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Docket No. 90226-Agenda 28-March 2001.

ELLA HADDICK, Special Adm'r of the Estate of James Griffith, 
Appellee, v. VALOR INSURANCE, Appellant.

Opinion filed November 21, 2001.

JUSTICE GARMAN delivered the opinion of the court:

The issue in this case is at what point in time does aninsurance provider's duty to settle arise. Plaintiff, Ella Haddick, asthe special administrator of the estate of James Griffith, filed asingle-count complaint against defendant, Valor Insurance,alleging that defendant acted in bad faith by failing to settle aclaim against its policyholder within the policy limits. The trialcourt granted defendant's section 2-615 motion to dismiss thecomplaint and the appellate court reversed. We consider all well-pleaded facts contained in the allegations of the complaint and theexhibits attached thereto.

BACKGROUND

On May 6, 1996, James Griffith and Larry Woodley, Jr., wereinvolved in a single-car accident, which resulted in Griffith'sdeath. According to the police report, Woodley owned the vehicleand was driving the vehicle at the time of the accident. Shortlyafter the accident, the men were transported to separate hospitals.The reporting officer attempted to speak with Woodley at thehospital, but he was unresponsive. At the request of the officer, anemergency room doctor woke Woodley to ask who was driving thevehicle. Woodley responded that he was driving. After detectingan odor of alcohol, the officer issued Woodley a ticket for drivingunder the influence. On May 13, 1996, Woodley informed thesame officer that he did not remember the accident and did notknow who had been driving the vehicle.

Woodley had liability coverage through defendant of $20,000per person. On August 13, 1996, the attorney for the decedent'sestate wrote defendant, informing the insurer that the decedent hadincurred medical bills totaling $82,544.80 as a result of theaccident. After the attorney made a demand for settlement,defendant responded by letter dated August 22, 1996, that it woulddiscuss settlement after it received a copy of the police report. OnNovember 1, 1996, defendant wrote to the attorney acknowledgingreceipt of the police report and indicating that an investigation wasstill pending to ascertain the actual driver of the vehicle.According to defendant, Woodley was still unable to recall theaccident; therefore, upon completion of the police investigation,defendant would determine its position and a possible resolutionof the claim.

On March 7, 1997, plaintiff, decedent's mother, was namedas the special administrator of his estate. By letter of the samedate, she presented to defendant her claim against Woodley forwrongful death. Plaintiff demanded that defendant settle the claimfor the policy limits within 14 days of receipt of the letter,otherwise she would "no longer settle [the] claim within the policylimits." Defendant responded that the settlement demand waspremature and that it was still investigating to determine who wasdriving the vehicle. Plaintiff subsequently extended the settlementdeadline to April 7, 1997. When defendant did not offer to settleby the requested date, plaintiff informed defendant by letter datedApril 9, 1997, that she had filed a wrongful death suit and had "nointention of settling the case at this time."

Approximately one year later, defendant offered to settle thecase for the policy limits. Plaintiff refused this offer. The trialcourt entered summary judgment in plaintiff's favor on the issueof liability and, after trial, entered a judgment in the amount of$150,924.80.

Following the judgment, Woodley assigned all claims againsthis insurer to plaintiff, who then filed the present action. Plaintiffalleged that defendant acted in bad faith by failing to settle herclaim against Woodley within the policy limits. Pursuant tosection 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615(West 1998)), the trial court dismissed the complaint, finding thatdefendant had no duty under Illinois law to settle the claim priorto suit being filed and that plaintiff could not maintain a bad-faithclaim once she withdrew her policy demand.

On review, the appellate court reversed. Citing Cernocky v.Indemnity Insurance Co. of North America, 69 Ill. App. 2d 196,207-08 (1966), the court concluded that the duty to settle is createdby the "conception of the insurance contract" (315 Ill. App. 3d752, 756) because the policyholder relinquishes his right tonegotiate settlement on his own behalf when he enters into thecontract. "Thus, the same threat exists to the policyholder that theinsurer will wrongly refuse to settle within the policy limits and ajudgment will be entered against him in excess of the policywhether the third party attempted to negotiate a settlement prior toor after filing suit." 315 Ill. App. 3d at 757. Further, noting thatmany insurance contracts specifically provide for a duty to settleboth before and after a suit is filed, the court opined that if itaffirmed the trial court's blanket holding, "such a ruling couldretroactively limit the duties of an insurer to a policyholder, whichwere bargained for in the insurance contract." 315 Ill. App. 3d at757. Finally, the court held that plaintiff could maintain her causeof action for bad faith even though she revoked her offer to settlewithin the policy limits. 315 Ill. App. 3d at 759.

We granted defendant's petition for leave to appeal (177 Ill.2d R. 315(a)) and allowed the Illinois Trial Lawyers Associationto file an amicus curiae brief in support of plaintiff (155 Ill. 2d R.345).

ANALYSIS

A section 2-615 motion to dismiss challenges the legalsufficiency of a complaint. Upon review, all well-pleaded facts inthe complaint are taken as true. Facts apparent from the face of thepleadings, including the exhibits attached thereto, may beconsidered. Weatherman v. Gary-Wheaton Bank of Fox Valley,N.A., 186 Ill. 2d 472, 491-92 (1999). The reviewing courtdetermines whether the allegations of the complaint, wheninterpreted in the light most favorable to the plaintiff, aresufficient to establish a cause of action upon which relief can begranted. A cause of action will not be dismissed unless it is clearthat the plaintiff cannot prove any set of facts entitling her torelief. Board of Directors of Bloomfield Club Recreation Ass'n v.Hoffman Group, Inc., 186 Ill. 2d 419, 424 (1999). We review adismissal pursuant to section 2-615 de novo. Neade v. Portes, 193Ill. 2d 433, 439 (2000).

This court has recognized that an insurance provider has aduty to act in good faith in responding to settlement offers.Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513, 526(1996), citing Krutsinger v. Illinois Casualty Co., 10 Ill. 2d 518,527 (1957). If the insurer breaches this duty, it may be liable forthe entire judgment against its insured, including any amount inexcess of policy limits. Cramer, 174 Ill. 2d at 526; Mid-AmericaBank & Trust Co. v. Commercial Union Insurance Co., 224 Ill.App. 3d 1083, 1087 (1992); 14 Couch on Insurance