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Valdovinos v. Gallant Insurance Company

July 07, 2000


Appeal from the Circuit Court of Kane County. No. 98--LM--592 Honorable Richard J. Larson, Judge, Presiding.

The opinion of the court was delivered by: Justice Inglis

Plaintiff, Jose Valdovinos, sued defendant, Gallant Insurance Company, for failing to settle a claim under plaintiff's automobile insurance policy. The trial court awarded plaintiff $11,091 on the claim but denied his petition for attorney fees and costs under section 155 of the Illinois Insurance Code (Code) (215 ILCS 5/155 (West 1998)). Plaintiff appeals, arguing that the trial court abused its discretion when it denied his petition because defendant's failure to negotiate was vexatious and unreasonable.

At trial, plaintiff testified that, on September 10, 1997, defendant issued a policy to insure plaintiff's 1995 Cadillac against losses sustained in traffic collisions. Three days later, the car was severely damaged when plaintiff was involved in an auto accident. On September 17, 1997, plaintiff filed a claim under the policy. In response to defendant's requests, plaintiff supplied defendant with the accident report number, the bill of sale proving he owned the car, and a recorded statement of plaintiff's account of the accident. Plaintiff hired Joe Edgington, an independent appraiser, and he estimated that it would cost $11,591 to repair the car. After plaintiff sent Edgington's estimate to defendant, defendant told plaintiff that it would process the claim. Plaintiff called defendant over 20 times but received no response. Early in November 1997, he borrowed money from friends and family and paid $11,591 for the repairs. A few days later, defendant sent plaintiff a check for approximately $6,800, but plaintiff returned the check because it was inadequate. Plaintiff finally regained the use of his car more than 10 weeks after the accident.

Edgington testified that he estimated the cost of repairing plaintiff's vehicle. He used a labor rate of $36 per hour when calculating the cost because that rate was reasonable under the circumstances. Plaintiff could not obtain labor for only $24 per hour because that rate would be unprofitable for a repair shop in the area. During 1996, defendant hired Edgington's appraisal company to estimate the cost of repairing several vehicles involved in traffic accidents. Defendant repeatedly told Edgington that his company provided an excellent appraisal service.

John Lanoue, one of defendant's claims adjusters, testified that, although he was assigned to plaintiff's claim, he never spoke to plaintiff, Edgington, or plaintiff's attorney. Among Lanoue's duties was the recording of correspondence between insureds and defendant. One of defendant's field appraisers was directed to estimate plaintiff's repair costs, and Lanoue received the estimate on October 3, 1997. The appraiser completed a supplemental estimate two weeks later. Defendant never sent the appraisals to plaintiff or his attorney.

On November 6, 1997, defendant sent plaintiff a check for $6,814. The check did not cover the repair costs because defendant was unwilling to replace the car's damaged aftermarket parts or to pay $36 per hour for labor. Defendant never explained its settlement offer to plaintiff. Lanoue also admitted that, under the policy, defendant had no right to dictate where the repairs would be completed.

The trial court awarded plaintiff $11,091 on his insurance claim, concluding that "defendant really made no attempt to adjudicate the plaintiff's claim" as required under the policy. The court also noted that defendant failed to explain its settlement offers or recommend a less expensive repair shop. The court accepted plaintiff's assertion that he was frustrated by defendant's failure to return his many telephone calls.

The trial court later heard plaintiff's petition for fees and costs under section 155 of the Code. At the hearing, the parties agreed to include the trial transcript in evidence. Plaintiff's attorney testified that he billed plaintiff $8,670 for attorney fees and costs incurred during the litigation. He introduced an itemized statement of the work that his firm completed. Defendant offered no evidence to rebut plaintiff's calculation of the fees and costs.

Lanoue testified that, when an insured files a claim under a recently issued policy, defendant routinely investigates the claim for fraud. In this case, defendant concluded that there was no evidence of fraud and that an investigation was unnecessary. After defendant learned that plaintiff had retained an attorney, it increased its settlement offer to $8,021. Defendant did not explain the offer to plaintiff, and it made no other settlement offers.

The trial court denied plaintiff's petition for fees under section 155 but awarded plaintiff prejudgment interest from the date he filed the complaint. A reviewing court should not reverse a trial court's denial of attorney fees, costs, and the additional statutory amount unless the trial court abused its discretion. Marcheschi v. Illinois Farmers Insurance Co., 298 Ill. App. 3d 306, 311 (1998). We agree with plaintiff that the trial court abused its discretion when it declined his request under section 155 of the Code.

Section 155 of the Code provides in relevant part:

"(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 or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, 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 against the ...

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