IL 1st Dist. – Third Party Has No Standing to Assert Bad Faith Claimshoke2013
No Duty to Reveal Existence of Umbrella Limits in Response to Statutory Request to Disclose Policy Limits
An Illinois appellate court, applying Illinois law, upheld the circuit court’s ruling that a third party does not have standing to file an action for bad faith under Section 155 of the Illinois Insurance Code. The appellate court also upheld the circuit court’s ruling that Section 143.24b of the Illinois Insurance Code does not require an insurer to disclose its insured’s umbrella policies.
The bad faith allegations at issue stem from an insurer’s actions related to a car accident between Christine Demarco (“Demarco”) and Austin Sahr (“Sahr”). As a result of the accident, Demarco filed a personal injury action against Sahr. Demarco’s attorney sent Country Financial (“Country”), Sahr’s auto insurer, a request pursuant to the Illinois Insurance Code Section 143.24b asking Country to “disclose your insured’s policy limits”. A Country claims specialist responded stating that “our insured’s policy limits are $250,000 per person, $500,000 per incident.” Demarco served Sahr with discovery requests. In response to the interrogatories, Sahr disclosed his Country auto policy. Sahr also indicated that he did not have any excess coverage. A few weeks later, pursuant to a document request, Sahr produced a declaration sheet which provided evidence that at the time of the collision, Country also insured Sahr under a $1,000,000 personal umbrella liability policy. During a deposition, Sahr was questioned about his interrogatory answer in which he denied having umbrella or excess coverage. He testified that no one had informed him that his answer was inaccurate, and that at the time he believed it was correct.
Demarco subsequently filed a putative class action complaint against Country and a motion for class certification. Demarco alleged that it was Country’s accepted practice to have its employees misrepresent and conceal policy limits. The amended putative class action complaint alleged (1) fraudulent concealment and misrepresentation of the policy limits, (2) an implied right of action under the Illinois Insurance Code Section 143.24b, (3) violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, (4) recovery under Section 155 of the Illinois Insurance Code for “unreasonable and vexatious acts constituting improper claims practice,” and (5) negligent misrepresentation of the policy limits.
Country filed a motion to strike or dismiss the class action allegations. After a hearing, the circuit court concluded that Country made the proper disclosure pursuant to Section 143.24b of the Illinois Insurance Code. The circuit court also rejected Demarco’s bad faith claim pursuant to Section 155 of the Illinois Insurance Code, stating: “I don’t think there is a 155 claim available to somebody other than the insured.” After finding that there was no consumer nexus for the alleged Consumer Fraud Act claim and that Demarco did not and could not plead the required damages for her fraud claim, the circuit court ordered the amended complaint to be dismissed entirely with prejudice and without leave to amend. Demarco filed a motion to reconsider and attached a second amended complaint. The motion was denied. Demarco appealed.
The appellate court agreed that claims under Section 155 for bad faith cannot be brought by third parties: “Our supreme court has expressly stated, however, that ‘the remedy embodied in section 155 of the Insurance Code does not extend to third parties.’” The appellate court noted that the reason assignees of an insured have standing under Section 155 is because an assignee succeeds to the same position as the insured and, therefore, is not a true third party. The appellate court also agreed that Demarco had failed to adequately plead fraud, negligent misrepresentation, and violation of the Consumer Fraud Act. Also, the appellate court upheld the ruling that Demarco did not have a claim under Section 143.24b. According to the appellate court, the statute was clear and unambiguous and did not require the disclosure of umbrella policies.
The appellate court did not address Demarco’s arguments regarding her motion for class certification because the circuit court never ruled on the issue. The circuit court did not rule on class certification because, without a claim for an individual plaintiff, there could not be a class action. Demarco v. CC Services Inc. a/k/a Country Financial, 2017 IL App (1st) 152933-U (1st Dist. Mar. 24, 2017).