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Hobbs v. State Farm Mutual Automobile Insurance Company

March 8, 2002

SHANNON HOBBS, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, STATE FARM FIRE AND CASUALTY COMPANY, STATE FARM INDEMNITY COMPANY, CNA CASUALTY, CONTINENTAL CASUALTY, NATIONAL FIRE INSURANCE OF HARTFORD, TRANSCONTINENTAL INSURANCE COMPANY, VALLEY FORGE INSURANCE COMPANY, AMERICAN CASUALTY COMPANY, ALLSTATE INSURANCE COMPANY, ALLSTATE INDEMNITY COMPANY, SAFECO CORPORATION, GENERAL INSURANCE COMPANY OF AMERICA, LIBERTY MUTUAL INSURANCE COMPANY, LIBERTY MUTUAL FIRE INSURANCE COMPANY, LIBERTY INSURANCE CORPORATION, FIRST LIBERTY INSURANCE CORPORATION, USAA CASUALTY INSURANCE COMPANY, USAA GENERAL INDEMNITY COMPANY, UNITED SERVICES AUTOMOBILE ASSOCIATION, D/B/A USAA, GOVERNMENT EMPLOYEE INSURANCE COMPANY, D/B/A GEICO, GEICO CASUALTY COMPANY, GEICO GENERAL INSURANCE COMPANY, AND GEICO INDEMNITY COMPANY, DEFENDANTS (COLLETTE CLOYD, PLAINTIFF-APPELLEE V. LIBERTY MUTUAL FIRE INSURANCE COMPANY, DEFENDANT-APPELLANT).



Appeal from the Circuit Court of Madison County. No. 99-L-1068. Honorable Nicholas G. Byron, Judge, presiding.

The opinion of the court was delivered by: Justice Kuehn.

Liberty Mutual Fire Insurance Company appeals on an interlocutory basis from the trial court's May 25, 2001, order denying its motion to compel an appraisal and to stay the individual claims of plaintiff Collette Cloyd.

This case is a putative class action concerning the use of automotive repair parts manufactured by companies other than the original automobile manufacturers (non-OEM parts). This appeal involves only the individual claims of Collette Cloyd, a Chicago-area resident.

The case was originally filed by an Illinois resident, Shannon Hobbs, on November 2, 1999, and alleged that Liberty Mutual Fire Insurance Company (Liberty Mutual) and other insurers provided inferior automobile parts in settling claims. Thereafter, on January 13, 2000, Liberty Mutual filed motions to dismiss but did not raise the appraisal clause at issue in this appeal. On April 14, 2000, with leave to amend granted, a Mr. and Mrs. Holder of Louisiana were added as plaintiffs. They alleged that Liberty Mutual specified an "inferior quality replacement part" in estimating their automobile's damages. Liberty Mutual filed a motion to dismiss this amended complaint but again did not reference the appraisal clause. The trial court largely denied that motion. Ultimately, the trial court dismissed the Holders' claim on forum non conveniens grounds. On March 2, 2001, the complaint was again amended to add Collette Cloyd as a plaintiff and class representative.

Collette Cloyd insured her 1997 Pontiac Grand Prix with defendant Liberty Mutual. She was involved in a motor vehicle accident in March 1999 in the Chicago area. Pursuant to her coverage with Liberty Mutual, she was provided with a repair estimate. She alleges that this estimate was partly based upon the use of non-OEM parts, including a tail lamp assembly and a rear bumper cover.

The Liberty Mutual automobile policy at issue provides in its collision coverage section that, for its limits of liability, it will pay the lesser of the actual cash value of the damaged car or the amount necessary to repair or replace the car with property of "like kind and quality."

In a variety of theories, Collette Cloyd's complaint alleges that the non-OEM parts utilized in its repair estimate are not of a like kind and quality compared to OEM parts. Count I alleges that this practice violates the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 1996)). Count II alleges a breach of contract. Count III alleges that Liberty Mutual is a coconspirator for the alleged tortious conduct of its co-defendants. Count IV seeks declaratory relief for future claims. At issue in this appeal are counts I, II, and IV.

The collision coverage within Liberty Mutual's policy includes an appraisal clause, which provides as follows:

"If we and you do not agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will select a competent appraiser. The two appraisers will select an umpire. The appraisers will state separately the actual cash value and the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding."

In a different part of the policy the general conditions there is a clause that provides as follows: "No legal action may be brought against us until there has been full compliance with all the terms of this policy."

Collette Cloyd did not join this lawsuit as a party plaintiff until March 2, 2001. The pleading served upon Liberty Mutual at that time was the third amended complaint. The third amended complaint was the first version of this lawsuit to allege that the use of non-OEM parts to calculate Collette Cloyd's loss breached the terms of the insurance policy.

On March 8, 2001, Liberty Mutual communicated with Collette Cloyd's attorney in writing and demanded that the parties resolve the dispute pursuant to the appraisal clause. On March 30, 2001, Collette Cloyd's attorney, acting on her behalf, refused to comply with Liberty Mutual's demands. In this letter, Collette Cloyd asserts as follows:

"In this case there is no dispute regarding the amount of loss, nor is this a circumstance where there is a question as to the actual cash value of property. The only question in this litigation is if Liberty Mutual, having elected to repair Ms. Cloyd s vehicle, has complied with its contractual obligation to provide sufficient amounts of money to replace damaged parts with 'like kind and quality'. Because there is no dispute as to the amount of a loss, but instead whether the replacement parts specified by Liberty Mutual are of 'like kind and quality,' the appraisal provision is irrelevant to Ms. Cloyd's claims against Liberty Mutual. Nor would comparison of the quality of non-OEM replacement parts to OEM parts be within the qualifications of appraisers."

Following its receipt of this letter, Liberty Mutual filed a motion to compel an appraisal and to stay counts I, II, and IV pending the completion of that appraisal. Without ...


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