained a court order. The
independent agency's inspection found several indications that West
Loop may not have performed all of the operations for which it
billed plaintiff. The independent inspector based his findings on
indicia such as tool marks, corrosion, and factory-installed decals
on parts. Defendant also had one of its own employees, an
individual with many years of experience in the auto body field,
inspect the vehicle. Defendant's employee took over 100 photographs
of the vehicle, opined that the extent of the damage claimed on West
7
1-04-2110
Loop's invoice was not present during defendant's initial inspection
of the vehicle before repairs were made, and concurred with the
independent inspector that there were indications that West Loop did
not perform all the work it claimed to have performed and that the
sub-frame, steering, and transmission repairs were not necessary.
In April 2004, plaintiff filed a motion for summary judgment on
her claims for breach of contract and violation of section 155 of
the Insurance Code. In her motion, plaintiff contended that
defendant implemented a "scheme" by which it systematically adjusted
claims in a manner that constituted a violation of Illinois
insurance statutes, which was a per se breach of contract,
perpetrated through its use of "bogus labor rates to calculate the
cost of necessary automobile repairs." Plaintiff also argued that
the extra-contractual remedy afforded by section 155 of the
Insurance Code should be imposed, claiming that defendant relied on
its significant economic advantage and bargaining power to shift the
obligation to pay for reasonable repairs to the insured by imposing
its "discount estimate" as a bar to collecting full value of the
insurance policies its insureds contracted for. Additionally,
plaintiff contended that defendant violated section 919.80(d)(6) of
the Department of Insurance Regulations, specifically the
requirement that "[t]he estimate prepared by or for the company
shall be reasonable, in accordance with applicable policy
provisions, and of an amount that will allow repairs to be made in a
workmanlike manner." Defendant's estimate, contended plaintiff, was
8
1-04-2110
not reasonable.
During discovery, plaintiff deposed Louis DiLisio, an
individual with close to 40 years experience in the auto repair and
auto claims industries, and planned on introducing his opinion that
West Loop's $38 per hour labor charge was "reasonable." DiLisio
based his opinion on a "survey" he conducted of Chicago area body
shops, and on his experience in the field, which consisted of many
years of working in body shops in New York and for an auto claims
industry service provider in Chicago. When pressed, DiLisio
explained that his survey consisted of telephone calls to five
Chicago area body shops where he had cordial relationships with the
operators. The trial court granted defendant's subsequent motion to
strike and bar DiLisio's testimony on May 6, 2004.
On May 13, 2004, defendant filed a combined response to
plaintiff's motion for summary judgment and cross-motion for summary
judgment. In its response, defendant pointed out that plaintiff
filed all her actions as class actions despite the fact that no
2
class had been certified; that Passaglia admitted in his deposition
that West Loop's customary procedure would have been to notify
plaintiff's insurer of the additional work it was planning to do to
allow the insurer to re-inspect the vehicle, but that he did not
follow this procedure in this instance; that at the same time West
Loop charged plaintiff $38 per hour for labor, it charged other
customers at rates varying from $21 per hour to $28 per hour as
2
The deposition was not included in the record.
9
1-04-2110
evidenced by other West Loop estimates; that the Consumer Fraud Act
claim was dismissed at an earlier proceeding; and that plaintiff's
motion relied on the testimony of Louis DiLisio, which had been
barred by the trial court.
In its own motion for summary judgment, defendant stated that
it fully complied with the plain language of the policy when it
issued the check for repair to plaintiff. Defendant relied on the
endorsement given its procedures by the Department of Insurance, as
evidenced by the September 2000 letter sent to plaintiff. Defendant
addressed the issue of violating section 155 of the Insurance Code
by pointing out that (1) plaintiff had not disclosed any information
relating to attorney fees sought, which is a requirement for section
155 claims; (2) plaintiff refused the December 2000 offer of
settlement, which encompassed attorney fees, thus precluding any
further claims for attorney fees; and (3) even if section 155
violations were found, defendant should only be liable for the 25%
amount that was in effect at the time of plaintiff's claim, not the
current 60%, that was enacted during the pendency of this case.
Finally, defendant argued that the striking of DiLisio's testimony
rendered plaintiff's argument, that West Loop's rates should be
considered "reasonable," baseless.
Defendant attached several supporting affidavits to its motion,
including one from the telephone service representative who
initially told plaintiff about the DRP and one from the claims
adjuster who handled plaintiff's claim. A further affidavit, from
10
1-04-2110
defendant's physical damage manager, included a listing of the
"customs and practices" in the auto repair industry in Chicago and
northern Illinois. The list included observations that many
insurers have agreements with body shops to provide quality repairs
at agreed-upon rates and that, when an insurer recommends an insured
to such a shop, both the shop and the insurer guarantee the work to
the insured. The list also included the physical damage manager's
belief that it is customary for the body shop to notify the insurer
should the need for additional work on the vehicle arise.
Additional customs, according to the physical damage manager,
include insurers notifying insureds of their financial
responsibility should they opt not to use the DRP, and paying to tow
a car to a DRP shop. An affidavit from the owner of a body shop in
defendant's DRP corroborated all of these points and confirmed that
it performed work for defendant at a $22 per hour labor rate.
On June 25, 2004, a hearing was held on the motions for summary
judgment and the motion to bar the testimony of DiLisio. During the
hearing, the court questioned plaintiff's attorney regarding the
quality of repair at issue, as follows:
"THE COURT: Now, there is no direct
evidence as I understand it that the places to
which Founders wanted to direct Mrs. Gaston
couldn't have done the job perfectly well, is
there?
MR. GOLD [Plaintiff's attorney]: No.
11
1-04-2110
THE COURT: Okay.
MR. GOLD: They could have."
In evaluating the disputed testimony of DiLisio, the trial
court noted that:
"Mr. DiLisio is certainly qualified to talk
about repair costs, and given an appropriate
amount of homework I suppose he might be
qualified to talk about Chicagoland repair
costs. *** [But] the five phone calls made by
Mr. DiLisio in my view provide nothing
remotely approaching an adequate database for
the conclusions that he is asserting, unless
he is defining the terms he is using, like
'reasonable in the marketplace' in a
completely different way than I think the rest
of us are talking about."
The trial court then denied plaintiff's motion for summary
judgment, granted defendant's motion for summary judgment, and
granted the motion to bar the testimony of DiLisio. This appeal
followed.
ANALYSIS
Preliminarily, defendant contends that plaintiff did not
invoke the appraisal provision of the policy and therefore is
barred from raising this issue. Plaintiff makes no reply to this
allegation.
12
1-04-2110
Generally, issues raised for the first time on appeal are
waived. Daley v. License Appeal Comm'n of City of Chicago, 311 Ill.
App. 3d 194, 200, 724 N.E.2d 214 (1999). A review of the record
reveals that plaintiff failed to raise this issue at any time prior
to her appeal. Accordingly, plaintiff waived this issue for
purposes of this appeal.
A secondary initial matter concerns defendant's attempted
settlement offer early in the proceedings. Defendant contends that,
by virtue of its tender of the entire amount of plaintiff's claim,
plus interest, plaintiff's class action for breach of contract was
rendered moot. Plaintiff counters that it is well settled that a
putative class representative cannot be "bought off."
The tender of a settlement offer to a putative class
representative after class certification is sought, but before class
status is granted, does not deprive the class representative of
standing or moot his or the class members' claims. Deposit Guaranty
National Bank, Jackson, Mississippi v. Roper, 445 U.S. 326, 332-36,
63 L. Ed. 2d 427, 100 S. Ct. 1166 (1980). In the instant case, the
offer of full payment to plaintiff was not made until after she
sought class certification. Roper is therefore applicable and,
accordingly, we find that defendant's settlement offer did not
deprive plaintiff of standing nor render her claim moot.
Payment of Loss Provision
Plaintiff contends that defendant failed to show that its
13
1-04-2110
liability for paying the entire claim was not limited or excluded by
the policy and that defendant's failure to pay the entire claim was
a breach of contract. Plaintiff relies on the theory that defendant
failed to exercise its option to repair. Plaintiff points to the
"payment of loss" (POL) provision of the policy in support of her
contention. Plaintiff argues that POL provisions are standard terms
in policies of property damage insurance and give the insurer two
options for settling a claim where the insured's property is damaged
but not destroyed: (1) pay the loss in money so that the insured can
have the repairs done by a contractor of his or her choice, or, (2)
undertake the repairs itself by hiring contractors and otherwise
controlling the repair process.
Plaintiff contends that the record establishes that defendant
never exercised its option to repair her vehicle, which bound it to
pay the entirety of her repairs. Plaintiff also contends that
defendant failed to present any evidence that it ever communicated
to her in a clear, positive, distinct, and unambiguous way that it
wanted to exercise its option to repair the subject vehicle.
Plaintiff points primarily to the lack of any written correspondence
being sent to her, noting that defendant failed to send any sort of
unequivocal notice to her that it was exercising its right to
repair. Plaintiff also notes that defendant told her that she was
free to have her car repaired at West Loop, and that, while
defendant sets forth numerous statements of assurance in its
affidavits and briefs, there is no evidence that such statements
14
1-04-2110
were ever made directly to her at the outset of the matter.
Plaintiff further contends that the fact that defendant attempted to
settle her claim based on a written estimate is enough to establish
that it opted to pay the loss in money rather than exercise its
option to repair.
Plaintiff also contends that defendant attempted to force her
into choosing between (1) accepting its payment based on the
estimate created by defendant's appraiser, and (2) having her
vehicle repaired by a third-party shop chosen by defendant without
any assurance that the insurer would accept the responsibility for
the repairs performed by that shop. This ongoing tactic, contends
plaintiff, allows defendant to force policyholders to choose a DRP
shop, which then allows defendant to benefit from the lower rates it
has negotiated with the shop while simultaneously distancing itself
from the liability that would have arisen if defendant had properly
exercised its option to repair.
In support of her argument, plaintiff relies heavily on Howard
v. Reserve Insurance Co., 117 Ill. App. 2d 390, 254 N.E.2d 631
(1969), a case involving a building fire and the disagreement
between the parties as to whether the defendant insurance company
exercised its option to repair. The Howard court set forth five
criteria that make the notice of an insurer's election to exercise
its option to repair effective: (1) it must be made within a
reasonable time after the damage or loss has occurred to the
insured; (2) it must be clear, positive, distinct, and unambiguous;
15
1-04-2110
(3) the repairs or replacements must be made within a reasonable
time; (4) it cannot be coupled with an offer of compromise or be
made for the purpose of forcing a compromise, but it must be an
election made with no alternative; and (5) when the election is
made, the repair or replacement must be suitable and adequate.
Howard, 117 Ill. App. 2d at 399. The Howard court further noted:
"We adopt these criteria, however, with this caution that most legal
controversies present differences which must be decided individually
within the legal and factual bounds therein contained." Howard, 117
Ill. App. 2d at 399.
In summarizing her argument, plaintiff states that defendant
was free to negotiate whatever rates it wanted with the body shops
on its list and, further, to exercise its option to have plaintiff's
vehicle repaired at any one of those shops. Plaintiff maintains,
however, that because defendant failed to comply with the policy's
POL provision in the first instance, it waived its right to raise
the option to repair as grounds to reduce her claim or as a defense
to an action on the policy. Plaintiff contends that the trial court
should have found that once defendant waived its option to repair,
it was required to reimburse her for the amount she actually paid to
have her vehicle repaired.
Defendant contends that the policy in question does not, as
plaintiff argues, require it to indemnify or reimburse plaintiff for
the "amount she paid" to repair her vehicle. The amount paid for
repairs, argues defendant, is irrelevant in that the policy binds it
16
1-04-2110
to arrange for workmanlike repairs regardless of cost. Defendant
notes that, in her brief, plaintiff agreed that "Founders was free
to negotiate whatever rates it wanted with the body shops on its
list and further, to exercise its option to have [her] vehicle
repaired at any one of those shops."
Defendant further contends that it did all it could or should
to exercise its repair option under the policy, but that plaintiff
refused to allow the designated repair shop to tow or repair the
vehicle, despite several offers and explanations given by defendant.
Defendant argues that the option to pay for repairs or to have the
vehicle repaired did not belong to plaintiff; instead, the policy
expressly reserved those options to defendant. A plaintiff car
owner, contends defendant, cannot insist on payment for repairs
simply by refusing to allow the insurer to repair the vehicle.
Defendant further argues that it did not violate its policy and, in
fact, plaintiff was the party in violation as evidenced by her
refusal to let defendant repair the vehicle. Expounding on this
argument, defendant relies on plaintiff's own in-court admission
that defendant's chosen shop would have done the repair work
perfectly well. Lastly, defendant, citing Home Mutual Insurance Co.
of Iowa v. Stewart, 105 Colo. 516, 100 P.2d 159 (Colo. 1940), argues
that insurers are only obligated to pay the lowest sum for which the
car can be repaired when insureds thwart the insurer's direct repair
efforts.
In response to plaintiff's repeated arguments that defendant
17
1-04-2110
made no assurance to plaintiff regarding the quality of the repair
work, defendant cites Mockmore v. Stone, 143 Ill. App. 3d 916, 919,
493 N.E.2d 746 (1986), which held that liability is imposed on an
insurer who chooses a body shop by operation of law. It would have
been legally impossible, defendant argues, for it to not guarantee
the work. In support of this argument, defendant relies on (1) the
affidavit of the owner of Elar Auto Rebuilders, who guaranteed his
shop's work, and (2) the affidavit of defendant's physical damage
manager, who guaranteed the work of all the shops in the DRP.
Defendant points to the absence of any counteraffidavits,
admissions, or depositions submitted by plaintiff to rebut these
facts as evidence of plaintiff's failure to raise a genuine issue of
material fact required to defeat a motion for summary judgment.
Defendant further argues, with respect to its labor rates and
final bill, that they are a nonissue and relies on plaintiff's own
words in support of its argument. Defendant quotes from plaintiff's
argument that "[i]f an insurer can get a body shop to do quality
work for which the insurer will assume liability, the shop's labor
rates become a non-issue." Defendant labels this statement as one
that precisely sums up the case before us. Defendant argues that,
because it arranged for a shop to do quality work, and assumed
responsibility for the completeness and quality of the repairs, the
rates plaintiff complains of are immaterial. As to the final bill
and disparity between estimates, defendant points out that plaintiff
never let it re-inspect the vehicle to estimate the additional
18
1-04-2110
damages West Loop supposedly found during repairs and that an
independent inspector found evidence that the additional work
charged on West Loop's final bill may not have been performed or, if
performed, not necessary.
"Summary judgment is appropriate only where there is no genuine issue of
material fact." State Farm Fire & Casualty Co. v. Moore, 103 Ill.
App. 3d 250, 257, 430 N.E.2d 641 (1981). The standard of review for
the granting or denial of a motion for summary judgment is de novo.
In re Estate of Hoover, 155 Ill. 2d 402, 411, 615 N.E.2d 736
(1993). Bare contentions in the absence of citation of authority do
not merit consideration on appeal and are deemed waived. City of
Highwood v. Obenberger, 238 Ill. App. 3d 1066, 1073-74, 605 N.E.2d
1079 (1992).
Plaintiff's argument wholly rests on her stated belief that if an insurer does not
exercise its option to repair, it must then pay the insured money so that the insured can
have repairs done by a contractor of her choice. Plaintiff fails, however, to cite any case law
or other supporting authority lending credence to such an assumption. A reading of the
actual policy reveals no text granting the insured the option to have such unfettered control
over the repair process when the insurer fails to exercise its direct repair option. Rather, the
actual wording of the policy obligates the insurer to pay "the amount necessary to repair the
damaged property at the time of loss."
A thorough examination of the POL provision issue, then, would
be in order only if the trial court's determination that defendant
complied with the terms of the policy was in error. Put simply, if
19
1-04-2110
it was found that defendant did indeed exercise its repair option,
notwithstanding plaintiff's refusal to comply with its efforts,
then plaintiff has no claim for breach of contract. On the other
hand, if it were found that defendant did not exercise its repair
option, but did provide plaintiff with what was necessary to repair
her vehicle, there would also be no grounds for breach of contract.
Accordingly, we must turn to the issues of policy interpretation
and defendant's compliance with section 919.80(d)(6) of the
Insurance Regulations.
Policy Interpretation and Section 919.80(d)(6)
of the Department of Insurance Regulations
Plaintiff contends that the trial court erred in its decision
to grant summary judgment in favor of defendant based on its
misinterpretation of section 919.80(d)(6) of the Department of
Insurance Regulations, specifically the sentence: "The estimate
prepared by or for the company shall be reasonable, in accordance
with applicable policy provisions, and of an amount that will allow
repairs to be made in a workmanlike manner."
Plaintiff contends that, by taking the position that the
contract term "necessary" should be construed as limiting the
insurer's liability for paying claims at the rates charged by the
shops with which the insurance company had arranged volume
discounts, all defendant really did was concede that the term has a
hidden or alternative meaning that is not defined in the policy and
that may not have been understood by a layperson; in other words,
20
1-04-2110
that it is ambiguous and should be construed strongly against the
insurer as the drafter of the policy.
Turning to the term "reasonable estimate" in section
919.80(d)(6) of the Department of Insurance Regulations, plaintiff
contends that it would be absurd to construe that term as anything
other than "the objectively reasonable cost of repairs in the
marketplace." According to plaintiff, by manipulating the labor
rates and leaving a few necessary repairs off of a repair estimate,
unscrupulous insurers can make just about any claim fall just above
or just below the policyholder's deductible and thereby cheat
customers out of benefits that they are legitimately due under their
policy. At a bare minimum, plaintiff argues, there is a genuine
issue of material fact as to whether defendant's repair estimate was
"reasonable" as that term is used in section 919.80(d)(6) of the
Department of Insurance Regulations.
In addressing plaintiff's argument regarding the term
"necessary repairs," defendant posits that plaintiff seeks to impose
upon an insurer a duty to pay for whatever additional damage that
any body shop chosen by an insured may claim to find during the
course of repairs, like the additional damage that was found by West
Loop but hidden from defendant. Defendant contends that the policy
does not obligate it to pay what it would cost plaintiff to have her
car repaired on her own. Defendant points to repeated references to
"the company" in the policy as evidence that the provision refers to
and limits liability to the cost of repairs incurred by the
21
1-04-2110
insurance company rather than any costs incurred by the insured car
owner. The policy, continues defendant, does not refer to necessary
expenses incurred by "you" or "the insured," but rather clearly
refers to repair costs incurred by "the company."
Defendant also argues that there is no ambiguity in the term
"necessary to repair" because an ordinary layperson would not even
consider the labor rates paid to the repair shop, much less read
certain unspecified labor rates into the policy. Instead, defendant
argues, the ordinary layperson cares only that his or her car is
properly repaired and that he or she is not required to pay any more
than the deductible amount for the repairs, which is exactly what
defendant offered to plaintiff.
In response to plaintiff's contention that defendant should
have disclosed its DRP to plaintiff when she purchased her policy,
defendant argues that, under the terms of the policy, the option to
repair the car lay with defendant, not plaintiff. This arrangement
gave defendant control of the repairs, including the choice of body
shops. Defendant further argues that, since plaintiff admits that
defendant's chosen shops would have performed the repairs perfectly
well, she could not have been harmed in any way by defendant's
choice of shop or the price paid by defendant to the shop.
Defendant maintains that it informed plaintiff four times of the DRP
before she incurred the expenses at West Loop, which she knew were
not going to be paid for by defendant. Defendant labels plaintiff's
claim that she was harmed by any misrepresentation or lack of
22
1-04-2110
disclosure regarding defendant's agreements with certain body shops
as "disingenuous" because, it claims, she made an informed and
conscious decision to incur the extra charges from West Loop.
Defendant also contends that plaintiff's interpretation of the
policy as requiring payment of high labor rates would only benefit
body shops, which are not even parties to the insurance contract.
Accordingly, defendant argues that since the parties to the
insurance contract clearly did not intend to benefit body shops by
ensuring them higher rates, fees, and payments, it is unreasonable
to interpret the policy provision as requiring those higher,
allegedly "reasonable" body shop rates. Defendant further points
out that plaintiff fails to delineate to whom the labor rates should
be "reasonable" and does not suggest how any labor rate or repair
bill, whether high or low, could be proved to be unreasonable.
Continuing in its argument concerning the term "reasonable,"
defendant relies on the evidence showing that West Loop's rates
varied widely from customer to customer. While West Loop charged
plaintiff as much as $79 per hour, it charged other customers
various other rates as low as $21 per hour. Defendant then couples
that disparity with the uncontradicted affidavits showing more than
30 Chicago area body shops charging the same labor rates as used in
defendant's estimate to illustrate the range of labor rates that
could possibly be deemed "reasonable."
Defendant further contends that, to both the insured and the
insurer, the lowest obtainable rate for the same quality repairs
23
1-04-2110
would seem reasonable. Defendant argues that any higher rates would
only seem reasonable to the body shops receiving the inflated fees
and that such a scheme would deprive insurance companies, insured
car owners, and individual body shops of their respective abilities
to negotiate better terms for themselves. Such a system, defendant
contends, would benefit only the higher priced body shops because,
while insureds would receive the same quality repairs at any price,
insurers would end up paying more for repairs and lower priced
shops would lose their competitive advantage.
Defendant points to plaintiff's rejection of its offer of
payment of the full amount she claimed under the policy plus
interest as evidence of plaintiff's real motive behind this case,
i.e., to benefit body shops and their attorneys. Defendant notes
that the attorneys who represent plaintiff in this case also
represent West Loop and have brought several class actions like this
one in an effort to compel insurance companies to pay higher labor
rates to body shops.
Defendant bolsters its argument by maintaining that its
practices do not violate public policy, as plaintiff implies, by
pointing out that our legislature focused on this issue in 1997.
Defendant highlights House Bill No. 1502, which, if enacted, would
have prohibited insurance companies from restricting the choice of
an auto body repair facility. The General Assembly's decision not
to bar the practice, contends defendant, demonstrates that it is not
against public policy. The courts, defendant asserts, should not
24
1-04-2110
carve out new substantive law, as plaintiff requests, which the
legislature has expressly rejected. As further support for its
argument, defendant turns to the Department of Insurance, which
advises consumers on its website that if they choose a repair shop
which charges more than the insurance company's suggested shop, the
consumer may have to pay the difference himself. Also, defendant
points out, the Department of Insurance not only approved the
issuance of the policy and limit of liability at issue in this case,
but also found that defendant did not violate the Insurance Code or
the Department of Insurance Regulations in this particular instance.
Defendant contends that it complied with every aspect of
section 919.80(d)(6) of the Department of Insurance Regulations in
that it provided plaintiff with the names of more than one repair
shop, which admittedly would have made the repairs to her car in a
workmanlike manner. Defendant defends its repair program by
pointing out that it has spared its insureds the time and trouble of
dealing with body shops by inspecting, negotiating with, and
approving quality and price with all the shops in its DRP.
Defendant argues that most insureds lack the knowledge, training, or
resources to do these things and would be at a disadvantage when
dealing with body shops, as evidenced by the high rates imposed on
plaintiff by West Loop.
The court's primary objective in interpreting an insurance
policy is to ascertain and give effect to the intention of the
parties, as expressed in the policy language. Hobbs v. Hartford
25
1-04-2110
Insurance Co. of the Midwest, 214 Ill. 2d 11, 17, 823 N.E.2d 561
(2005). While ambiguous terms in insurance policies are construed
in favor of the insureds, that rule of construction only applies
when the policy is ambiguous. Hobbs, 214 Ill. 2d at 17. The word
"necessary" is not ambiguous and has a plain, ordinary, and popular meaning of being
essential, indispensable, or requisite. Chatham Corp. v. Dann Insurance, 351 Ill. App. 3d
353, 358, 812 N.E.2d 483 (2004).
An insurer's election to repair an insured's vehicle, together
with its selection of the means by which such repairs are to be
accomplished, imposes a contractual liability for damages resulting
from negligent repairs. Mockmore, 143 Ill. App. 3d at 919. An
attorney's statement in court constitutes a binding admission of the
party which cannot be refuted. Darling v. Charleston Community
Memorial Hospital, 50 Ill. App. 2d 253, 328, 200 N.E.2d 149 (1964).
Unless the terms of a policy are against public policy when applied, the terms
determine the benefits available under the policy. Parish v. Country Mutual Insurance Co.,
351 Ill. App. 3d 693, 699, 814 N.E.2d 166 (2004). "This court has held declaring a policy
provision void as against public policy is an 'extraordinary remedy' which this court finds
'unpalatable.'" Parish, 351 Ill. App. 3d at 699. Illinois courts may not establish
public policy which is contrary to the public policy that the
legislature has deemed appropriate for the state. State Farm Mutual
Automobile Insurance Co. v. Smith, 197 Ill. 2d 369, 376, 757 N.E.2d
881 (2001). Where the Director of Insurance takes no action against
an insurance policy provision, it can be inferred that the Director
26
1-04-2110
felt the provision did not violate any part of the Insurance Code.
Bernardini v. Home & Automobile Insurance Co., 64 Ill. App. 2d 465,
467-68, 212 N.E.2d 499 (1965).
Section 919.80(d)(6) of the Department of Insurance Regulations states:
"If partial losses are settled on the basis of a written estimate
prepared by or for the company, the company shall supply,
upon request of the insured, a copy of the estimate upon which
the settlement is based. The estimate prepared by or for the
company shall be reasonable, in accordance with applicable
policy provisions, and of an amount which will allow for repairs
to be made in a workmanlike manner. If the insured
subsequently claims, based upon a written estimate which he
obtains, that necessary repairs will exceed the written estimate
prepared by or for the company, the company shall review and
respond promptly to the insured and provide the insured with
the name of a repair shop that will make the repairs in a
workmanlike manner. Failure of the company to so inform the
insured of the name of such a repair shop shall require the
company to provide written notice to the insured that any and all
reasonable costs incurred for repair or replacement related to
the partial loss in excess of the company's estimate will be
reimbursed by the company. The company shall maintain
27
1-04-2110
documentation of all such communications." 50 Ill. Admin.
Code _919.80(d)(6).
In Chatham Corp., the plaintiff was a company that sterilized
medical equipment at a plant in Virginia. Chatham Corp., 351 Ill.
App. 3d at 354. When an explosion severely damaged the plaintiff's
plant, it turned to its insurance carrier, the defendant, for relief
under its policy, which included the provision that the defendant
would pay the plaintiff the "necessary expenses you incur during the
period of restoration." Chatham Corp., 351 Ill. App. 3d at 355.
The defendant then paid for the reconstruction of the plaintiff's
plant, but refused to pay for a portion of the expenses the
plaintiff incurred in its efforts to maintain the business
relationship it had with its main customer, a corporation known as
Maxxim Medical, Inc. Chatham Corp., 351 Ill. App. 3d at 355. The
business contract the plaintiff had with Maxxim called for the
plaintiff to find alternate sterilization facilities and to pay the
cost of shipping Maxxim's unsterilized goods from the plaintiff's
facility to an alternate sterilization facility. Chatham Corp., 351
Ill. App. 3d at 355. The defendant recognized the plaintiff's
obligation under the Maxxim contract as "necessary" and reimbursed
the plaintiff for the expense of shipping the goods between the
facilities. Chatham Corp., 351 Ill. App. 3d at 355. When the
plaintiff looked to the defendant for reimbursement for the expense
it incurred by shipping the newly-sterilized goods to Maxxim's
customers, the defendant refused to pay, deeming that cost
28
1-04-2110
"unnecessary." Chatham Corp., 351 Ill. App. 3d at 355.
After proceedings in federal court in Virginia, the plaintiff
filed a complaint in Illinois, alleging, among other things, breach
of contract. Chatham Corp., 351 Ill. App. 3d at 356. After the
trial court granted summary judgment in favor of the defendant, the
plaintiff appealed and this court affirmed, finding that "necessary"
was not an ambiguous term, that it does not encompass expenses that
insureds may have wanted to incur on a voluntary basis, and that a
court cannot add terms to a contract which the parties have not
included in the language of the policy. Chatham Corp., 351 Ill.
App. 3d at 358-59. See also Butwin Sportswear Co. v St. Paul Fire &
Marine Insurance Co., 534 N.W.2d 565 (Minn. App. 1995) (an
appraiser's fee is not a "necessary" expense that an insurer is
obligated to reimburse; "necessary" is not ambiguous).
Smith provides a good example of an insurance policy provision
that violated public policy. In Smith, the defendant passenger was
injured when her vehicle, being driven by a valet parking attendant
of a casino, rolled backward as she (the defendant) was getting into
the car. Smith, 197 Ill. 2d at 370. The insurance policy in
question in Smith contained an exclusion, which stated that there
was no coverage for vehicles being used by any person employed or
engaged in any way in a car business. Smith, 197 Ill. 2d at 372-73.
The plaintiff, the defendant's insurance company, then moved for a
declaratory judgment that it had no duty to defend the casino based on an "automobile
business" exception in the defendant's policy. Smith, 197 Ill. 2d at 371. The trial court held
29
1-04-2110
that the automobile business exclusion applied, and that the plaintiff had no duty to defend
or indemnify the casino. Smith, 197 Ill. 2d at 371. Accordingly, the trial court granted the
plaintiff's motion for summary judgment. Smith, 197 Ill. 2d at 371.
On appeal, this court reversed, finding that the "business exclusion" provision violated
the Illinois rule that a liability insurance policy issued to the owner of a vehicle must cover
the named insured and any other person using the vehicle with the named insured's
permission and, therefore, was against public policy. Smith, 197 Ill. 2d at 372. On further
appeal, the supreme court affirmed this court, holding that the automobile business
exclusion violated the public policy of Illinois, namely, by violating established case law and
a section of the Vehicle Code. Smith, 197 Ill. 2d at 374. In its holding, the supreme court
adhered to its rule of not establishing public policy which is contrary to the public policy that
the Illinois legislature has deemed appropriate for the State of Illinois. Smith, 197 Ill. 2d at
376.
As discussed above, the POL provision of the policy in the
instant case is rendered irrelevant if it can be shown that
defendant fulfilled its "amount necessary" obligation. Plaintiff's
initial effort to ensure that this court's interpretation of section
919.80(d)(6) of the Department of Insurance Regulations conforms
with the finding in Howard regarding POL provisions, then, should
also be classified as immaterial pending a recommendation on the
"necessary" clause.
Although the trial court here looked to a federal case for its
ruling on the term "necessary," we have no need to look any further
30
1-04-2110
than this district. The Chatham Corp. court was clear in labeling
"necessary" as an unambiguous term meaning essential, indispensable,
or requisite. It is apparent from the facts of this case that it
was not "essential" that plaintiff's vehicle be repaired at West
Loop. There were several other body shops that could have done the
job, including defendant's two DRP shops that plaintiff's attorney
admitted, in court, would have done the job in a workmanlike manner.
It is important to note that, as defendant points out, the
policy language in Chatham Corp. refers to "necessary expenses you
incur," with "you" clearly referring to the insured. (Emphasis
added.) Chatham Corp., 351 Ill. App. 3d at 355. In this case, the
policy language states "the Company's limit of liability for all
losses *** shall not exceed *** (b) the amount necessary to repair
the damaged property." Illinois case law that has held that policy
language is meant to express the intention of the parties compels
this court to find that the "amount necessary" refers to the amount
the insurer must spend to repair the vehicle, not the amount the
insured decides to spend. Indeed, such an open-ended clause would,
as defendant argues, benefit only the high-rate body shops. See
Chick's Auto Body v. State Farm Mutual Automobile Insurance Co., 168
N.J. Super. 68, 401 A.2d 722 (N.J. Super. L. 1979) (the practice of
insurance companies to calculate reimbursement of insureds based
upon lowest prevailing price in marketplace (and to insure integrity
of that estimate by having an open list of competing shops which
will generally accept it) is the very essence of competition). In
31
1-04-2110
fact, with the Mockmore rule in effect, compelling all insurers to
assume all liability for repairs made at body shops they chose, it
is unclear how the policy interpretation plaintiff is arguing for
would protect insureds at all. See Williams v. Farm Bureau Mutual
Insurance Co. of Missouri, 299 S.W.2d 587 (Mo. App. 1957) (if the
insurer's chosen shop performs shoddy work, then the insured is
entitled to damages; no claim, however, arises from mere speculation
that the work promised by insurer would not suffice).
It follows then, if the amount "necessary" to repair the
vehicle is the amount defendant would need to spend to have the
vehicle repaired, then a "reasonable estimate" is one reflecting the
defendant's potential costs, not what the insured would incur if she
were negotiating on her own. Accordingly, we find that "reasonable
estimate" is not an ambiguous term and was not grounds for denial of
summary judgment here.
In Smith, the statute and case law presented by the defendant
supported a successful argument that the policy language at issue
was against public policy. In the instant case, plaintiff has not
provided any such support for her argument. It should also be noted
that, as evidenced by the legislature's decision not to enact House
Bill No. 1502, Illinois has found the very practice defendant
implements in this case to not be against public policy. This is
also illustrated in the Department of Insurance letter to plaintiff
and the instructions posted on the Department of Insurance's
website.
32
1-04-2110
With respect to section 919.80(d)(6) of the Department of
Insurance Regulations, the record here is clear that defendant
complied with each aspect of the section. Defendant supplied
plaintiff with a copy of its estimate, which can accurately be
considered "reasonable" in light of the analysis above, and provided
plaintiff not only with a list of shops where she could have her
vehicle repaired for the total listed on that estimate but also with
the offer of a free tow and storage.
Accordingly, we find that the trial court correctly interpreted
the policy, that there were no ambiguous terms on which to deny
summary judgment for defendant, and that the policy language was not
against public policy.
DiLisio's Testimony
Plaintiff contends that the trial court abused its discretion
in striking DiLisio's testimony and that the court's own comments
reveal the deficiency in its judgment. Specifically, plaintiff
points to the statement of the trial court that "Mr. DiLisio is
certainly qualified to talk about repair costs, and given an
appropriate amount of homework I suppose he might be qualified to
talk about Chicagoland repair costs." Plaintiff contends that this
statement shows that the perceived deficiencies in DiLisio's
research would have gone only to the weight, not the sufficiency, of
his opinions.
Plaintiff contends that, because the trial court was supposed
to consider all of the evidence of record in determining whether a
33
1-04-2110
factual controversy existed between the parties, but not weigh the
testimony of one deponent against another or make any credibility
determinations, it abused its discretion in refusing to consider
DiLisio's testimony because of a perceived deficiency in the number
of shops which he called to form his opinion.
Defendant contends that DiLisio's affidavit is irrelevant and
immaterial because it exercised its option to repair plaintiff's car
and, as such, was not bound to any specific rates, but rather only
to repairing her car in a workmanlike manner. Defendant argues that
the trial court properly struck DiLisio's testimony because there
was no factual basis for his opinion. To illustrate its contention,
defendant points out that DiLisio did not randomly select the shops
he called, but rather personally selected shops from an incomplete
list of shops he compiled for unspecified reasons.
In addressing plaintiff's contention that the deficiencies in
DiLisio's testimony should only affect the weight, but not the
admissibility of the evidence, defendant argues that the
qualifications of an expert/opinion witness must be established
before he may give any opinion testimony. In support of its
argument, defendant maintains that DiLisio had no statistical
training and did not claim that his five telephone calls, which
posed only one question to shop owners he already knew, produced any
statistically reliable result. Defendant contends that this
"survey" was flawed, both for its size and for lack of appropriate
questions, and that the trial court did not abuse its discretion by
34
1-04-2110
striking it.
A ruling on the admissibility of expert testimony will not be
reversed absent an abuse of discretion. Copeland v. Stebco Products
Corp., 316 Ill. App. 3d 932, 937, 738 N.E.2d 199 (2000). Testimony
is irrelevant and properly excluded if it has no legitimate bearing
on any fact or issue in the case. Dial v. City of O'Fallon, 81 Ill.
2d 548, 559, 411 N.E.2d 217 (1980).
Defendant is correct in its argument that the labor rates
charged by West Loop and the shops in its DRP are irrelevant to this
case. As established above, defendant fulfilled its obligation to
plaintiff by making arrangements to repair her car with no expense
to her beyond her deductible. It should be noted that, although the
trial court struck DiLisio's affidavit because it found it to be
based on insufficient facts, we need not address that decision
because the issue of labor rates is irrelevant. The opinion of
DiLisio as to the reasonableness of any labor rates has no bearing
on the central issue of this case and, as a result, there is no need
to analyze either his testimony or the court's striking of his
affidavit. Accordingly, we find that, although the trial court
struck DiLisio's affidavit for a different reason, the court did not
abuse its discretion in striking the affidavit.
Section 155 of the Insurance Code
Plaintiff contends that the trial court abused its discretion
in granting defendant summary judgment on plaintiff's claim under
section 155 of the Insurance Code (Code) (215 ILCS 5-155 (West
35
1-04-2110
2000)). Plaintiff argues that she presented sufficient facts to
support her claim that defendant acted unreasonably and vexatiously
in the handling of her loss. Plaintiff states again that
defendant's interpretation of the POL provision would "force
policyholders like [her] to either accept less than what they were
due under the policy if they had their vehicles repaired at a body
shop of their choice or to assume the risk of having their vehicles
repaired at body shops selected by the insurer without any
assurance" guaranteeing the success of the repairs. Plaintiff
further contends that defendant denied significant portions of her
claim based on its use of labor rates that it knew did not reflect
the objectively reasonable cost of those services in the
marketplace, but, rather, reflected only the discounted rates it had
negotiated with its DRP shops.
Defendant counters that it did not act unreasonably, as
evidenced by its compliance with the terms of the policy, section
919.80(d)(6) of the Department of Insurance Regulations, and the
Department of Insurance website. Defendant maintains that it
promptly offered to tow and repair plaintiff's vehicle for the
amount of its estimate at any of its DRP shops and that any delay in
processing was due to plaintiff's own refusal to allow defendant to
repair the vehicle. Defendant then notes that it complied with
section 919.80(d)(6) of the Department of Insurance Regulations by
promptly providing plaintiff with the name of a shop that would
honor its estimate. Defendant further argues that, in fact, it
36
1-04-2110
provided plaintiff with the names of all the shops in its DRP,
including two that were very close.
Defendant also argues that the dispute at issue is a bona fide
coverage dispute and, as such, is not the type of dispute section
155 of the Code is designed to remedy. Defendant notes that
plaintiff has not cited a single case awarding costs and sanctions
under section 155 of the Code where the policy gave the insurer the
option to repair or pay for repairs to an insured's vehicle, the
insured refused the insurer's proffered repair of the vehicle, and
the insurer then promptly paid the insured the cost of the insurer's
repairs.
Section 155 of the Code provides, in pertinent part, for the award of attorney fees in
cases where the insurer caused an unreasonable delay in settling a claim, and it appears to
the court that such action or delay was vexatious and unreasonable. Mobil Oil Corp. v.
Maryland Casualty Co., 288 Ill. App. 3d 743, 751-52, 681 N.E.2d 552 (1997). "A court
should consider the totality of the circumstances when deciding whether an insurer's actions
are vexatious and unreasonable. Factors to consider are the insurer's attitude, whether the
insured was forced to sue to recover, and whether the insured was deprived of the use of
his property. If a bona fide dispute existed regarding the scope of the insurance coverage,
an insurer's delay in settling the claim may not violate section 155." Valdovinos v. Gallant
Insurance Co., 314 Ill. App. 3d 1018, 1021, 733 N.E.2d 886 (2000). "While the question of
whether the insurer's action and delay is vexatious and unreasonable is a factual one, it is a
matter for the discretion of the trial court; the trial court's determination will not be disturbed
37
1-04-2110
unless an abuse of discretion is demonstrated in the record." Dark v. United States Fidelity
& Guaranty Co., 175 Ill. App. 3d 26, 30-31, 529 N.E.2d 662 (1988).
In Valdovinos, which plaintiff here relies on, the plaintiff
insured was involved in an automobile accident and filed a timely
claim with the defendant, his insurer. Valdovinos, 314 Ill. App. 3d
at 1019. The Valdovinos plaintiff hired an independent appraiser to
estimate the damage to his vehicle and then sent the estimate to the
defendant, who told the plaintiff that it would process the claim.
Valdovinos, 314 Ill. App. 3d at 1019. The defendant then failed to
communicate with the plaintiff for two months despite the
plaintiff's efforts to make contact, including calling the defendant
over 20 times. Valdovinos, 314 Ill. App. 3d at 1019. During these
two months, the plaintiff was forced to borrow money for alternative
transportation and to repair his vehicle. Valdovinos, 314 Ill. App.
3d at 1020. When the defendant finally did communicate with the
plaintiff, it did so by submitting a "counteroffer" that was several
thousand dollars lower than his submitted estimate, with no
explanation for the differing estimate amounts. Valdovinos, 314
Ill. App. 3d at 1022. The plaintiff then was forced to take legal
action, and incur the accompanying expenses and fees. Valdovinos,
314 Ill. App. 3d at 1022. At trial, the trial court awarded the
plaintiff his claimed expenses, but denied his petition for fees and
costs under section 155 of the Code. Valdovinos, 314 Ill. App. 3d at
1019. On appeal, the Valdovinos court reversed, noting the
defendant's delay in processing the claim and its lack of
38
1-04-2110
communication and finding that there was no bona fide dispute over
the cost of repairs. Valdovinos, 314 Ill. App. 3d at 1022. The
case was then remanded to the trial court with directions to award
the plaintiff fees and costs under section 155 of the Code.
Valdovinos, 314 Ill. App. 3d at 1023.
In contrast to the defendant in Valdovinos, defendant's efforts
at communication in this case were prompt and numerous. It is
undisputed that defendant's representatives spoke with plaintiff on
the telephone at least four times in the first few weeks following
the accident. There is also no evidence that defendant failed to
fully and completely explain the limits of plaintiff's policy to
her. Also, unlike Valdovinos, the amount to be paid on the estimate
was in dispute at all times in this case. Further, there is no
evidence that plaintiff had to initiate a lawsuit just to receive
the benefits of her policy, as the offer to fix her car without
additional cost was made several times. The cost-inducing delay in
this case was not caused by the same type of operational breakdown
apparent in Valdovinos. Whether the delay was caused by defendant's
refusal to pay the rates charged by West Loop or plaintiff's refusal
to allow her car to be repaired at one of defendant's DRP shops, the
dispute can be classified as bona fide. As a bona fide dispute,
then, defendant's delay in "settling the claim," such as it was,
cannot be considered vexatious or unreasonable. Accordingly, we
find that the trial court did not abuse its discretion in denying
the award of attorney fees and costs under section 155 of the Code.
39
1-04-2110
Class Action Treatment Under Section 155 of the Code
Plaintiff contends that the trial court erred in ruling that
the pleadings precluded class action treatment for the claims
asserted under section 155 of the Code. Plaintiff argues that class
action treatment is proper, and has been shown to be proper by case
law, when an insurer uses an arbitrary and unreasonably low payment
schedule to deny legitimate claims. Plaintiff maintains that
defendant has a regular policy and practice of rejecting all or part
of legitimate physical damage claims without regard to the fees
actually charged by repair shops within the applicable geographic
location. In this case, plaintiff argues, the dominant and
persuasive issue is one of contract interpretation, specifically,
whether defendant breaches its contract with its insureds each time
it purports to pay a physical damage claim in money but limits such
payment to an arbitrary and unreasonable amount based on the use of
discounted labor rates charged by the shops that participate in its
DRP. As such, plaintiff contends that her case is precisely the
type of case that is suitable for class action treatment.
Defendant contends that the trial court's dismissal of
plaintiff's claim for class action relief was proper because that
claim was not supported by either the facts or the law. Defendant
notes that plaintiff's argument that "a number of cases" approve
class action status for claims under section 155, "alleging that an
insurer uses an arbitrary and unreasonably low payment schedule to
deny legitimate claims," is not supported by a single case.
40
1-04-2110
Defendant further contends that a section 155 class action in this
case would require an examination of all the factors and
considerations that go into automobile damage estimates prepared by
a myriad of body shops and adjusters. Defendant maintains that
common sense and experience show that there are variations in every
estimate and that, were a class action to be granted, the court
would have to hold a trial for each individual claim to determine
the bona fides of both the repair shop's and the adjuster's
estimate. The trial court would also, argues defendant, have to
determine whether the damages claimed from each accident to each
vehicle were legitimate or fraudulent. Such a trial to determine
all of those important issues separately for each individual claim,
defendant contends, would be so unwieldily as to defeat the purpose
of a class action.
"Dismissal of a cause of action on the pleadings is only proper
where it is clearly apparent that plaintiff can prove no set of
facts that would entitle him to recover. In ruling on a motion to
dismiss pursuant to Ill. Rev. Stat. ch. 110, para. 2-615 (1991), the
court must accept as true all well-pleaded facts in the complaint
and all reasonable inferences that can be drawn therefrom. The
court reviews a ruling on a motion to dismiss de novo." Sherman v.
Kraft General Foods Inc., 272 Ill. App. 3d 833, 835-36, 651 N.E.2d
708 (1995). Where a predominant and common question of law or fact
exists, requirement of individual proofs, or multiple claims
requiring separate adjudication, do not bar class actions. Puritt
41
1-04-2110
v. Allstate Insurance Co., 284 Ill. App. 3d 442, 447, 672 N.E.2d 353
(1996).
In Puritt v. Allstate Ins. Co., 284 Ill. App. 3d 442, 443, 672
N.E.2d 353 (1996), which plaintiff relies on, the plaintiff was an
insured who was injured in an automobile accident and was
dissatisfied with the amount her insurer, the defendant, paid for
her medical expenses. Consequently, the plaintiff filed a lawsuit
for individual and class action relief, alleging that the defendant
implemented a practice of rejecting all or part of legitimate
medical claims by using a payment schedule that was unreasonably low
and arbitrarily set. Puritt, 284 Ill. App. 3d at 443. Prior to
trial, the trial court granted the defendant's motions to dismiss
the complaint, contending that the plaintiffs lacked standing and
that the action was not proper for class certification. Puritt, 284
Ill. App. 3d at 443. In making its decision, the trial court relied
on case law that found class actions inappropriate for purported
classes that were dependent on "intervening factors," i.e., a group
of insureds cannot be a class simply because they "may" get into an
accident and be denied coverage. Puritt, 284 Ill. App. 3d at 447.
On appeal, the Puritt court found that the trial court erred
and defined the purported class as consisting of the defendant's
insureds who had been involved in an automobile accident, were
injured, received medical treatment for which they submitted claims
under the medical payments provisions of their policies, and were
tendered less than the amounts billed based on the defendant's
42
1-04-2110
alleged policy and practice of depriving its insureds of reasonable
payments on their medical claims. Puritt, 284 Ill. App. 3d at 447.
In vacating the order to dismiss the class action count, the Puritt
court explained that instead of an "intervening factor" class
action, the plaintiff had introduced a "common issue of contract
interpretation." Puritt, 284 Ill. App. 3d at 447. The Puritt court
was deliberate in explaining that it was not deeming a class action
appropriate, but rather that it found that the trial court relied on
the wrong type of cases in making its determination. Puritt, 284
Ill. App. 3d at 447. See also Van Vactor v. Blue Cross Ass'n, 50
Ill. App. 3d 709, 721, 365 N.E.2d 638 (1977) (class action upheld
where allegation was that the insurer violated contracts with the
insureds by denying benefits solely on the ground that it disagreed
with honest judgment of treating doctors on need for medical
services).
Applying the reasoning underlying Puritt and Van Vactor to this
case, then, results in a finding that the only way a class action
could have survived a motion to dismiss is if the class members were
found to be joined by a common issue of contract interpretation and
victims of the "scheme" that plaintiff has alleged defendant
implements. It follows, then, that absent a finding of any
"scheme," there can be no class of victims. In accordance with our
finding that there was no "scheme," we therefore affirm the trial
court's denial of class action treatment of plaintiff's claim under
section 155 of the Code.
43
1-04-2110
CONCLUSION
For the reasons stated, we affirm the judgment of the circuit
court of Cook County.
Affirmed.
GORDON and McBRIDE, JJ., concur.
44