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January 28, 1997


Appeal from the Circuit Court of Madison County. No. 94-MR-145. Honorable David R. Herndon, Judge, presiding.

The Honorable Justice Hopkins delivered the opinion of the court. Welch, J., and Chapman, J., concur.

The opinion of the court was delivered by: Hopkins

JUSTICE HOPKINS delivered the opinion of the court:

Millers Mutual Insurance Association of Illinois (Millers) appeals from orders of the Madison County circuit court in favor of defendant and counterplaintiff, Lou Ann House (House). The issues we consider are: (1) whether Millers made a sufficient offer of uninsured motorist coverage to those covered under its automobile policies; (2) whether the court's order assessing statutory damages and attorney fees against Millers was proper; (3) if statutory damages were proper, whether the amount assessed for those damages and attorney fees was accurate; and (4) whether the court properly entered judgment against Millers for intentional infliction of emotional distress. For reasons we will more fully explain, we affirm the court's order finding that Millers did not sufficiently offer uninsured motorist coverage. We also affirm the order assessing statutory damages and attorney fees against Millers. However, we reverse the court's order against Millers on the issue of intentional infliction of emotional distress.


On February 14, 1993, House was injured in a collision with an uninsured motorist. At the time of the accident, she was covered by a policy of automobile liability insurance issued by Millers and providing $100,000 coverage for bodily injury liability and $40,000 coverage for collisions with uninsured and underinsured drivers. On February 10, 1994, House's attorney mailed a letter to Millers offering to settle the case for $100,000, demanding arbitration if Millers did not want to settle, and nominating an arbitrator. Millers did not respond to the settlement offer or to the demand for arbitration, but instead, on April 5, 1994, Millers filed a complaint requesting a judgment declaring that House's uninsured motorist coverage was limited to $40,000.

House filed an answer and counterclaim. Her amended counterclaim alleged that Millers willfully failed to name an arbitrator and, as a result, waived its right to arbitration. House further alleged that Millers' refusal to name an arbitrator and refusal to tender at least $40,000 in settlement of House's uninsured motorist claim amounted to an intentional and willful bad faith attempt by Millers to delay payment of House's claim.

On August 31, 1995, the cause came on for hearing on Millers' complaint for declaratory judgment and on the count of House's counterclaim seeking reformation of her policy to increase her uninsured motorist coverage to $100,000. Millers presented evidence that it mailed information concerning the rights of its insureds to increase the limits of their uninsured/underinsured motorist coverage to the amount of liability insurance they carried. According to Jan Scharth, Millers' supervisor for policy services, Millers notified persons such as House of their right to increase their uninsured/underinsured motorist coverage through inserts mailed to the insureds with their renewal notices. Scharth testified that one mail clerk, Carol Korte, was responsible for assembling several pages of inserts and placing all of the inserts into the envelopes containing the renewal notices. During the six-month period in which House received her renewal notice and in which she was supposed to receive the uninsured motorist insert, Korte was required to assemble 200 renewal packages in an average day. Korte was the only person performing this task, and Millers had no way of knowing whether its insureds, such as House, actually received the uninsured motorist insert.

Scharth testified that Millers. had a policy that its agents were supposed to check with the insureds they represented to make sure they received their uninsured motorist insert with their renewal packages, but Scharth did not know if House's agent, Warren Baumgartner, followed up with House. Scharth admitted that Millers had absolutely no system to verify that insureds received their uninsured motorist insert, even though they had the capability to do a computer check to verify the receipt of this information during this time period. Scharth also admitted that the information contained in the insert was vague and that insureds could not make an informed decision as to whether they needed to increase their uninsured motorist coverage without calling their insurance agent.

House testified that she had full-coverage insurance through Millers from the age of 16, that she called Baumgartner to drop the policy when she joined the military, and that, after she got out of the military in December 1985, she called Baumgartner to reinstate her full-coverage insurance with Millers in January 1986. House testified that she did not have to come into the office to sign any papers, but that Baumgartner simply took her information over the phone. House stated that Baumgartner never advised her of the existence or nature of uninsured motorist coverage and never informed her that she could increase her uninsured motorist coverage to the same level as her liability coverage. House testified that she was sure that she did not receive the uninsured motorist insert, because if she had, she would have called Baumgartner, since she would not have understood what to do otherwise.

House was working at the time of the car accident and went back to work shortly thereafter. However, she suffered an epileptic seizure at work and was not allowed to return to work thereafter. She received sick pay benefits for a while, but when those benefits were terminated, she was without any income until she began receiving social security disability payments. The record is undisputed that House suffers from uncontrolled epilepsy as a result of the car accident for which she claimed uninsured motorist benefits. It is also undisputed that the value of her claim exceeds the $100,000 limit for liability and the $5,000 medical payment limit.

After a separate hearing, the trial court entered an order finding that Millers unreasonably delayed payment of the $40,000 uninsured motorist coverage clearly due to House, and as a result, the court assessed statutory damages in the amount of $25,000, attorney fees in the amount of $20,625, prejudgment interest in the amount of $3,800, and taxable costs against Millers. The court also determined that Millers was guilty of intentional infliction of emotional distress by its unreasonable delay in paying at least the $40,000 due to House, and therefore, the court ordered Millers to pay $50,000 in punitive damages to House.

We will discuss any additional facts necessary to the resolution of this appeal in the following analysis section.



The trial court held that Millers waived its right to arbitration by filing the declaratory judgment action and that the manner in which the notice was mailed to insureds such as House was not commercially reasonable. As a result of this finding, the trial court ordered reformation of House's insurance policy to provide her with $100,000 in uninsured motorist coverage. The trial court based its decision upon the finding that Millers had no policy to confirm that its insureds actually received the insert. Additionally, the trial judge indicated that he believed House's testimony that, in fact, she did not receive the insert and that she thought she had full-coverage insurance at the time Millers attempted to send her the insert. The court reasoned that it would be inconsistent for House to think that she needed to change her policy to increase her coverage for uninsured motorist insurance since she did not know what uninsured motorist coverage was, and no one, including her insurance agent, ever explained it to her.

Millers argues that its method of placing the uninsured motorist coverage inserts into policyholders' renewal packets is acceptable under the relevant case law and, as such, the court erred in reforming the policy. The leading Illinois Supreme Court decision on this issue is Cloninger v. National General Insurance Co., 109 Ill. 2d 419, 94 Ill. Dec. 549, 488 N.E.2d 548 (1985). In Cloninger, the supreme court determined "what type of information would adequately inform an insured so that the insured could make an intelligent decision." Cloninger, 109 Ill. 2d at 425. Those who are covered under automobile insurance policies are entitled to this information because our legislature requires that ...

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