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09/08/88 Paul L. Dark, v. United States Fidelity &

September 8, 1988





529 N.E.2d 662, 175 Ill. App. 3d 26, 124 Ill. Dec. 681 1988.IL.1356

Appeal from the Circuit Court of Cook County; the Hon. Brian L. Crowe, Judge, presiding.


JUSTICE JOHNSON delivered the opinion of the court. LINN and McMORROW, JJ., concur.


Plaintiff, Paul L. Dark, D.D.S., brought this action to recover amounts owed under a policy of fire insurance, damages occasioned by the insurer's unreasonable and vexatious delay in refusing to pay under the policy, and for damages caused by a libelous statement made in denying said claim. Plaintiff brought this action in two separate counts. Count I was comprised of an action in contract and a statutory claim wherein the sole defendant was United States Fidelity & Guaranty Co. (hereinafter USF&G). This count sought recovery under a policy of fire insurance issued by USF&G and a statutory claim for damages occasioned by USF&G's vexatious and unreasonable delay in denying the claim. Count II was a libel action against defendants USF&G, William J. Schaefle,

Frank L. Schneider, Elizabeth Pendzich, and the law firm of Clausen, Miller, Gorman, Caffrey & Witous, P.C. (hereinafter Clausen Miller). Prior to trial, defendants Schneider, Pendzich and Clausen Miller were dismissed (by an order not appealable at that time) due to plaintiff's failure to timely join them as defendants to the action.

The issues were bifurcated. The contract claim proceeded before a jury, which returned a verdict for plaintiff on the issue of liability under the policy of insurance and answered a special interrogatory in the negative on the question of whether the insured intentionally set fire to his office building. The same jury then heard the libel action; however, the trial court directed a verdict in favor of defendants. Plaintiff proceeded before the bench on the vexatious delay claim. The trial court decided for USF&G, finding that plaintiff had not presented a prima facie case. The trial court also denied plaintiff's motion to reopen the contract action to recompute damages.

Plaintiff appeals from these rulings raising the following issues: (1) whether the trial court abused its discretion by refusing to award plaintiff attorney fees and costs, plus a penalty for USF&G's vexatious and unreasonable delay in the refusal of plaintiff's claim; (2) whether the trial court erred by precluding plaintiff from amending his complaint and offering evidence of damages incurred in excess of the stated compromised amount; (3) whether the trial court erroneously directed the verdict on the issue of libel on the grounds that plaintiff failed to prove actual malice; and (4) whether the motion Judge erred by dismissing plaintiff's third amended complaint as to defendants Schneider, Pendzich and Clausen Miller.

We affirm.

On December 15, 1979, at approximately 8 a.m., a fire occurred in a one-story professional building owned by plaintiff and located at 1052 West 11th Street, Chicago, Illinois. The building and contents were covered by a $75,000 policy of insurance issued by USF&G, which was in full force and effect at the time of the fire. On December 22, 1980, USF&G denied plaintiff's claim under the policy by letter addressed to plaintiff. As the reason for denial, the letter stated that, "Our investigation reveals that this fire appears to have been intentionally set either by yourself, the insured, or by your agent." Plaintiff thereupon filed suit for payment on the contract of insurance, for damages incurred by reason of the USF&G's vexatious and unreasonable delay in handling and refusing to pay, and for damages occasioned by the defendants' libelous letter of denial.

At the outset of the trial, the court denied defendants' motion for severance, but bifurcated the case, ruling that count I (the contract claim) and then count II (the libel action) would be tried successively before the same jury. The trial court further ruled that the claim of vexatious delay and denial would be heard and decided by the bench.

At the time of trial, count I was directed against USF&G only. Plaintiff had earlier named all defendants, but the trial court entered an order dismissing that portion of the claim for failure to state a cause of action. Thus, all defendants except USF&G were dismissed from count I and plaintiff has taken no appeal from that order. USF&G was allowed to proceed first in trying the contract claim on its affirmative defense of arson. At the end of that trial, the court allowed the jury to deliberate solely on the issue of liability under the policy. The court further requested an answer to a special interrogatory on whether plaintiff or his agent intentionally set fire to the building. The jury returned a verdict for the plaintiff and answered the special interrogatory in the negative.

The case then proceeded to the trial of count II on the issue of libel. Count II was directed against USF&G and the other named defendants. Plaintiff alleged that USF&G engaged Schaefle, Schneider, Pendzich, and the firm of Clausen Miller to conduct an investigation; that defendants "maliciously and wrongfully composed and wrote a certain letter under the hand of Schaefle . . . containing a false and defamatory statement" which imputes to plaintiff the commission of arson; and that defendants delivered the letter to third parties, injuring plaintiff in his credit and reputation.

Clausen Miller, Schneider and Pendzich were first added as defendants on June 27, 1983. The letter in question, however, was dated December 22, 1980. Therefore, the trial court dismissed the claim against these three defendants as being untimely. The remaining defendants in count II are Schaefle and USF&G. These defendants filed answers denying the material allegations of ...

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