APPEAL from the Circuit Court of Edgar County; the Hon. JAMES
K. ROBINSON, Judge, presiding.
MR. JUSTICE GREEN DELIVERED THE OPINION OF THE COURT:
On February 21, 1974, plaintiff, Neil C. Lynch and Richard Boes, Jr., d/b/a Crown Enterprises, filed suit in the circuit court of Edgar County against defendant, Mid-America Fire and Marine Insurance Co. The dispute arose from a fire occurring on September 4, 1973, in a building which, together with its contents, was owned by plaintiff and insured by defendant. An amended complaint was filed on November 8, 1976. Count I was brought on the policy for breach of contract and sought payment of the insured's loss plus attorney's fees for unreasonable and vexative refusal to pay. Count II sought compensatory and punitive damages for defendant's breach of good faith in handling of the claim and refusal to pay. Defendant's answer denied many of the allegations and alleged affirmative defenses of (1) failure to disclose other insurance, (2) failure to make proof of loss, and (3) arson.
On December 4, 1978, after a jury trial, the court entered judgments on verdicts in favor of plaintiff and against defendant awarding damages as to count I in the sum of $39,314.11 and as to count II for $150,000 compensatory damages and $100,000 punitive damages.
On appeal defendant asserts: (1) no common-law action as alleged in count II exists; (2) all verdicts were contrary to the manifest weight of the evidence; and (3) in the alternative, trial and procedural errors require reversal and remandment as to both counts. We affirm the judgment as to count I. We, (1) affirm the portion of the judgment as to count II finding defendant liable for compensatory damages, (2) reverse the award of $150,000 compensatory damages and remand for a new trial on the question of compensatory damages only, and (3) reverse the award of punitive damages. We discuss only those issues necessary because of our rulings.
The most serious issue in this case is whether, at times pertinent, there existed a common-law tort action in this case whereby insureds could recover, from an insurer on a fire insurance policy, compensatory and punitive damages for the insurer's bad faith in making settlement on the policy when the insurer's conduct was not sufficiently culpable to be outrageous. Count II was based upon an action of this nature. The supreme court has never spoken on this issue and the various districts of the appellate court are not in agreement.
The Illinois genesis for the existence of such a tort was Ledingham v. Blue Cross Plan (1975), 29 Ill. App.3d 339, 330 N.E.2d 540, rev'd on other grounds (1976), 64 Ill.2d 338, 356 N.E.2d 75. There, a husband and wife sued her medical and hospital insurance carriers for their failure to honor claims for such expenses incurred by the wife. After a jury trial, a single $9200 verdict was rendered on count I, charging the defendants with wilful and wanton conduct and requesting actual and punitive damages and count III brought on the contract for the amount of medical and hospital expenses claimed under the policy. The appellate court reversed and remanded, ordering the trial court to enter a judgment for $1592.85, the amount claimed by plaintiffs under the policy. The court explained that the balance of the judgment represented punitive damages which could not be recovered because the evidence showed the carrier's refusal to pay to have resulted from a good faith dispute.
Although holding that the evidence did not support an award beyond the benefits of the policy, the Ledingham court explained in detail its theory that the policy gave rise to implied duties upon insurer and insured to deal fairly with each other and that a breach of that duty gave rise to not only contract but also tort liability for which punitive damages might be awarded in an appropriate case. The opinion cited similar holdings in other jurisdictions including Gruenberg v. Aetna Insurance Co. (1973), 9 Cal.3d 566, 510 P.2d 1032, 108 Cal.Rptr. 480, where bad faith dealing by a fire insurer in settlement of a claim was deemed to be a common law tort. Both Ledingham and the cases cited there drew analogy to cases proclaiming the now well established rule that liability insurance carriers may be liable in tort for breach of good faith in dealing with their insureds. See Krutsinger v. Illinois Casualty Co. (1957), 10 Ill.2d 518, 141 N.E.2d 16.
The opinions of other districts of the appellate court refusing to follow Ledingham have criticized its failure to consider section 155 of the Insurance Code of 1935 (Ill. Rev. Stat. 1973, ch. 73, par. 767) which then and during the times pertinent in the instant case permitted the court to award to an insured suing on a policy certain costs and attorney's fees if the insurer's conduct had been "vexatious" and "unreasonable." Those opinions deemed the legislation to have preempted any common law remedy for a failure to act in good faith upon the part of the insurer as alleged here. However, they do not deny the existence of such a remedy if the insurer's conduct is outrageous.
The first decision critical of Ledingham was Debolt v. Mutual of Omaha (1978), 56 Ill. App.3d 111, 371 N.E.2d 373, arising from the trial court's dismissal of a complaint charging improper conduct upon the part of one insurer in adjusting a claim on a disability income policy. The complaint sought compensatory damages for intentional infliction of emotional distress and punitive damages for breach of good faith dealing. The court held the count seeking punitive damages failed to set forth with specificity conduct constituting the tort claimed and deemed no tort action to exist for the bad faith dealing. It disagreed with the Ledingham analogy to actions against liability carriers and set forth the preemption theory.
Next came Tobolt v. Allstate Insurance Co. (1979), 75 Ill. App.3d 57, 393 N.E.2d 1171. There a trial court had dismissed a complaint similar to that in Debolt but, as here, arising from a dispute over settlement of claims on a fire insurance policy. The opinion followed the reasoning of Debolt. It also noted that effective October 1, 1977, section 155 was amended to provide that in addition to limited costs and attorney's fees, the court might award the lesser of "an amount not to exceed" a percentage of the recovery, $5,000, or the excess of the court award on the policy over the insurer's offer. (Ill. Rev. Stat. 1977, ch. 73, par. 767.) The opinion considered the amendment to give a further indication of prior legislative intent to preempt the field of redress for an insurer's failure to deal in good faith in settlement of claims.
In Siegal v. Health Care Service Corp. (1980), 81 Ill. App.3d 784, 401 N.E.2d 1037, the court recognized the other courts>' rejections of Ledingham but found it unnecessary to express an opinion as to the validity of their theory of tort liability for lack of good faith dealing because the evidence there did not support such a charge. In Urfer v. Country Mutual Insurance Co. (1978), 60 Ill. App.3d 469, 376 N.E.2d 1073, this court did not create any precedent as to the Ledingham theory. Mr. Justice Trapp wrote for the court holding the complaint there to be insufficient to allege with sufficient specificity the breach of good faith dealing and made no decision as to the theory. Mr. Justice Mills concurred agreeing with Debolt. His concurrence was cited with approval in Tobolt. Mr. Justice Craven dissented, approving Ledingham.
Most recently in Hoffman v. Allstate Insurance Co. (1980), 85 Ill. App.3d 631, 407 N.E.2d 156, insureds brought suit against their automobile collision carrier. A count stricken by the trial court claimed compensatory and punitive damages for the insurer's unreasonable delay in paying a claim. The appellate court held the request for punitive damages to have been properly stricken but that a cause of action existed for compensatory damages. It noted the preemption theory expressed in Debolt, Tobolt and the Urfer concurrence interpreted them as holding that section 155 preempted any claim by an insured for punitive damages and adopted that interpretation. The court then reasoned that nevertheless, section 155 did not, on its face, "preempt a plaintiff's right to claim compensatory damages for a breach of good faith and fair dealing." (85 Ill. App.3d 631, 635, 407 N.E.2d 156, 159.) The opinion did not indicate that plaintiff's claim for those compensatory damages was being made under section 155. The opinion thus appears to disagree with Tobolt's holding that no cause of action exists for compensatory damages for an insurer's failure to deal in good faith with its insured.
• 1, 2 We do not agree with the preemption theory as applied to section 155 as it existed at times pertinent here which were prior to its amendment. Absent statutory authority, a court cannot properly tax attorney's fees as costs and award them to an opposing party. (Meyer v. Marshall (1976), 62 Ill.2d 435, 343 N.E.2d 479.) Section 155 merely granted that authority and stated that the court "may" do it. The fees were limited and even in this case could not have exceeded $1000. The tenor of the section gives no indication that it was intended to cover the field of awarding compensation for bad faith or vexatious dealing by insurers. The Tobolt court reasoned that the amendment providing for a limited discretionary cash award evidenced a prior intent to preempt the field. Even if the present section 155 indicates such a present intent, we do not see how that could relate to the prior legislative intent. Where legislation is amended to grant a power expressly, the amendment has been interpreted to indicate a legislative acknowledgment of a previous lack of that power. (People ex rel. Scott v. ...