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09/07/95 STEVEN M. CRAMER v. INSURANCE EXCHANGE

September 7, 1995

STEVEN M. CRAMER, PLAINTIFF-APPELLEE,
v.
INSURANCE EXCHANGE AGENCY AND AGENT G. SWANSON, DEFENDANTS, AND ECONOMY FIRE & CASUALTY CO. AND AGENT LAURIE KOESTER, CLAIMS EXAMINER, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court for the 9th Judicial Circuit, Knox County, Illinois. No. 93 L 98. Honorable David R. Hultgren, Judge, Presiding.

Petition for Leave to Appeal Allowed December 6, 1995.

Present - Honorable Allan L. Stouder, Presiding Justice, Honorable Peg Breslin, Justice, Honorable William E. Holdridge, Justice

The opinion of the court was delivered by: Breslin

The Honorable Justice BRESLIN delivered the opinion of the court:

The plaintiff, Steven M. Cramer, filed suit against the co-defendants, Economy Fire & Casualty Company and Agent Laurie Koester (collectively, Economy), alleging negligence, fraud and deceptivepractice in the cancellation of an insurance policy. The trial court denied Economy's motion for summary judgment but certified the following questions for review pursuant to Supreme Court Rule 308 (134 Ill. 2d R. 308): (1) whether section 155 of the Illinois Insurance Code (Code) (215 ILCS 5/155 (West 1992)) preempts a common law fraud cause of action against an insurance company for its allegedly unreasonable conduct in denying an insurance claim; and (2) whether a limitation provision in an insurance policy which states "No action can be brought unless the policy provisions have been complied with and the action is started within one year after the date of loss" applies to a common law fraud cause of action against an insurance company for its allegedly unreasonable conduct in denying an insurance claim. We answer both questions in the negative.

The plaintiff purchased a policy of personal property insurance from Economy in late October 1991. According to Economy, a notice of cancellation was sent to the plaintiff on December 2, 1991, explaining that the policy was being cancelled because the company had been unable to secure a phone number where the plaintiff could be reached, to secure previous insurance coverage for the dwelling, to confirm the type of construction of the dwelling, to obtain driving directions to the dwelling's rural location and to obtain a more specific occupation for the plaintiff. The policy cancellation was allegedly effective January 6, 1992. The plaintiff, in a sworn affidavit, denied ever receiving this cancellation notice.

On January 9, 1992, the plaintiff's home was burglarized. On February 14 and 25, Economy wrote letters to the plaintiff advising him that Economy needed more information in order to process his claim. A letter dated March 2 indicates that Economy was unable to make a commitment regarding coverage because its investigation of the claim was still ongoing. On May 6, Economy wrote to the plaintiff again, alerting him to the fact that his proof of loss statement had not been filed and that failure to file the proof of loss within 60 days was itself reason to deny the claim. Economy did not deny the claim at that time, however, but extended the time for the plaintiff to file his proof of loss to June 3.

The plaintiff submitted his proof of loss statement on May 20, 1992. On May 22, Economy denied the plaintiff's claim because the burglary had occurred three days after the cancellation of his policy. Thereafter, Economy refunded the plaintiff's premium in June 1992.

In October 1993, the plaintiff filed this suit pro se. The trial court found that although it was inartfully drafted, the complaint sufficiently alleged negligence, fraud and deceptive practice against Economy. Economy moved for summary judgment, asserting section155 of the Code as well as the policy's suit limitation clause as bars to the plaintiff's claim. The trial court denied Economy's motion, but certified the instant appeal pursuant to Supreme Court Rule 308.

The first issue certified for review is whether section 155 of the Code preempts a common law fraud cause of action against an insurance company for its allegedly unreasonable conduct in denying an insurance claim.

Section 155 provides, in part, as follows:

"Attorney Fees. (1) In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance *** and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:

(a) 25% of the amount which the court or jury finds such party is entitled to recover ...


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