Appeal from the Circuit Court for the 10th Judicial Circuit, Tazewell County, Illinois No. 99-L-123 Honorable Robert A. Barnes Judge, Presiding
The opinion of the court was delivered by: Justice Breslin
Plaintiff Ella Haddick, administrator of the estate of her son, James Griffith, filed this suit against defendant Valor Insurance Company (Valor), alleging that Valor acted in bad faith when it refused to settle a claim against its policyholder within the policy limits. The trial court granted Valor's motion to dismiss, finding that Valor had no duty to settle prior to the filing of a lawsuit against its policyholder.
We reverse and hold that an insurance company has a duty to act in good faith in settling a claim against its policyholder in a timely manner both before and after suit is filed. We further hold that a plaintiff may maintain a cause of action against an insurance company for failure to settle a claim in good faith though the plaintiff withdrew her offer to settle within the policy limits before filing suit.
On May 6, 1996, Griffith was killed in a single car accident when the vehicle in which he was traveling left the road. Both of the occupants of the car, Griffith and Larry Woodley Jr., had been thrown from the car. The two men were taken to a hospital where Griffith died. Griffith incurred medical bills in excess of $80,000.
The vehicle was owned by Woodley. A police report from the accident included an accident reconstruction report indicating that Woodley was driving. At the hospital, the police officer asked an emergency room doctor to question Woodley about who was driving. Woodley responded to the doctor's question that he was. Woodley was then arrested for driving under the influence. Approximately a week later, Woodley claimed that he could not remember who was driving.
On August 22, 1996, after a demand for settlement was made by Haddick's attorney on behalf of Griffith's estate, Valor responded by letter indicating that it would discuss settlement after receiving a copy of the police report. Haddick sent a copy of the report to Valor but heard nothing from Valor for seven months. Thereupon Haddick sent a letter to Valor on March 7, 1997, demanding that it settle for the policy limits of $20,000. The letter outlined Haddick's claim, discussed the probability that Woodley was driving the vehicle, and requested that settlement be made within 14 days. Valor responded that it was still investigating the claim to determine who was driving. At the end of the 14 days, Haddick extended the deadline for settlement for another two weeks after learning that a new claims adjustor had taken over the case.
After Valor did not respond, Haddick sent a letter indicating that suit would be filed and she would no longer accept settlement for the policy limits. Approximately one year later, Valor offered the policy limits of $20,000 but that offer was rejected. The case went to trial and a verdict was returned in favor of Haddick for $150,924.80.
Following the entry of judgment against him, Woodley assigned to Haddick all of his causes of action against Valor. Haddick then filed this action against Valor claiming that it should be liable for the whole judgment because it acted in bad faith in refusing to settle within the policy limits. The trial court granted Valor's motion to dismiss pursuant to section 2-615(b) of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-615(b) (West 1998)), and Haddick appeals.
On appeal, we must determine whether the trial court erred when it dismissed Haddick's complaint pursuant to section 2-615(b) of the Code (735 ILCS 5/2-615(b) (West 1998)).
A motion to dismiss pursuant to section 2-615 admits all well-pled facts in the plaintiff's complaint. Jackson v. Michael Reese Hospital & Medical Center, 294 Ill. App. 3d 1, 689 N.E.2d 205 (1997). Considering such well-pled facts as true, an involuntary dismissal on the pleadings is proper if it is clearly apparent that no set of facts can be proved which would entitle the plaintiff to recover. Grassini v. Du Page Township, 279 Ill. App. 3d 614, 665 N.E.2d 860 (1996). On appeal, this court reviews the trial court's decision to dismiss a claim de novo. Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112, 619 N.E.2d 732 (1993).
The trial court dismissed Haddick's complaint finding both that Valor had no duty under Illinois law to settle Haddick's claim prior to suit being filed and that Haddick could not maintain a bad faith claim after she withdrew her policy limit demand. Haddick disputes both of these findings.
An insurer has a duty to act in good faith in responding to settlement offers arising from the insurer's exclusive control over settlement negotiations. See Krutsinger v. Illinois Casualty Co., 10 Ill. 2d 518, 141 N.E.2d 16 (1957). While the insurer may have an incentive to refuse settlement and proceed to trial, the policyholder may prefer to settle within the policy limits to avoid the risk of trial, thus avoiding a verdict in excess of the policy limits for which the ...