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Bashaw v. American Family Mutual Insurance Co.

December 8, 2006


The opinion of the court was delivered by: Judge Virginia M. Kendall


Plaintiff Terri Bashaw ("Plaintiff") brings suit against American Family Mutual Insurance Company ("AFMIC") for failure to settle in good faith a personal injury suit in which Plaintiff, an insured of AFMIC, was a defendant. Plaintiff brings a second claim for attorney's fees against AFMIC pursuant to 215 ILCS 5/155. AFMIC moves for summary judgment on both counts. Because there exists a genuine issue of material fact as to whether AFMIC breached its duty of good faith, summary judgment on the failure to settle in good faith claim is denied. Because § 155 does not apply to the tort of failure to settle in good faith, summary judgment on the § 155 claim is granted.


On August 8, 1989, AFMIC issued Plaintiff an automobile liability insurance policy with limits of $100,000 per person and $300,000 per occurrence. Plaintiff's Statement of Additional Undisputed Facts ("Pltf. 56.1 Facts") at ¶ 5. On February 12, 1997, Plaintiff and Charles Wilson ("Wilson") were in an automobile accident in which both parties were injured. Id. at ¶ 6. On May 8, 1997, Wilson filed a suit against Terri Bashaw in the Cook County Circuit Court, which action was later transferred to Lake County and then voluntarily dismissed. Id. at ¶¶ 7-11. On June 22, 1999, the case was refiled in Cook County by new attorneys, and again transferred to Lake County (the "Wilson case"). Id. AFMIC acknowledged the policy and retained counsel to defend Plaintiff in the Wilson case. Id. at ¶ 6. William P. McElligott assumed defense of Plaintiff. Id. at ¶ 19. Shortly after the case was filed, AFMIC increased its reserve on the case from $15,000 to $50,000. Defendant's Statement of Undisputed Facts ("Def. 56.1 Facts") at ¶ 13.

Discovery on the case took years. As the case approached trial in 2002, McElligott assessed Wilson's medical damages at approximately $16,000. Pltf. 56.1 Factsat ¶ 24; Pltf. Ex. 3. AFMIC used an insurance adjustment tool, Collosus, to evaluate the case. Collosus estimated the gross settlement range of the case between $30,509 and $35,249. Id. at ¶ 18. In correspondence with an adjuster at AFMIC, Eileen Lenhardt ("Lenhardt"), McElligott relayed his assessments of the case against Plaintiff as discovery unfolded, including his assessments that a jury would find Plaintiff 100% liable and that the case should settle between $30,000 and $40,000. Id. at 20; see also Pltf.'s Ex. 3. Both claims adjusters at AFMIC, Lenhardt and Maria Jensen ("Jensen") testified that they believed the verdict range for Wilson against Plaintiff was between $30,000 and $50,000. Def. 56.1 at ¶ 10, 21. Plaintiff's expert, Daniel Varner, testified that on the basis of his review of the records and his familiarity with the industry, the investigation by AFMIC and the $50,000 reserve were reasonable. Def. 56.1 at ¶ 60.

Lenhardt initially gave McElligott authority to offer $15,500 to counsel for Wilson, which McElligott conveyed to counsel for Wilson. McElligott told Lenhardt that counsel for Wilson would settle the case for the policy limit of $100,000 and that he believed the value of the case was within the policy limit. Def. 56.1 Facts at ¶ 16. Lenhardt had the impression that counsel for Wilson might take less than the policy limit of $100,000. Pltf. 56.1 Facts at ¶ 34. Lenhardt repeatedly asked McElligott to seek a counter-offer in response to the $15,500, but did not receive any firm written demand from them. Def. 56.1 at ¶ 12; Def. Ex. 4 at 9. Lenhardt did not authorize McElligott to increase the settlement offer because she did not wish to "bargain against herself." Def. 56.1 at Ex. 4, Pg. 10.

Shortly before trial, Judge Brady of the Lake County Court conducted a mediation and recommended that the case settle between $50,000 and $70,000. Def. 56.1 Facts at ¶ 25. The judge also stated that the verdict potential could be in the area of $70,000 to $90,000. Id. On the first day of the trial, Jensen (who was acting in Lenhardt's stead while Lenhardt was on vacation) authorized McElligott to move above the initial offer of $15,500 if he could convince counsel for Wilson to "meet us halfway, 50 or so." Def. 56.1 Facts at ¶ 22. She did not authorize McElligott to offer a specific figure, but did tell McElligott to call her if counsel for Wilson reduced their offer to $40,000. Jensen Dep., Def. Ex. 6, at 51.

Brian Bashaw, Plaintiff's husband, retained counsel Davis Carr to advise the family with respect to the case against Plaintiff.*fn1 Def. 56.1 Facts at ¶ 46. Mr. Bashaw did not dispute that he received a letter from AFMIC shortly after the suit had been filed stating that the Bashaws could be personally liable for a judgment in excess of $100,000, and that they might wish to consult with an attorney. Id. at ¶ 49. Mr. Bashaw testified that Mr. Carr tried to communicate with McElligott and AFMIC about settlement but had little success. Id. at ¶ 53. Mr. Bashaw acknowledged that he and his wife had conversations with Carr about what would happen if the verdict exceeded the policy limits. B. Bashaw Dep., Def. Ex. 9, at 200-201. The Bashaws had concerns about the case going to trial, and had particular concerns after the trial started and Wilson testified to the extent of his injuries. B. Bashaw Dep. Def. Ex. 9 at 149-151. The Bashaws talked with Jensen about their desire to settle the case, and Mr. Carr sent a letter requesting settlement, but their requests were not heeded by AFMIC. Def. 56.1 at ¶ 55; B. Bashaw Dep., Def. Ex. 9 at 148-51.

On June 27, 2002, a jury returned a verdict in favor of Wilson. Def. 56.1 Facts at ¶ 7. Reduced by his own contributory negligence of 10%, the jury awarded Wilson $585,390 in damages. Id.


Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In determining whether a genuine issue of fact exists, the Court must view the evidence and draw all reasonable inferences in favor of the party opposing the motion. Bennington v. Caterpillar Inc., 275 F.3d 654, 658 (7th Cir. 2001); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

The Court, however, will "limit its analysis of the facts on summary judgment to evidence that is properly identified and supported in the parties' [Local Rule 56.1] statement." Bordelon v. Chicago Sch. Reform Bd. Of Trustees, 233 F.3d 524, 529 (7th Cir. 2000). Where a proposed statement of fact is supported by the record and not adequately rebutted, the court will accept that statement as true for purposes of summary judgment. An adequate rebuttal requires a citation to specific support in the record; an unsubstantiated denial is not adequate. See Albiero v. City of Kankakee, 246 F.3d 927, 933 (7th Cir. 2001); Drake v. Minnesota Mining & Mfg. Co., 134 F.3d 878, 887 (7th Cir. 1998) ("Rule 56 demands something more specific than the bald assertion of the general truth of a particular matter[;] rather it requires affidavits that cite specific concrete facts establishing the existence of the truth of the matter asserted.").*fn2

A. Failure to Settle in Good Faith

Plaintiff alleges that AFMIC breached its duty of good faith to Plaintiff, the insured, when it refused to settle the claim by Wilson against Plaintiff. If an insurer's refusal to settle a claim amounts to bad faith, the insurer may be held liable for the entire judgment against the insured, including the amount of the judgment in excess of the policy limits. Mid-America Bank & Trust Co. v. Commercial Union Ins. Co., 587 N.E.2d 81, 84 (Ill. App. Ct. 1992). "Where an insurer is pursued for its refusal to settle a claim, 'bad faith' lies in an insurer's failure to give at least equal consideration to the insured's interests when the insurer arrives at a decision on whether to settle the claim." O'Neill v. Gallant Ins. Co., 769 N.E.2d 100, 106 (Ill. App. Ct. 2002); Bailey v. Prudence Mutual Cas. Co., 429 F.2d 1388, 1391 (7th Cir. 1970). An insurer is not required to hold ...

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