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O'Connor v. Country Mutual Insurance Co.

Court of Appeals of Illinois, Third District

March 5, 2013

DORENE O'CONNOR, Plaintiff-Appellant,

Rehearing denied April 5, 2013

Held [*]

A judgment denying relief to plaintiff in her action for damages under section 155 of the Insurance Code based on allegations that her insurer acted unreasonably and vexatiously in failing to settle her under insured motorist claim was upheld, since her insurer’s offer of less than half of what she was awarded in arbitration, standing alone, did not establish that the offer was unreasonable, and her insurer presented sufficient evidence that it used reasonable standards in evaluating claims, even though it did not have a manual for such evaluations.

Appeal from the Circuit Court of Kankakee County, No. 05-L-170; the Hon. Kendall O. Wenzelman, Judge, presiding.

John Bernard Cashion (argued), of Northfield, for appellant

Keith G. Carlson (argued), of Carlson Law Offices, of Chicago, for appellee.



¶1 Plaintiff Dorene O'Connor filed this action against defendant Country Mutual Insurance Company alleging that it unreasonably and vexatiously failed to settle her under insured motorist insurance claim. The trial court entered judgment in favor of Country Mutual, finding that O'Connor did not prove that County Mutual engaged in unreasonable and vexatious conduct. O'Connor appealed. We affirm.


¶3 Plaintiff Dorene O'Connor was injured in an automobile accident in June 2002, suffering a broken leg and sustaining more than $24, 000 in medical expenses. Defendant Country Mutual Insurance Company provided automobile insurance to O'Connor with a policy that included limits of $250, 000 for under insured motorist (UIM) coverage and $10, 000 for medical payments coverage. Pursuant to its policy, Country Mutual paid O'Connor the full $10, 000 in medical coverage. She also received a $105, 000 payout from the tortfeasors' insurers. In November 2004, Country Mutual offered a settlement of $40, 000 under the policy's UIM provisions. O'Connor estimated her damages at $202, 450 and offered to settle her claim with Country Mutual for $97, 500. The parties failed to reach an agreement on a settlement amount under the UIM provisions and in December 2005 proceeded to arbitration as required by the policy. The issue for the arbitrators' determination was damages. Following the conclusion of evidence, the arbitrators entered an award of $213, 295 to O'Connor, subject to $115, 000 in set offs, for a net payment of $98, 295. Country Mutual promptly paid the arbitration award and O'Connor deposited the award check.

¶4 O'Connor filed a two-count complaint, seeking, in part, damages under section 155 of the Illinois Insurance Code (Code) (215 ILCS 5/155 (West 2002)). In March 2007, she filed an amended complaint for section 155 damages, alleging the following: (a) the arbitration award was more than twice Country Mutual's offer, "raising an inference that the defendant failed and refused to evaluate and pay plaintiff's claim in an objectively reasonable sum prior to arbitration"; (b) Country Mutual gave insufficient deference to O'Connor's interests; and (c) Country Mutual failed to use any objective criteria in evaluating O'Connor's claim. Country Mutual filed a motion to dismiss, which the trial court denied. Discovery took place with many motions by both parties seeking disclosure or to bar disclosure of discovery materials. The trial court ultimately issued a ruling that attorney-client and work-product privileges protected only three of the documents O'Connor requested from Country Mutual's claim files. The privileged documents concerned preparation for the instant litigation. Immediately prior to trial, O'Connor filed her trial memorandums, raising for the first time that the trial court should consider section 154.6 of the Code as a standard for determining whether Country Mutual's conduct was unreasonable and vexatious under section 155 of the Code. 215 ILCS 5/154.6, 155 (West 2002).

¶5 A trial took place. The Country Mutual litigated-claims attorney who handled O'Connor's file after May 2005 testified. In evaluating claims, she did not use any manuals, written procedures, bulletins, leaflets or computer programs. She looked at everything in the files and analyzed all cases on their merits. The practice at Country Mutual was to hire outside counsel who would take discovery depositions of medical and occurrence witnesses, review medical files and bills, and report on the value on the case. She received summaries, updates, and other documents from outside counsel. She considered different criteria case-by-case, not by case type, and evaluated first-party claims the same as third-party claims. She did not try to lowball offers because of pressure or to impress her supervisors. She evaluated claims for their reasonable value and did not weigh the interest of Country Mutual in doing so. She sought to determine the right value in the community for a given injury. She did not specifically recall the instant case, but knew the claim was assigned to her in May 2005, after outside counsel had been given $40, 000 settlement authority. She did not consider the award in the instant case to be substantially above the offer.

¶6 The claims attorney who first handled O'Connor's claim for Country Mutual testified. Country Mutual did not use a written claims manual but the insurance policy operated as a manual, for example, spelling out the arbitration procedure. In a UIM claim like the instant claim where damages were at issue, Country Mutual would hire outside counsel, who would conduct discovery regarding the nature of the injury, any special damages claimed, the type of permanency, the impression the insured would make as a witness, community verdicts, and the differences between going to trial or to arbitration. Generally, he would attempt to settle a claim instead of going to arbitration and in his experience 90% of claims would settle. Evaluations were done case-by-case and not based on a computer program. After discussions with outside counsel regarding O'Connor's claim and based on counsel's evaluation, the claim was valued at $145, 000 to $155, 000, which calculated to $30, 000 to $40, 000 above what had already been paid to O'Connor by Country Mutual and the other insurers.

ΒΆ7 Outside counsel who took the case to arbitration testified. He would share significant information with the Country Mutual claims attorney but not every detail in the case. His general evaluation procedures in UIM arbitration cases included reviewing the claim files and the underlying case, other offers and settlements, the injuries and medical files, and factors such as the locality, permanency of the injuries, lasting disabilities, age, gender/role, kind of injury, and disfigurement. In O'Connor's case, he took her sworn statement about her claim, injury, permanency, and lifestyle changes. He obtained her medical records and deposed the orthopedic surgeon who treated her broken leg. O'Connor's initial demand was the policy limits of $135, 000 with a subsequent demand of $98, 000. He made several offers to O'Connor based on his evaluation, with the last offer of $40, 000. In determining a value, he looked at the value of the entire case and subtracted amounts already paid to reach the settlement amount. The arbitration award O'Connor received was a high award, nearly 10 times the medical expenses, with an ...

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