United States District Court, Northern District of Illinois, E.D
December 3, 1985
NORMA THIEL, PLAINTIFF,
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, DEFENDANT.
The opinion of the court was delivered by: Decker, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff, Norma Thiel (Thiel), brought this action against the
defendant, Prudential Insurance Company of America (Prudential).
Their dispute arises out of Prudential's refusal to pay Thiel's
medical expenses incurred in July of 1981. Plaintiff alleges
Prudential was obligated to pay her medical costs under the
parties' insurance agreement. Count I of the complaint seeks
recovery of those expenses, a statutory penalty, and attorney's
fees under Ill.Rev.Stat., ch. 73, § 767. Count II essentially
incorporates the facts alleged in Count I, but adds that the
failure and refusal of Prudential to pay the claim was
"vexatious, improper, willful, in bad faith and tortious and was
intended at all times to oppress and harm the plaintiff . . ."
Count II includes an additional claim for punitive damages on the
theory that the defendant's alleged breach of the insurance
contract constituted an independent, willful tort, i.e. breach of
a duty of good faith and fair dealing. The case is before the
court on Prudential's motion to dismiss plaintiff's punitive
The sole basis for defendant's motion to dismiss is that
Ill.Rev.Stat., ch. 73, § 767 provides an exclusive remedy and
thereby preempts plaintiff's common law claim for punitive
Under Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817,
82 L.Ed. 1188 (1938), the court must apply Illinois law in
determining this question. In doing so, the court must attempt to
apply the law as would the Illinois Supreme Court. See e.g. White
v. United States, 680 F.2d 1156, 1161 (7th Cir. 1982); Barr v.
Safeco Insurance Co., 583 F. Supp. 248, 252 (N.D.Ill. 1984).
The statute, itself, is silent as to its preemptive effect.
Unfortunately, the Illinois Supreme Court has not yet spoken to
this question. Every Illinois Appellate Court, however, that has
addressed this issue has held that Section 767 preempts a common
law tort remedy for punitive damages. See e.g. Fisher v. Fidelity
& Deposit Co., 125 Ill.App.3d 632, 641, 80 Ill.Dec. 880, 887,
466 N.E.2d 332, 339 (5th Dist.
1984); Kinney v. St. Paul Mercury Insurance Co., 120 Ill. App.3d 294,
296-297, 75 Ill.Dec. 911, 913-914, 458 N.E.2d 79, 81-82 (1st
Dist. 1983); Hamilton v. Safeway Insurance Co., 104 Ill. App.3d 353,
356, 60 Ill.Dec. 97, 99-100, 432 N.E.2d 996, 998-999 (1st
Dist. 1982); Hoffman v. Allstate Insurance Co., 85 Ill. App.3d 631,
634-635, 40 Ill.Dec. 925, 928, 407 N.E.2d 156, 159 (2d Dist.
1980); Tobolt v. Allstate Insurance Co., 75 Ill.App.3d 57, 68-72,
30 Ill.Dec. 824, 831-834, 393 N.E.2d 1171, 1178-1181 (1st Dist.
1979); Debolt v. Mutual of Omaha, 56 Ill.App.3d 111, 116-117, 13
Ill.Dec. 656, 661, 371 N.E.2d 373, 378 (3d Dist. 1978).
Similarly, every federal court, with one exception, which has
addressed this question has found preemption. See e.g. UNR
Industries v. Continental Insurance Co., 607 F. Supp. 855, 866-868
(N.D.Ill. 1984) (Hart, J.); Aabye v. Security-Connecticut Life
Insurance Co., 586 F. Supp. 5, 8-9 (N.D.Ill. 1984) (Aspen, J.);
Barr Co. v. Safeco Insurance Co., 583 F. Supp. 248, 255-256
(N.D.Ill. 1984) (Moran, J.); Jenco v. Jefferson Insurance Co.,
575 F. Supp. 980, 982 n. 2 (N.D.Ill. 1983) (Aspen, J.); Abbott
Laboratories v. Granite State Insurance Co., 573 F. Supp. 193, 195
(N.D.Ill. 1983) (Shadur, J.); Smith v. Metropolitan Life
Insurance Co., 550 F. Supp. 896, 899-900 (N.D.Ill. 1982) (Moran,
J.); Strader v. Union Hall, Inc., 486 F. Supp. 159, 161-162
(N.D.Ill. 1980) (Aspen, J.); but see Roberts v. Western-Southern
Life Insurance Co., 568 F. Supp. 536, 551 (N.D.Ill. 1983)
(Marshall, J.); Kelly v. Stratton, 552 F. Supp. 641, 648 (N.D.Ill.
1982) (Marshall, J.).
Obviously, plaintiff commends Judge Marshall's opinions in
Roberts and Kelly to the court. The court, however, cannot
lightly disregard decisions by Illinois' intermediate appellate
courts. See e.g. Commissioner of Internal Revenue v. Estate of
Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 1782-1893, 18 L.Ed.2d
886 (1967). Such decisions can only be disregarded if the court
is "convinced by . . . persuasive data [not considered by the
appellate courts] that the highest court of the state would
decide otherwise." Gates Rubber Co. v. USM Corp., 508 F.2d 603,
607 (7th Cir. 1975), quoting West v. American Telephone and
Telegraph Co., 311 U.S. 223, 237, 61 S.Ct. 179, 183, 85 L.Ed. 139
(1940). Roberts and Kelly, however, express no more than a
legitimate disagreement with the Illinois courts over plausible
interpretations of the relevant case law and legislative
history.*fn1 Under these unexceptional circumstances, a federal
court must follow the rule supported by the "overwhelming weight
of authority" of the state courts. Mitchell v. Young Refining
Corp., 517 F.2d 1036, 1040 n. 3 (5th Cir. 1975).
Finally, plaintiff points to Ledingham v. Blue Cross Plan,
29 Ill. App.3d 339, 330 N.E.2d 540 (5th Dist. 1975), rev'd on other
grounds, 64 Ill.2d 338, 1 Ill.Dec. 75, 356 N.E.2d 75 (1976).
Therein, the Illinois Appellate Court recognized a claim for
punitive damages under similar circumstances. However, that
decision, which did not consider the effect of Section 767 and
relied on California law under which there was no analogue to
Section 767, has been heavily criticized and does not represent
the settled law of Illinois. See e.g. Tobolt, 75 Ill.App.3d at
68-72, 30 Ill.Dec. at 832-833, 393 N.E.2d at 1179-1180; Debolt,
56 Ill.App.3d at 114-115, 13 Ill.Dec. at 659-660, 371 N.E.2d at
376-377. Further, the same appellate district that decided
Ledingham, has since held that Section 767 preempts common law
tort remedies. Fisher, 125 Ill.App.3d at 641, 80 Ill.Dec. at 887,
466 N.E.2d at 339. Plaintiff, thus, asks the court to pronounce
a bold innovation in Illinois law. A federal court, however,
should not attempt "dramatic innovation" in state law. Murphy v.
White Hen Pantry Co., 691 F.2d 350, 355 (7th Cir. 1982). The
court must be especially cautious in muddying up the long
established and fundamental distinction between contract and
The court concludes, with due respect to Judge Marshall, that
the weight of authority among both the Illinois Appellate courts
and the federal district courts holding that Section 767 preempts
plaintiff's common law tort claim is most likely to be upheld by
the Illinois Supreme Court.
For the foregoing reasons, plaintiff's claim for punitive
damages in Count II of the complaint is dismissed.