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May 1, 2001


The opinion of the court was delivered by: Martin C. Ashman, Magistrate Judge.


Plaintiff, the Estate of Judith Cencula, by Arthur Cencula as Independent Administrator, brought suit against Defendant, John Alden Life Insurance Company, to recover unpaid medical benefits under the terms of a group insurance plan. On March 28, 2000, this Court granted Plaintiff's Motion for Summary Judgment as to liability, finding Defendant accountable for Plaintiff's unpaid medical bills.

Two months later, on May 30, 2000, Plaintiff and Defendant negotiated a settlement agreement. Consequently, the case was dismissed with prejudice with the understanding that this Court retained jurisdiction for the purpose of enforcing the settlement agreement. Now, pursuant to that provision, Plaintiff brings a Petition to Enforce Settlement Agreement and for Other Relief. Plaintiff contends that Defendant has acted in bad faith by failing to carry out the terms of the settlement agreement with a reasonable time. For the reasons that follow, Plaintiff's petition is granted in part and denied in part.

I. Background

As more fully described in Cencula v. John Alden Life Insurance Co., No. 98 C 0562, 2000 WL 336522 (N.D.Ill. Mar. 28, 2000), this case commenced as a result of Defendant's refusal to pay insurance claims that accrued as a result of Judith Cencula's fatal bout with cancer. On October 6, 1998, one of Plaintiff's claims was dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). But on March 28, 2000, this Court found Defendant liable for Plaintiff's unpaid medical bills pursuant to the terms of Defendant's group insurance plan.

With Defendant's liability determined, the parties turned their attention to damages. During a settlement conference on May 30, 2000, the parties reached an oral agreement and the case was dismissed with prejudice. In exchange for a release from all claims, Defendant agreed to reimburse plaintiff for certain out-of-pocket prescription expenses and premium payments, to pay Plaintiff's attorney's fees, and to satisfy numerous outstanding medical bills. Apparently, Defendant promised to reduce the agreement to writing and to submit a copy to Plaintiff for review within two weeks time.

However, the two weeks came and went without communication from Defendant regarding the settlement agreement. Plaintiff telephoned Defendant to inquire about the delay and left a voice-mail message reminding Defendant that the written settlement agreement was overdue. Defendant never returned the call.

To Plaintiff's satisfaction, the written settlement agreement contained all of the orally agreed upon terms that Plaintiff anticipated. The agreement contained provisions requiring Defendant to reimburse Plaintiff for out-of-pocket prescription expenses and insurance premiums, to pay Plaintiff's attorney's fees, and to satisfy all of the outstanding medical bills that Judith Cencula incurred. The agreement also established a time frame in which Defendant was obligated to make some of those payments. For instance, the agreement required Defendant to reimburse Plaintiff for the out-of-pocket prescription expenses and to pay Plaintiff's attorney's fees immediately. But for other matters such as Defendant's obligation to pay Plaintiff's unpaid medical bills, the agreement contained no specific time reference.

Nonetheless, the agreement did require Defendant to "exercise all due diligence" in carrying out the terms of the agreement. (See Pet. Enforce Settlement & Other Relief Ex. C at 4.) Oddly, however, the agreement contained no provision dealing with breach of the agreement. Furthermore, the agreement contained no provision for attorney's fees in the event one party had to come into court to enforce the settlement agreement.

The first payments under the settlement agreement came trickling in around July 20, 2000. At that time, Defendant paid $3,257.16 to plaintiff for out-of-pocket prescription expenses, $600 to Plaintiff for insurance premiums, and $80,000 to Plaintiff for attorney's fees. Allegedly these payments were seven weeks overdue. Defendant never provided plaintiff with a reason for the delay.

But plaintiff was not the only one who was experiencing difficulty receiving payment. On August 4, 2000, the University of Chicago Hospitals sent a letter to Plaintiff demanding payment of a $130,310.88 bill. Evidently, Chicago Hospitals knew of the settlement and grew tired of waiting for its share. Another letter sent by Chicago Hospitals on October 2, 2000, apprised Plaintiff of Chicago Hospitals's frustrated dealings with Defendant. Purportedly, Defendant refused to agree to any particular sum for satisfaction of the outstanding medical bill or to provide Chicago Hospitals with an indication of when Chicago Hospitals would receive any money at all. As a result, Chicago Hospitals threatened to increase the amount due from $130,310.88 to $153,612.68, recanting its willingness to discount the bill. The apparent point of contention between Chicago Hospitals and Defendant concerned conflicting interpretations of the Illinois Probate Act.

With no end in sight, on October 11, 2000, Plaintiff returned to court. Plaintiff filed a Petition to Enforce Settlement Agreement and for Other Relief asking this Court to enter judgment against Defendant in the amount of $153,612 for payment to Chicago Hospitals, to impose upon Defendant a $25,000 statutory penalty for Defendant's dilatory conduct, to award Plaintiff attorney's fees for bringing the petition, and to require Defendant to submit a monthly written report to Plaintiff detailing Defendant's progress in settling the unpaid claims.

The petition led to additional court appearances. Then on November 30, 2000, this Court granted Plaintiff part of the relief requested by requiring Defendant to submit monthly status reports to Plaintiff detailing Defendant's efforts to discharge its payment obligations under the settlement agreement. At that time, ...

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