B. Count II (Libel)
American Family and Soyk advance two reasons for dismissing Count II. First, these defendants contend that the action is barred by the one-year statute of limitations applicable to libel actions, 735 ILCS 5/13-201. Second, they contend that their alleged statements to the Winnebago County State's Attorney are privileged and cannot provide a basis for a civil action. Plaintiffs do not respond to either contention.
The failure to affirmatively plead compliance with the applicable statute of limitations is not a basis for dismissal in federal court. Tregenza v. Great Am. Communications Co., 12 F.3d 717, 719 (7th Cir. 1993), cert. denied, 128 L. Ed. 2d 465, 114 S. Ct. 1837 (1994). Where a plaintiff, however, pleads facts that show her claim is time-barred, she has, in effect, pleaded herself out of court. Whirlpool Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605, 608 (7th Cir. 1995). Under Illinois law, actions for libel must be commenced within one year after the cause of action accrues. 735 ILCS 5/13-201. The discovery rule applies to this limitation period, which means that the action accrues when the plaintiff knew or should have known of the defamatory remark or statement. See Tom Olesker's Exciting World of Fashion, Inc. v. Dun & Bradstreet, Inc., 61 Ill. 2d 129, 334 N.E.2d 160, 164 (Ill. 1975).
American Family and Soyk contend that this action accrued at about the time the information was given to the Winnebago County State's Attorney (a date which is not specified in the complaint and is therefore unknown), or, at the latest, July 14, 1994, when the grand jury indicted plaintiffs for arson. The problem with this argument is that neither of these events necessarily means that plaintiffs were aware of the alleged defamatory statement. That is, the court cannot infer from these events alone that plaintiffs were aware that defendants provided false information to law enforcement authorities. There are, however, other facts that are alleged which show this action is time-barred. It is alleged that the publication of the false statements was ongoing from the time plaintiffs were indicted to the time the charges were dismissed on May 2, 1996. It is further alleged that plaintiffs had their own experts retest the materials in the presence of defendants on April 7, 1995, to show defendants that their previous tests were false, and that defendants continued to publish the false statements by denying Woodard's claim and encouraging the prosecution. It is evident from these allegations that plaintiffs were aware of the defamatory remarks and of defendants' involvement in the prosecution by no later than April 7, 1995. This action was filed on May 20, 1996, over a year later. Accordingly, this action is time-barred.
Even if this court did not find this claim time-barred, it would nonetheless grant American Family and Soyk's motion, as the alleged defamatory remarks fall under an Illinois privilege. Under Illinois law, statements made to law enforcement officials regarding an alleged commission of a crime are absolutely privileged and no civil action for libel based thereon can be maintained. Layne v. Builders Plumbing Supply Co., 210 Ill. App. 3d 966, 569 N.E.2d 1104, 1108, 155 Ill. Dec. 493 (Ill. App. Ct. 2d Dist. 1991). Thus, the mere transmission of the test results and any other information relating to the alleged arson to the Winnebago County State's Attorney cannot be grounds for a libel action. Accordingly, for all these reasons, American Family and Soyk's motion to dismiss Count II is granted. Because plaintiffs do not offer any basis for amending this claim, Count II is dismissed with prejudice.
C. Count III (Fraud)
American Family and Soyk move to dismiss Count III on the grounds that plaintiffs' fraud claim against them is preempted by 215 ILCS 5/155(1) and that Count III fails to allege plaintiffs relied on defendants' misrepresentations. With respect to the former contention, American Family and Soyk rely on Kush v. American States Ins. Co., 853 F.2d 1380, 1385 (7th Cir. 1988), which held that any claim alleging nothing more than the conduct proscribed by section 155 is preempted by the statute. American Family and Soyk contend that the allegations in Count III merely amount to an unreasonable denial of coverage, conduct which is proscribed by section 155. In response, plaintiffs contend that Count III alleges more than a mere refusal to settle a claim and that it therefore is not preempted. As to the failure to allege reliance, plaintiffs contend that the reliance element is sufficiently alleged. Plaintiffs also seek leave to amend so as to properly plead the reliance element.
Prior to the completion of the briefing schedule in this case, the Illinois Supreme Court decided Cramer v. Insurance Exch. Agency, 174 Ill. 2d 513, 1996 Ill. LEXIS 119, 221 Ill. Dec. 473, 675 N.E.2d 897, 1996 WL 616221 (Ill. 1996). In Cramer, the court was presented with the issue of whether section 155 preempts common law torts arising out of an insurance company's delay in settling a claim. The court held that the statute merely provides an extra-contractual remedy for insurer misconduct that is vexatious and unreasonable and that it was not intended to displace well-established tort actions, including common law fraud. Id. at *6. Thus, an insurer's conduct may give rise to both a breach of contract action as well as a separate tort action, provided the plaintiff can establish the elements of that tort. Id. at *8. In light of the Illinois Supreme Court's recent decision, Kush no longer provides the rule of decision. Because section 155 does not preempt common law torts, but merely supplements an insured's contractual remedy, defendants' first contention is rejected.
Plaintiffs must nonetheless plead all the elements of fraud, and as this court has already determined in Section I of this opinion, plaintiffs have not alleged that they relied on defendants' misrepresentations. Accordingly, American Family and Soyk's motion to dismiss Count III is granted. Plaintiffs shall be granted leave to amend this claim, but the court reminds plaintiffs of the admonitions made in Section I(C) of this opinion.
D. Count IV (Negligence)
American Family and Soyk move to dismiss Count IV on the grounds that they owed no duty to plaintiffs in selecting a laboratory and that 215 ILCS 5/155(1) preempts all common law tort actions against an insurer. With regard to this latter contention, American Family and Soyk contend that Count IV is merely based on their bad faith conduct, and as such, cannot be maintained under the Seventh Circuit's decision in Kush. Plaintiffs contend that a duty is properly alleged and that section 155 does not preempt torts which require proof beyond a mere bad faith or vexatious refusal to settle. As it found in its discussion of Count III, see infra Section II(C), there is no basis for finding a duty of care owed to Wright. He has no relationship with any of the defendants, contractual or otherwise, and plaintiffs have not provided the court with, nor is the court aware of, any case law which would support finding such a duty. Accordingly, the court grants American Family and Soyk's motion as it relates to any claim Wright is asserting against them in Count IV. Woodard's claim, however, requires a different analysis.
Although American Family and Soyk's reliance on Kush is misplaced, they are nonetheless entitled to a dismissal of Woodard's claim against them in Count IV. While the Illinois Supreme Court in Cramer held that section 155 did not preempt common law torts, it also held that there is no common law tort for bad faith or unreasonable and vexatious conduct. Cramer, 174 Ill. 2d 513, 1996 Ill. LEXIS 119, 1996 WL 616221, at *8, 221 Ill. Dec. 473, 675 N.E.2d 897. Looking beyond the legal theory attached to the conduct forming the basis of Woodard's claim against American Family and Soyk, see id., the court concludes that she has alleged no more than a mere breach of an implied duty of good faith and fair dealing by American Family and Soyk under the insurance agreement. Whatever duty of care American Family and Soyk owed Woodard with respect to processing her claim, it arose out of the contract between them. The complained of conduct alleged in Count IV merely amounts to a breach of that duty of care. The Illinois Supreme Court in Cramer clearly foreclosed a plaintiff from maintaining such a claim as an independent tort action, as such a claim would be nothing more than a claim of bad faith. Id. at *8. Thus, Woodard's claim in Count IV against American Family and Soyk is dismissed.
E. Count V (Breach of Contract)
American Family and Soyk move to dismiss Count V on the grounds that it is barred by the one-year limitations period contained in the insurance agreement. In response, Woodard concedes this action was commenced well beyond the one-year limitations period but contends that the doctrines of equitable estoppel and fraudulent concealment operate to bar defendants from raising the limitations period as a defense. Woodard seeks leave to amend the complaint to add such allegations should this court determine the present allegations to be insufficient.
The court does not find Woodard's allegations sufficient to support a tolling of the limitations period. The mere fact that Woodard had to defend a criminal prosecution against her does not, in and of itself, explain why she was prevented from filing suit. Similarly, there are no allegations that defendants fraudulently concealed matters which prevented her from timely filing suit. In fact, as the court has already noted in its discussion of the fraud claim, the allegations suggest that Woodard contested the test results throughout the period relevant to this complaint. Be that as it may, the court shall grant Woodard leave to amend the complaint. In so doing, however, the court reiterates its admonitions regarding Rule 11. Accordingly, Count V is dismissed without prejudice.
F. Count VI (Vexatious Refusal to Settle)
The sole contention made by American Family and Soyk with respect to this count is that once this court finds Count V barred by the limitations period, Count VI should also be dismissed. Woodard did not respond to this contention. Because a claim under section 155 is dependent upon a valid claim for breach of contract, it is properly dismissed. Accordingly, defendants' motion is granted as to Count VI.
For the foregoing reasons, defendants' motions to dismiss are granted in part and denied in part. Counts II and IV are dismissed with prejudice as to all defendants. Counts III, V and VI are dismissed without prejudice. The motions are denied in all other respects. Plaintiffs are granted leave to file an amended complaint, if necessary, within twenty-one (21) days of this order, after which defendants shall have twenty (20) days to answer or otherwise plead.
PHILIP G. REINHARD, JUDGE
UNITED STATES DISTRICT COURT
DATED: January 31, 1997