The opinion of the court was delivered by: Bucklo, U.S. District Judge
MEMORANDUM OPINION AND ORDER
Leona's Pizzeria, Inc. ("Leona's"), an Illinois corporation, sues
Northwestern National Casualty Co. ("Northwestern"), a Wisconsin
insurance corporation, for breach of an insurance policy and for
violations of the Illinois Consumer Fraud and Deceptive Business
Practices Act, 815 ILCS 505/1 et seq. (the "Act").*fn1 Northwestern
answered the complaint with regard to the breach of contract claim, but
moves to dismiss the claim under the Act. I grant the motion.
Leona's operates thirteen restaurants in the Chicago, Illinois,
metropolitan area, and operates a commissary at 3931 South Leavitt in
Chicago, where it stores and prepares food for its restaurants. The
commissary also houses and operates a laundry for restaurant linens.
Leona's had a fire insurance policy with Northwestern that covered the
commissary. On October 18, 2000, a fire broke out in the laundry of the
commissary, damaging the building to the extent that business could no
longer be conducted there and destroying significant amounts of food
inventory. Leona's moved the food storage and preparation operations
previously performed at the commissary to other restaurant locations and
purchases substitute food from outside vendors.
The commissary was shut down for seventeen weeks for repairs, and
Leona's incurred $982,944.32 in food costs to outside vendors and
business interruption losses, in addition to repair costs of
$1,343,525.24. Leona's insurance coverage with Northwestern was
sufficient, to cover its losses. Leona's made a claim on its policy, and
Northwestern made an advance payment of $1,113,370.69 toward the losses.
After an investigation, however, Northwestern accused Leona's of falsely
and fraudulently inflating its claim, declared the policy void from the
outset, and denied the claim in full, demanding a return of $966,631.69.
Leona's claims that the investigation was a sham, that there is no
evidence to support the allegation that it falsified its claim, and that
Northwestern acted in bad faith. In addition, Leona's claims that
Northwestern and its parent company were undergoing financial
difficulties, of which it did not inform Leona's prior to the purchase of
the policy. Leona's also alleges that, two weeks before denying Leona's
insurance claim, Northwestern's financial rating was downgraded to a
"C-," and that it was because of the downgrade in its own rating that it
denied Leona's claim.
For the purposes of this motion, I take the allegations in the
complaint as true, draw all reasonable inferences in favor of Leona's,
and dismiss only where it is clear that Leona's could prove no set of
facts consistent with its complaint that would entitle it to relief under
the Act. First Ins. Funding
Corp. v. Federal Ins. Co., 284 F.3d 799, 804
(7th Cir. 2002).
The Act provides a cause of action for "[a]ny person who suffers actual
damages as a result of a violation of this Act committed by any other
person." 815 ILCS 505/10a(a). The Act is violated when a defendant uses or
employs "any deception, fraud, false pretense, false promise,
misrepresentation or the concealment, suppression or omission of any
material fact" in the conduct of trade or commerce with the intent that
others rely on the fraud, though no person need actually have relied on
the fraud. § 2. "Consumer" means any person or corporation "`who
purchases or contracts for the purchase of merchandise not for resale in
the ordinary course of his business." § 1(c) , (e). "Merchandise"
includes services, § 1(e), and "[t]he sale of insurance is clearly a
service and insureds are thus consumers and within the protection of the
Consumer Fraud Act." Fox v. Industrial Cas. Ins. Co., 424 N.E.2d 839,
8421 (Ill.App. Ct. 1981).
Northwestern argues that Leona's has alleged no more than a
straightforward. breach of contract claim, which is not cognizable under
the Act and which is preempted by the Illinois Insurance Code, 215 ILCS
5/155. Section 155 of the Insurance Code "provides an extracontractual
remedy to policyholders whose insurer's refusal to recognize liability
and pay a claim is vexatious and unreasonable." Cramer v. Insurance
Exch. Agency, 675 N.E.2d 897, 900 (Ill. 1996). The Illinois Supreme Court
has recognized that:
an insurer'.s conduct may give rise to both a breach
of contract action and a separate and independent tort
action. Mere allegations of bad faith or unreasonable
and vexatious conduct, without more, however, do not
constitute such a tort. Courts therefore should look
beyond the legal theory asserted to the conduct
forming the basis for the claim. In cases where a
plaintiff actually alleges and proves the elements of
a separate — tort, a plaintiff may bring an
independent tort action, such as common law fraud, for
Id. at 904 (citations omitted). The conduct forming the basis of Leona's
claim, as set forth in the complaint, includes: failure to advise Leona's
Northwestern's financial problems; bad faith failure to pay a claim;
delay of the claim by a sham investigation; failure to engage in
meaningful settlement negotiations or to respond to legitimate inquiries
about the claim; and libel and slander of Leona's. Compl. ¶ 56.
With the exception of the failure to disclose the financial problems,
none of Leona's claims amount to more than a claim for bad faith denial
of a claim under the policy. A claim that an insurer is "lying after the
fact to avoid paying [a] claim" amounts to no more — than claim for
denial of benefits and breach of contract, and is preempted by §
155. Cramer, 675 N.E.2d at 905. See also Combs v. Insurance Co. of Ill.,
497 N.E.2d 503, 508 (Ill.App. Ct. 1986) (cited with approval in Cramer,
675 N.E.2d at 904) (holding that claim of bad faith denial of benefits,
framed as claim for intentional infliction of emotional distress, was
preempted by § 155). Even if those claims were not preempted,
however, they would fail to state a claim for consumer fraud because they
amount to no more than a breach of contract. See Nillson v. NBD sank of
Ill., 731 N.E.2d 774, 784-85 (Ill.App. Ct. 1999) (holding that simple
breach of contract claim is not cognizable under the Act)
Nonetheless, § 155 leaves the door open for claims that truly sound
in tort, particularly fraud. See Cramer, 675 N.E.2d at 902. Leona's
claims that it was induced to enter the contract by Northwestern's
fraudulent suppression of information about its poor financial
condition. At least one court in this district has recognized that claims
for fraud in the inducement of an insurance policy are not preempted by
§ 155 and may be cognizable under the act. See Commonwealth Ins. Co.
v. Stone Containter Corp., No. 99 C 8471, 2001 WL477151, at *3 (N.D.
Ill. May 3, 2001). However, "any count alleging nothing more than the
conduct proscribed by section 155 is preempted by the statute." Mazur v.
Hunt, 592 N.E.2d 335, 340 (Ill.App. Ct. 1992) (cited with approval in
Cramer, 675 N.E.2d at 905). Although Leona's does allege that it acted in
reliance on the alleged fraudulent omission (I need not decide here
whether there was in. fact any duty to reveal this information), it
claims no additional damages from the fraud itself, beyond what it is
already entitled to for a bad faith ...