Officials Can’t Be Forced to Adjudicate Claims Practices
By Don R. Sampen, published, Chicago Daily Law Bulletin, January, 21 2025
The 1st District Appellate Court recently held that mandamus relief is not available to an insured to compel the Illinois Department of Insurance to investigate and prosecute a consumer complaint for engaging in an improper claims practice under 215 ILCS 5/154.5 & 154.6, even though the department is the only entity that can enforce these sections of the Illinois Insurance Code.
The case is Bernacchi v. Illinois Department of Insurance, 2024 IL App (1st) 231710 (Dec. 13).
The insured, Gina Bernacchi, was represented by the Sinson Law Group of Chicago. The office of Attorney General Kwame Raoul represented the Insurance Department.
Bernacchi was injured in a traffic accident when the taxicab in which she was riding as a passenger was struck by an uninsured driver in Chicago in 2018. She brought an initial declaratory action to determine the amount of uninsured motorist coverage that applied. That amount came to $350,000 under a policy issued by First Chicago Insurance Co. to the taxicab.
She then submitted documentation of her injuries to First Chicago, which extended her a settlement offer equal to her then-incurred medical expenses of about $43,000, but did not provide any compensation for future knee replacement, her pain and suffering, or loss of normal life.
Bernacchi rejected the offer, demanded payment of the full $350,000 policy limit, and subsequently brought suit in federal court against First Chicago. In that action she alleged improper claims practices by First Chicago as set forth in the Illinois Insurance Code, 215 ILCS 5/154.5 and 154.6. Those sections list such practices as an insurer’s refusal to pay claims without conducting a reasonable investigation, and the failure to acknowledge communications promptly.
The federal court dismissed her action on the ground that these sections did not provide for a private cause of action and could be enforced only by the Illinois Department of Insurance.
Bernacchi then filed a consumer complaint with the department contending that First Chicago engaged in improper claims practices. Upon being notified by the department, First Chicago answered by stating that because it was defending against ongoing litigation with Bernacchi, it would respond no further. The department informed Bernacchi of the response and further informed her that it would not investigate her complaint.
At that point, Bernacchi filed the instant action against the Insurance Department and its director seeking a writ of mandamus to require the defendants to adjudicate her improper claims practices claim. She alleged, among other things, that due to regulatory capture by the insurance industry, the department had never enforced the sections of the Insurance Code that prohibit bad-faith insurance practices.
The circuit court dismissed her mandamus action, and she brought this appeal.
Analysis
In an opinion by Justice Raymond W. Mitchell, the 1st District affirmed. He initially observed that a writ of mandamus will only issue if the plaintiff establishes (a) a clear right to the relief requested, (b) a clear duty of the public official to act and (c) clear authority in the public official to comply with the writ.
Mitchell also outlined the duties of the department to enforce the insurance laws under the Insurance Code, including the duty of the director of insurance to notify an insurer of charges of improper claims practices and to schedule an administrative hearing. That duty arises, however, only after the department conducts an investigation and finds that the company has engaged in such practices.
The duty to prosecute a violation through an administrative hearing, wrote Mitchell, is therefore not absolute but rests within the department’s discretion. Similarly, the department has discretion in its decision to investigate a consumer complaint. That discretion is exercised after the department receives the insurer’s response to a notification of a complaint, and the department evaluates whether an investigation or further regulatory action is necessary.
Because the defendants’ decision to investigate and prosecute is discretionary, Mitchell found that Bernacchi had no clear right to the mandamus relief requested, and the circuit court did not err in granting the motion to dismiss.
Bernacchi further contended that she was injured by the defendants’ failure to adopt reasonable rules pertaining to a finding that an insurance company has engaged in an improper claims practice. Mitchell rejected this argument because Bernacchi’s consumer complaint had never become the subject of an improper claims practice administrative hearing under the Insurance Code, and she therefore lacked adequate standing.
The 1st District therefore affirmed in favor of the Insurance Department and its director.
Key Point
Mandamus relief is not available to compel the Department of Insurance to investigate or prosecute improper claims practices under Sections 154.5 or 154.6 of the Insurance Code.
Don R. Sampen