Illinois Appellate Court Holds That Section 155 of the Illinois Insurance Code Preempts a Claim Brought Under the Illinois Consumer Fraud and Deceptive Business Practices Act
September, 2004
The Illinois Appellate Court, First District, holds that § 155 of the Illinois Insurance Code preempts a cause of action brought under the Illinois’ Consumer Fraud and Deceptive Business Practices Act (“Consumer Fraud Act”). Young v. Allstate Ins. Co., 812 N.E.2d 741 (Ill. App. 2004).
Facts
Plaintiffs insured seven vehicles with Allstate. The Allstate policy provided coverage for “classic” and “typical” vehicles. In addition to six other vehicles, the policy insured a 1976 Cadillac Eldorado. The policy limited Allstate’s liability as to the Cadillac to $30,000 or the Cadillac’s actual cash value. In July 1998, plaintiffs’ Cadillac was involved in a collision. In August 1998, Allstate declared the Cadillac to be a “total loss,” and offered plaintiffs the actual cash value of the Cadillac. Plaintiffs rejected this and subsequent offers “because they insisted that the policy provided stated value coverage of $30,000.” Litigation ensued.
In November 2000, plaintiffs filed their second amended complaint alleging breach of contract, respondeat superior, bad faith, estoppel, and consumer fraud. The trial court granted Allstate’s motion to dismiss the respondeat superior and estoppel counts. Allstate then moved for summary judgment on the remaining counts. Allstate argued, inter alia, that § 155 of the Illinois Insurance Code preempts claims under the Consumer Fraud and Deceptive Business Act. The trial court agreed, and the First District affirmed.
Analysis
Allstate’s preemption argument was premised primarily on the position that “a separate tort theory [brought under the Consumer Fraud Act] is unnecessary … because a contractual remedy is available pursuant to statute [§ 155 of the Illinois Insurance Code].”
Section 155 allows a plaintiff to recover reasonable attorney fees, other costs, and a penalty if its insurer’s actions or delay in settling a claim is vexatious and unreasonable. The costs recoverable under § 155 constitute an “extracontractual remedy intended to make suits by policyholders economically feasible and punish insurance companies for misconduct.” Section 155 sets forth a remedy for “insurer misconduct that does not rise to the level of a well-established tort.”
The court summarized Allstate’s position as follows:
Allstate contends that the Consumer Fraud [and Deceptive Business Practices] Act should not apply to simple breach of contract claims. … Allstate claims that the Consumer Fraud Act establishes a cause of action sounding in tort; however, plaintiffs’ claim is premised on a breach of an insurance contract. Allstate contends that a separate tort theory is unnecessary because a contractual remedy is available pursuant to statute. Allstate contends that any tort-based theory of recovery under the Consumer Fraud Act is preempted by section 155.
The First District agreed with Allstate, declaring “We [the First District] conclude that section 155 preempts plaintiffs’ Consumer Fraud Act claim.” Relying primarily on Cramer v. Ins. Exchange Agency, 675 N.E.2d 897 (Ill. 1996), the First District offered the following rationale for its decision:
[a] plaintiff may bring an independent tort action for insurer misconduct if the plaintiff alleges and proves the elements of the separate tort. … In the instant case, plaintiffs brought a breach of contract claim alleging Allstate refused to tender the amount due under the insurance contract. Based on Cramer, a separate tort claim is not necessary and is inapplicable in the present case because a contractual remedy is available to plaintiffs.
Learning Point:
In Young, the First District appears to indicate that Section 155 of the Illinois Insurance Code may not preempt a Consumer Fraud Act claim in every case; however, Young stands for the proposition that when an insured brings a simple breach of contract action, its damages are prescribed by Section 155.
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