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Nelles v. State Farm Fire & Casualty Co.

December 27, 2000

THOMAS NELLES,
PLAINTIFF-APPELLEE,
V.
STATE FARM FIRE & CASUALTY COMPANY,
DEFENDANT-APPELLANT.



The opinion of the court was delivered by: Justice Burke

Appeal from the Circuit Court of Cook County. Honorable James F. Henry, Judge Presiding.

Defendant State Farm Fire & Casualty Company (State Farm) appeals from an order of the circuit court denying its motion to strike and dismiss portions of plaintiff Thomas Nelles' complaint. This matter is before us on interlocutory appeal pursuant to the following question certified by the trial court: "Whether Section 155 of the Illinois Insurance Code [(Code) (215 ILCS 5/155 (West 1998))] places a cap of $25,000 on statutory penalties awarded under that Section, or whether that Section allows a court to select one of the three enumerated penalties?" For the reasons set forth below, our answer to the certified question is that section 155 places a limit of $25,000 on the amount of statutory penalties that may be awarded.

STATEMENT OF FACTS

On September 1, 1992, Nelles was involved in an automobile accident. He settled with the driver of the other automobile for her policy limit of $100,000. Nelles had two policies of insurance with State Farm for underinsured benefits totaling $1.5 million. Nelles made a claim to State Farm for $1.4 million, his policies limits minus the $100,000 settlement amount. State Farm initially offered to settle for $20,000. Because the parties could not agree on a settlement, the matter proceeded to arbitration. Nelles was awarded $774,000, which was reduced to $674,000 by virtue of the prior settlement.

Nelles filed a complaint against State Farm seeking attorney fees, costs, and statutory penalties pursuant to section 155 of the Code based on State Farm's alleged vexatious and unreasonable delay in settling his underinsured motorist claim. Nelles sought penalties in the amount of $654,000, the difference between what he was awarded at arbitration and what State Farm had offered to settle for prior to arbitration. State Farm filed a motion to strike and dismiss those portions of Nelles' complaint in which Nelles alleged that he was entitled to statutory penalties in excess of $25,000. The trial court denied State Farm's motion, finding that it had discretion to impose penalties in an amount greater than $25,000. State Farm filed a motion to certify the question for interlocutory appeal, which the trial court granted. State Farm then filed its application for leave to appeal the certified question to this court, which we granted.

ANALYSIS

Section 155 of the Code provides:

"(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 company, exclusive of all costs;

(b) $25,000;

(c) the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action." 215 ILCS 5/155(1).

The trial court found that the $25,000 identified in paragraph (b) of section 155 was not a maximum penalty amount. Based on the language of the statute, the court concluded:

"[T]here is no indication from the express language of this Section that the legislature intended a $25,000 maximum assessment for the statutory penalty allowed under this Section. Rather, Section 155(a) clearly provides that '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...' " (Emphasis in original.)

According to the trial court, the highlighted phrase allows a trial court to "decide which of the three options listed in this Section should be applied ...


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