Appeal from the Circuit Court of Champaign County; the Hon.
John G. Townsend, Judge, presiding.
PRESIDING JUSTICE MCCULLOUGH DELIVERED THE OPINION OF THE COURT:
Plaintiff, a farmer and defendant's insured, lost a tractor and several pieces of equipment in a fire. Subsequently, after talking to defendant's adjuster, plaintiff signed a blank proof-of-loss form. Defendant issued checks in settlement of the claim. However, plaintiff rejected the checks as inadequate and not representative of the actual cash value of the lost tractor, blade, and plow. After making multiple attempts to discuss the dispute with defendant, plaintiff brought suit seeking compensatory, consequential, and punitive damages for fraud, vexatious delay in settling his claim, and breach of contract.
The jury found defendant had not engaged in fraudulent conduct. However, it awarded $120,000 in damages for the lost equipment and $105,000 in damages for lost profits on the contract claim. The court found defendant's conduct constituted vexatious delay in settling the claim. (Ill. Rev. Stat. 1983, ch. 73, par. 767.) Therefore, it awarded costs, $42,666 in attorney fees, and $5,000 punitive damages. We affirm the compensatory-damages award, vacate in part and reduce the award for lost profits, affirm the finding that defendant's conduct constituted a violation of section 155 of the Illinois Insurance Code (Ill. Rev. Stat. 1983, ch. 73, par. 767), but vacate in part and reduce the attorney fees award, which was based upon a contingent-fee arrangement.
In 1978, plaintiff purchased a Steiger-Panther tractor, blade, plow, and other equipment on a lease-purchase arrangement. Plaintiff needed the larger equipment to economically farm the ground he leased and owned. Plaintiff paid $30,000 in 1981 for the use of the equipment in 1982. Plaintiff and Dave White testified that the tractor, a 1979 model, was in excellent shape and was equipped with every available option. White, a farmer and implement dealer, said the equipment was the most suitable to economically farm 1,700 acres. Plaintiff agreed to insure the equipment. In 1980, he renewed his insurance with defendant. The policy covered the actual cash value of the equipment at the time of the loss.
Plaintiff leased approximately 687 acres of ground from the Clark family. The lease was on a cash-rent basis. On November 1, 1981, he made the final payment for 1981 and tendered 10% of the lease amount for 1982. He had fall plowed and disced the ground. Plaintiff stated that he annually alternated crops, planting both corn and soybeans. He did not make the next lease payment, due March 1, 1982, and by April 1982 had only made part of a loan payment. He also missed a late February 1982 loan payment. Plaintiff stated the bankers understood that his missed payments were due to difficulty in hauling grain. He agreed that his net worth had been decreasing. On April 6, 1982, after realizing the loss would not be settled, he forfeited his lease on the Clark ground.
On February 12 and February 13, 1982, while plaintiff and his wife were away from home, fire destroyed his barn and the equipment within it. When plaintiff arrived home, his wife had already contacted their agent, Bob Thompson, who contacted defendant. Walter Pribble, defendant's adjuster, viewed the damage a few days later. Plaintiff testified that he and Pribble did not discuss the loss during the first meeting, but Pribble told plaintiff to make a list of destroyed items and their values. Plaintiff's worksheets, reflecting his estimated valuations, were introduced into evidence. Pribble returned a week later with defendant's representatives, who inspected the fire damage.
On March 25, defendant's claims committee and Donald Gard, defendant's director, met with Pribble. They reached a consensus decision as to the valuations Pribble should place on the destroyed equipment. They also reviewed various valuations of the tractor. Pribble did not have any written valuation which reflected the $50,000 valuation set for the tractor. Gard testified that he believed that Pribble had discussed the proposed values with plaintiff prior to the meeting. Kenneth Moore and Ronald Kuhns, farmers and members of defendant's board, had previously inspected the fire loss. They were a part of the claims committee. Both testified that they agreed that Pribble could offer $87,000 plus or minus 10% in settlement of the claim. Pribble's worksheets, containing equipment valuations, were entered into evidence.
On March 26, Pribble met with plaintiff and his wife at their farm. The substance of the meeting is disputed. Plaintiff and Pribble agreed that Pribble brought a worksheet, containing a list of items and estimated values, with him. Plaintiff stated that he emphatically disagreed on the proposed valuation of the tractor, blade, and plow. They also disagreed on the valuations of many of the items. He and Pribble, however, agreed on values for some of the destroyed equipment and tools. Pribble stated that they would come back to the items which were in dispute.
Plaintiff further stated that Pribble had not assigned any value to used lumber stored in the barn. Pribble told him the lumber would be his way out and perhaps he could increase the offer after talking to defendant. Pribble then asked plaintiff to sign the blank proof-of-loss form to facilitate a settlement and save him a trip to plaintiff's farm. Plaintiff's wife corroborated his account.
Pribble testified that after he initially met with plaintiff, he called several equipment dealers, called the tractor manufacturer's home office, and obtained a copy of the equipment lease. He received estimated valuations on the tractor ranging from $60,000 to $80,000. He received a $6,000 estimated valuation on the blade, and he received a $13,000 estimated valuation on the plow. However, dealer estimates are usually high. On March 26, he and plaintiff agreed on valuations for all of the lost items, except the tractor and a few miscellaneous items. He, plaintiff, and plaintiff's wife agreed that the total amount of the settlement would be $97,600 without attempting to agree on a valuation for each individual item.
Pribble further testified that he intended to value the tractor at $80,000 on the proof of loss, but plaintiff requested a lesser valuation. Plaintiff did not explain why he wanted the lesser valuation shown on the proof of loss, and Pribble did not ask. Pribble stated that he had a blank proof of loss with him and gave plaintiff a copy of his handwritten worksheet, showing the totals. He asked plaintiff to sign the blank document, explaining that his secretary would type information on the document. This was because he had poor penmanship. Pribble agreed that he told plaintiff that his signature would speed the process and avoid delay. He thought it was coincidental that the tractor valuation agreed upon by the claims committee on March 25 and the valuation which he and plaintiff agreed upon on March 26 were identical.
Defendant issued two checks to plaintiff in settlement of his claim. One check, for plaintiff's wholly owned property, was for $34,639.72. The second, for the leased equipment, issued in the name of plaintiff and the lienholder, was in the amount of $63,000. Eventually, defendant reissued the checks on September 1, 1982. They were never cashed.
Plaintiff testified that Thompson brought the checks to his farm in early May 1982. However, he did not accept them, because they represented Pribble's initial amounts, rather than any negotiated amounts. Plaintiff asked Thompson to arrange a meeting between him and defendant's representatives. In July, Thompson sent a letter and asked in writing for a meeting. In September, plaintiff contacted an attorney, who sent a letter to defendant explaining that a blank proof-of-loss form had been signed. The letter also expressed dissatisfaction with the settlement amount and requested a new proof-of-loss form. Defendant did not send a blank proof-of-loss form.
Thompson, an agent for Spicer Insurance Agency, handled plaintiff's policy. From February 27, 1982, forward he called Gard every few days, asking why they were no closer to settlement. Initially, Gard told Thompson the adjuster was working on it. Later, he told Thompson the claims committee was working on it. Soon after March 26, plaintiff contacted Thompson and was very concerned about the proof of loss. Thompson stated that plaintiff understood the proof of loss was a formality necessary to start the settlement process. Thompson was concerned because he had never heard of a proof of loss being used to initiate the settlement process. However, he did nothing at that time. He talked to Gard frequently between February and May 1982. In early May, Thompson tried to deliver the checks, ...