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West Wind Express v. Occidental Fire & Casualty Company of North Carolina

United States District Court, Seventh Circuit

May 23, 2013



ROBERT M. DOW, Jr., District Judge.

Before the Court is Defendant's motion for judgment on the pleadings [72]. For the reasons stated below, the Court respectfully denies the motion.

I. Background

Plaintiff West Wind Express sought a declaratory judgment that it was not obligated to reimburse its insurer, Defendant Occidental Fire & Casualty Co. of North Carolina, for payments Defendant made in settlement of three lawsuits that third parties had filed against Plaintiff (Count I). Plaintiff also alleged that Defendant acted vexatiously and unreasonably in its "ongoing and repeated demands for reimbursement, " in violation of 215 ILCS 5/155, and sought statutory penalties and attorneys' fees in connection with that alleged violation (Count II). The Court implemented a biphasic discovery schedule, and Plaintiff moved for summary judgment on Count I [45] at the conclusion of the first phase. The Court granted Plaintiff's motion [68], and the parties proceeded with discovery on Count II. Defendant has now moved for judgment on the pleadings as to Count II [72]. Defendant contends that Plaintiff cannot state a claim under § 155 because Defendant did not withhold any policy benefits from Plaintiff. Defendant contends in the alternative that Plaintiff cannot succeed on its § 155 claim because there was a bona fide dispute about coverage.

II. Legal Standard

Pursuant to Federal Rule of Civil Procedure 12(c), a party may move for judgment on the pleadings after the parties have filed the complaint and answer. See also Brunt v. Serv. Emps. Int'l Union, 284 F.3d 715, 718 (7th Cir. 2002). The Court takes all well-pleaded allegations as true and, after drawing all reasonable inferences in favor of the non-moving party, determines whether the complaint sets forth facts sufficient to support a cognizable legal theory. Scherr v. Marriott Int'l, Inc., 703 F.3d 1069, 1073 (7th Cir. -). Federal Rule of Civil Procedure Rule 12(d) provides that a Rule 12(c) motion "must be treated as one for summary judgment under Rule 56" if "matters outside the pleadings are presented to and not excluded by the court." However, the Court may take judicial notice of documents that are part of the public record, including pleadings, orders, and transcripts from prior proceedings in the case, without triggering the operation of Rule 12(d). Scherr, 703 F.3d at 1073; see also Ennenga v. Stearns, 677 F.3d 766, 773 (7th Cir. 2012) ("Taking judicial notice of matters of public record need not convert a motion to dismiss into a motion for summary judgment."); Archer Daniels Midland Co. v. Burlington Ins. Co. Grp., Inc., 785 F.Supp.2d 722, 726 (N.D. Ill. 2011).

As a general rule, "[a] complaint that invokes a recognized legal theory * * * and contains plausible allegations on the material issues * * * cannot be dismissed under Rule 12." Richards v. Mitcheff, 696 F.3d 635, 638 (7th Cir. 2012) (citing Erickson v. Pardus, 551 U.S. 89 (2007)). But "a complaint that alleges an impenetrable defense to what would otherwise be a good claim should be dismissed (on proper motion) under Rule 12(c)." Id. at 637. In other words, dismissal under Rule 12(c) is proper when a plaintiff's allegations "show that there is an airtight defense [such that he] has pleaded himself out of court, " id., or, more generally, "if it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief." Hayes v. City of Chi., 670 F.3d 810, 813 (7th Cir. 2012) (quoting Thomas v. Guardsmark, Inc., 381 F.3d 701, 704 (7th Cir. 2004)); see also Edgenet, Inc. v. Home Depot U.S.A., Inc., 658 F.3d 662, 665 (7th Cir. 2011) ("When the complaint itself contains everything needed to show that the defendant must prevail on an affirmative defense, then the court can resolve the suit on the pleadings under Rule 12(c)."). Dismissal also is proper under Rule 12(c) when a movant has demonstrated that the complaint fails to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(h)(2)(B); Alioto v. Town of Lisbon, 651 F.3d 715, 718 (7th Cir. 2012). To make that assessment, the Court uses the more familiar Rule 12(b)(6) standard. See McMillan v. Collection Prof'ls, Inc., 455 F.3d 754, 757 n.1 (7th Cir. 2006). Thus, for a complaint to survive, its factual allegations must be sufficient to raise the possibility of relief above the "speculative level, " assuming that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555).

III. Discussion

Section 155 provides in relevant part that

(1) In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:
(a) 60% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;
(b) $60, 000;
(c) the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action.

215 ILCS 5/155. "The Illinois legislature designed this provision to provide a remedy to insureds who encounter unnecessary difficulties resulting from an insurance company's unreasonable and vexatious refusal to honor its contract with the insured.'" First Ins. Funding Corp. v. Fed. Ins. Co., 284 F.3d 799, 807 (7th Cir. 2002) (quoting Korte Constr. Corp. v. Am. States Ins., 750 N.E.2d 764, 771 (Ill.App.Ct. 1st Dist. 2001)). That is, § 155 "provides an extracontractual remedy for insurer misconduct that is vexatious and unreasonable." Cramer v. Ins. Exch. Agency, 675 N.E.2d 897, 902 (Ill. 1996); see also Area Erectors, Inc. v. Travelers Prop. Cas. Co. of Am., 981 N.E.2d 1120, 1127 (Ill.App.Ct. 1st Dist. 2012) ("The attorney fees, costs and limited penalty provisions of section 155 are an extracontractual remedy intended to make suits by policyholders economically feasible and punish insurance companies for misconduct." (quotation omitted)). Whether an insurer acted unreasonably or vexatiously is a question of fact, see Med. Protective Co. v. Kim, 507 F.3d 1076, 1086 (7th Cir. 2007) (citing Boyd v. United Farm Mut. Reinsurance Co., 596 N.E.2d 1344, 1349 (Ill.App.Ct. 5th Dist. 1992)), and a "trial court must consider the totality of the circumstances before it determines that an insurer's conduct violates section 155." Golden Rule Ins. Co. v. Schwartz, 786 N.E.2d 1010, 1018 (Ill. 2003). "Factors to consider are the insurer's attitude, whether the insured was forced to sue to recover, and whether the insured was deprived the use of his property." Siwek v. White, 905 N.E.2d 278, 284 (Ill.App.Ct. 1st Dist. 2009) (quotation omitted). "Attorneys['] fees may not be awarded simply because an insurer takes an unsuccessful position in litigation, but only where the evidence shows that the insurer's behavior was willful and without reasonable cause. This means that an insurer's ...

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