Find Legal Information

JUSTICE BURKE delivered the opinion of the court:

Defendant State Farm Fire & Casualty Company (State Farm)appeals from an order of the circuit court denying its motion tostrike and dismiss portions of plaintiff Thomas Nelles' complaint. This matter is before us on interlocutory appeal pursuant to thefollowing question certified by the trial court: "Whether Section155 of the Illinois Insurance Code [(Code) (215 ILCS 5/155 (West1998))] places a cap of $25,000 on statutory penalties awardedunder that Section, or whether that Section allows a court toselect one of the three enumerated penalties?" For the reasons setforth below, our answer to the certified question is that section155 places a limit of $25,000 on the amount of statutory penaltiesthat may be awarded.

On September 1, 1992, Nelles was involved in an automobileaccident. He settled with the driver of the other automobile for

her policy limit of $100,000. Nelles had two policies of insurancewith State Farm for underinsured benefits totaling $1.5 million. Nelles made a claim to State Farm for $1.4 million, his policieslimits minus the $100,000 settlement amount. State Farm initiallyoffered to settle for $20,000. Because the parties could not agreeon a settlement, the matter proceeded to arbitration. Nelles wasawarded $774,000, which was reduced to $674,000 by virtue of theprior settlement.

Nelles filed a complaint against State Farm seeking attorneyfees, costs, and statutory penalties pursuant to section 155 of theCode based on State Farm's alleged vexatious and unreasonable delayin settling his underinsured motorist claim. Nelles soughtpenalties in the amount of $654,000, the difference between what hewas awarded at arbitration and what State Farm had offered tosettle for prior to arbitration. State Farm filed a motion tostrike and dismiss those portions of Nelles' complaint in whichNelles alleged that he was entitled to statutory penalties inexcess of $25,000. The trial court denied State Farm's motion,finding that it had discretion to impose penalties in an amountgreater than $25,000. State Farm filed a motion to certify thequestion for interlocutory appeal, which the trial court granted. State Farm then filed its application for leave to appeal thecertified question to this court, which we granted.

Section 155 of the Code provides:

"(1) In any action by or against a companywherein there is in issue the liability of acompany on a policy or policies of insuranceor the amount of the loss payable thereunder,or for an unreasonable delay in settling aclaim, and it appears to the court that suchaction or delay is vexatious and unreasonable,the court may allow as part of the taxablecosts in the action reasonable attorney fees,other costs, plus an amount not to exceed anyone of the following amounts:

(a) 25% of the amount which the court orjury finds such party is entitled to recoveragainst the company, exclusive of all costs;

(b) $25,000;

(c) the excess of the amount which thecourt or jury finds such party is entitled torecover, exclusive of costs, over the amount,if any, which the company offered to pay insettlement of the claim prior to the action." 215 ILCS 5/155(1).

The trial court found that the $25,000 identified in paragraph (b)of section 155 was not a maximum penalty amount. Based on thelanguage of the statute, the court concluded:

"[T]here is no indication from the expresslanguage of this Section that the legislatureintended a $25,000 maximum assessment for thestatutory penalty allowed under this Section. Rather, Section 155(a) clearly provides that'the court may allow as part of the taxablecosts in the action reasonable attorney fees,other costs, plus an amount not to exceed anyone of the following amounts...' " (Emphasisin original.)

According to the trial court, the highlighted phrase allows a trialcourt to "decide which of the three options listed in this Sectionshould be applied when determining the appropriate penalty."

State Farm contends that the trial court erred in holding thatsection 155 allows penalties in excess of $25,000 based on theplain language of the statute, the legislative history, andIllinois Supreme Court commentary on the section, all of whichindicate that the legislature intended to limit statutory penaltiesto $25,000. Nelles contends that the trial court properlydetermined that $25,000 was not a "cap." According to Nelles, noneof the terms of section 155 are unclear and the trial court ispermitted to choose any of the three sections in assessingpenalties because there is nothing in the statutory language tolimit the trial court in assessing penalties to any one of thesections. Nelles also contends that had the legislature intendedto place a limit on the amount of statutory penalties, it couldeasily have added language to do so, but has failed to do sodespite three amendments of the statute. Lastly, Nelles maintainsthat the legislative history relied upon by State Farm has beentaken out of context. According to Nelles, the legislature, whenit increased the amount in paragraph (b), was only addressing anamendment to that paragraph and was not placing a limitation on thesection as a whole.

In construing a statutory provision, our primary goal is toascertain and give effect to the legislature's intent. Solich v.George & Anna Portes Cancer Prevention Center of Chicago, Inc., 158Ill. 2d 76, 81, 630 N.E.2d 820 (1994). We are to give thestatutory words their plain and commonly understood meaning. Panhandle Eastern Pipe Line Co. v. Illinois EnvironmentalProtection Control Board, 314 Ill. App. 3d 296, 301, 734 N.E.2d 18(2000). Every part of the statute must be considered together andevery word or phrase must be given some reasonable meaning. Kraft,Inc. v. Edgar, 138 Ill. 2d 178, 189, 561 N.E.2d 656 (1990). Noclause is to be rendered superfluous or void. Clay v. Kuhl, 297Ill. App. 3d 15, 20, 696 N.E.2d 1245 (1998). Where statutorylanguage is ambiguous, we may consider other extrinsic aids,including legislative history. Kunkel v. Walton, 179 Ill. 2d 519,534, 689 N.E.2d 1047 (1997). Construction of statutory language isa question of law, which we review de novo. Paris v. Feder, 179Ill. 2d 173, 177-78, 688 N.E.2d 137 (1997).

We conclude that the language of section 155 of the Code isunambiguous and clearly places a limit of $25,000 on the amount ofpenalties that can be awarded. While we agree with Nelles that thetrial court is free to choose, if necessary, which formula(paragraph (a) or (c)) it desires to use in setting a penaltyamount, we believe that pursuant to the statute's express language,"an amount not to exceed any one of the following amounts"preceding the three options, limits a trial court's award to amaximum of $25,000, as provided in paragraph (b). Paragraph (b)falls under the qualifying phrase, "any one of the following." Ifthe trial court awarded more than $25,000, the award would exceed"any one of the following," specifically, it would exceed theamount provided in paragraph (b). Moreover, as State Farm argues,if paragraph (b) was not intended to be a maximum, the legislaturewould have had no reason to include a fixed figure in the statute. We believe that to read the statutory language in the mannerurged by Nelles would render paragraph (b) superfluous or void. Inother words, if penalties were allowed in an amount in excess of$25,000, paragraph (b) would serve no purpose and have no meaningbecause the amount awarded could and would "exceed any one of thefollowing," i.e., paragraph (b). Such an interpretation iscontrary to the principles of statutory construction. Likewise, ifparagraph (b) was not intended to be a maximum, there would be novalid reason for the legislature to increase the amount set forthin that paragraph from time to time to meet changing economicneeds, as it has done by increasing the amount from $5,000 to$25,000. We believe that paragraphs (a) and (c) still serve aviable purpose and are not rendered superfluous by our decision. Trial courts may employ, based on the specific facts of the casebefore them, either of the formulas to fix the amount of a penaltywhere, for example, the court has determined that a penalty of$25,000 is excessive. Thus, our interpretation does not render anyof the three options void.

Our conclusion is supported by the supreme court's remarks inCramer v. Insurance Exchange Agency, 174 Ill. 2d 513, 675 N.E.2d897 (1996). In Cramer, the question before the court was notwhether section 155 placed a $25,000 limit on the award ofpenalties but, rather, whether section 155 preempted a common lawfraud cause of action against an insurance company for itsunreasonable conduct in denying insurance claims. Cramer, 174 Ill.2d at 515. In analyzing the issue, the Cramer court considered thepurpose and history of section 155. The Cramer court noted thatthe purpose of section 155 was to "provide a remedy for insurermisconduct." Cramer, 174 Ill. 2d at 519. Under the originalstatute, an award of attorney fees, up to a maximum of $500, wasthe only penalty allowed. The Cramer court then outlined theamendments since section 155 was enacted. In 1967, the cap onattorney fees was increased to $1,000. In 1977, the cap onattorney fees was removed altogether and the legislature then alsoprovided for an award of penalties against the insurer. At thistime, the "award was limited to a maximum of $5,000." Cramer, 174Ill. 2d at 521. Section 155 was last amended in 1986, at whichtime the legislature increased the penalty amount. According tothe Cramer court, "[t]he maximum allowable penalty under thestatute was raised to $25,000." Cramer, 174 Ill. 2d at 521. Thecourt noted later in its discussion of the preemption issue beforeit that the legislature specifically enacted section 155 to dealwith a lack of an extracontractual remedy on the part of theinsured for the insurer's bad faith and stated that "[t]he remedyprovided by section 155 allows an extracontractual award andspecifically defines the limits of this award." (Emphasis added.) Cramer, 174 Ill. 2d at 527. See also Cramer, 174 Ill. 2d at 534-35(Freeman, J., specially concurring) (stating three times thatsection 155 allows for limited penalties)).

While Nelles contends that the comments made by the Cramercourt are dicta, dicta can be binding, or, at the very least,persuasive authority. Pekins Insurance Co. v. Estate of Goben, 303Ill. App. 3d 639, 649, 707 N.E.2d 1259 (1999); Berg v. AlliedSecurity, Inc., 297 Ill. App. 3d 891, 896, 697 N.E.2d 769 (1998). The Cramer majority clearly stated that penalties were limited toa maximum of, first $5,000 and then later $25,000, and that section155 limits the award of penalties. While these statements may bedicta, they are influential as to how the supreme court wouldinterpret section 155. Moreover, while Nelles argues that no casesince Cramer has cited to Cramer as authority that section 155contains a limit, this argument is not well taken. First, theissue of whether section 155 contains a limit has presumably notarisen. Second, and more importantly, the fact that no cases haveaddressed the issue demonstrates that it is crystal clear thatthere is a limit of $25,000 on section 155 penalties and,therefore, there is no reason to raise the issue.

While we find that section 155 is clear and unambiguous, wenote that our holding is further supported by the legislativehistory which is absolutely clear that it was the legislature'sintent to place a maximum on section 155 penalties. When the billwas addressed in the House in 1977, the following comments weremade:

"REPRESENTATIVE BENNETT: Thank you, Mr.Speaker. This Bill came out of the InsuranceLaws Study Commission and simply changes thecivil penalty for vexatious or unreasonabledelay in the settlement of insurance claims toprovide *** for the payment of costs to thatperson, attorney fees and an amount not toexceed five thousand dollars." (Emphasisadded.) 80^th Ill. Gen. Assem., HouseProceedings, June 24, 1977, at 64-65.

When an amendment to the proposed bill was discussed in the Senatein 1977, the following comment was made:

"SENATOR RUPP: *** The amendment wouldprovide that the insured in these instanceswould be entitled to attorney's fees pluseither twenty-five percent of the amount thejury finds the insured entitled to [paragraph(a)] or fifteen thousand dollars [evidentlyparagraph (b)]⁽¹⁾." 80^th Ill. Gen. Assem.,Senate Proceedings, June 26, 1977, at 292.

Additionally, when the bill was being considered for amendment in1985, the following comment was made:

"SENATOR D'ARCO: Thank you, Mr.President. Committee Amendment No. 1 ***changes the limitation on vexatious andunreasonable delay from a...a five thousanddollar limit to an increase of twenty-fivethousand dollar limit." (Emphasis added.) 84^th Ill. Gen. Assem., Senate Proceedings, May14, 1985, at 7.

Senator D'Arco also commented:

"This bill raises the limit on punitivedamages for unreasonable and vexatious delayby an insurance company from five thousanddollars to twenty-five thousand dollars. Thiswas a compromise that we arrived at with theinsurance companies. I don't think it'senough but it's the best we could do rightnow." (Emphasis added.) 84^th Ill. Gen.Assem., Senate Proceedings, June 24, 1985, at224.

In the House, the following comments were made with respect to aproposed amendment to the bill:

"REPRESENTATIVE LAURINO: Madam Speakerand Members of the House, basically whatAmendment #3 to *** Senate Bill 60 does is itremoves a cap on the recovery for punitivedamages incurred with an insurance company."

*** What it's doing, is taking the capoff, because the cap is relatively small whenyou consider the...the problems that peoplehave in collecting the... What is due them,when a company wants to go belly up and notpay their debts. So, my ideas is [sic] youknow on a 5,000 or a 25,000 dollar cap, it's aslap on the wrist and doesn't mean nothing." (Emphasis added.) 84^th Ill. Gen. Assem., HouseProceedings, June 19, 1985, at 92-93.⁽²⁾

These remarks indicate that $5,000 and then $25,000 was a maximumpenalty. Nelles' argument that these remarks were meant only tolimit paragraph (b), and not the entire section, is without merit. The last comments of Senator D'Arco negates Nelles' argument. Ifthere was no limit on the entire section, D'Arco would have noconcern that $25,000 was an insufficient figure because a greateramount could be awarded under paragraph (a) or (c). Moreover, wenote that there was an amendment in the House, which was rejected,to remove the limit altogether. Thus, we find that it was thelegislature's intent to place a limit on the penalties availableunder section 155.

We briefly note that Millers Mutual Insurance Ass'n v. House,286 Ill. App. 3d 378, 675 N.E.2d 1037 (1997), which Nelles relieson in support of his argument that $25,000 is not a limit and thata trial court may choose to use either paragraph (a), (b) or (c) inreaching its decision, is distinguishable from the present case. House did not address the issue here of whether there was a limiton section 155 penalties. Rather, the House court addressed theissue of whether a trial court was required to choose the formulawhich rendered the least possible award. Unlike the Cramer court,the House court did not discuss, nor even mention, the words, cap,limit, or maximum. Rather, the court simply concluded that thetrial court's award of $25,000 was not erroneous.

For the reasons stated, our answer to the certified questionis that section 155 provides for a maximum award of $25,000 inpenalties.

Certified question answered; cause remanded.

HALL, P.J., and WOLFSON, J., concur.

1. Presumably there was an amendment to limit the amount to$15,000 rather than $5,000, which amendment apparently wasrejected.

2. This amendment to remove the limit altogether was rejected. 84^th Ill. Gen. Assem., House Proceedings, June 19, 1985, at 93.