APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR
A. SULLIVAN, JR., Judge, presiding.
MR. JUSTICE DOWNING DELIVERED THE OPINION OF THE COURT:
Rehearing denied August 18, 1981.
Plaintiffs Margaret and Joseph Adduci (the Adducis) filed a two-count complaint against defendants Vigilant Insurance Co., Inc., and Chubb & Son Insurance Co. (hereinafter collectively referred to as Insurer). The Adducis sued as the assignees of Insurer's insured, Connie Mihelich Contursi (Insured), asserting Insured's claim for recovery of that portion of a judgment against Insured which exceeded the limits of coverage of her insurance policy with Insurer. The trial court granted Insurer's motion to dismiss both counts of the Adducis' amended complaint.
The Adducis ask this court to decide whether (1) they have alleged sufficient facts in their amended complaint to state a cause of action for Insurer's alleged bad faith refusal to settle, within their policy limits, a civil action against Insured; and (2) Illinois law should recognize a duty on the part of an insurer to treat the insured's interests as paramount to its own in undertaking policy-related actions.
As a consequence of the trial court's disposition of the case, the facts available from the record come entirely from the complaint and the parties' briefs concerning Insurer's motion to dismiss the complaint.
Insured had contracted with Insurer for coverage under an accident and casualty liability insurance policy. Among that policy's provisions was a $25,000 single bodily injury liability limit.
On May 10, 1975, during the effective term of the policy, Insured was involved in a one-car accident in Chicago. At the time of the accident, the car was occupied by Insured, Margaret Adduci, Janet Clancy, and Peggy Sabados.
On May 19, 1975, suit was filed in the circuit court of Cook County against Insured by the Adducis. The ad damnum of the complaint significantly exceeded the liability limits of Insured's policy with Insurer. The complaint alleged that Insured lost control of the vehicle, which was alleged to have been in proper working condition at the time. On May 29, 1975, Insured was served with notices of attorneys' liens on behalf of all the passengers of the vehicle and their spouses.
The action against Insured then proceeded through early discovery phases. On November 3, 1975, Insurer's defense counsel (apparently employed by Insurer to defend Insured) was supplied with a copy of an October 13, 1975, medical report from Margaret Adduci's physician. Four days later, all parties received the physician's complete records on the patient.
Interrogatories from Insured were served on the Adducis. The answers returned on November 4, 1975, described the nature of Margaret Adduci's injuries, the sources of medical treatment, and the elements of damages sought.
In mid-1975 and in February 1976, counsel for the Adducis demanded that Insurer pay the full policy limits into the court in settlement of all claims. Insurer responded by requesting a discount. On April 2, 1976, Margaret Adduci was deposed. At the deposition, Insurer's counsel allegedly acknowledged that Margaret Adduci's damages alone exceeded Insured's policy limits. At that time, counsel possessed complete hospital records for Margaret Adduci, as well as copies of medical bills and proof of her income loss.
On April 7, 1976, the attorney representing all claimants wrote to Insurer's attorneys, demanding payment of the full policy limits of Insured's policy in return for covenants not to sue Insured, to be executed by each passenger of Insured's car. The demand set a 28-day deadline and noted that it would be withdrawn if the amount was not submitted by the end of that period, unless a written extension based upon "any reasonable grounds" had been requested during the period. A second letter clarifying the demand was sent on April 15, 1976. No responsive communication was received by claimants' attorney within the 28-day period. Subsequent preparation of the case for trial "foreclosed the opportunity for settlement," according to an allegation of the instant complaint. Included in these subsequent preparations was the filing of an amended complaint which added Clancy and Sabados as plaintiffs.
Insurer's counsel indicated by letter on June 7, 1976, that a response to the April 7 demand would be forthcoming at the pretrial conference set for June 18, 1976. At that later date, 72 days after the claimants demanded settlement, Insurer's attorney offered to pay Insured's full policy limits ($25,000) in settlement. The claimants refused the offer.
Prior to trial, the claims of Clancy and Sabados were settled, leaving $17,500 of insurance coverage remaining. The Adducis' claims went to trial. A jury returned a verdict in their favor for $70,000. On July 31, 1979, Insurer paid the remainder of the policy limits into court, leaving an unpaid balance of $52,500. Citation proceedings against Insured showed her to have insufficient assets to pay the judgment. The Adducis ...