Statutory Interpretation – Illinois Insurance Code – Extracontractual Damages

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7^th Circuit Court of Appeals

Case Name: Creation Supply, Inc., v. Selective Insurance Company of the Southeast

Case No.: 20-2509

Officials: RIPPLE, KANNE, and ROVNER, Circuit Judges.

Focus: Statutory Interpretation – Illinois Insurance Code – Extracontractual Damages

This appeal is part of an ongoing, decade-long, three-lawsuit fight between an insurer, Selective Insurance Company of the Southeast, and its insured, Creation Supply, Inc. (“CSI”), over who owed what when.

The issue here, though, is a narrow question of statutory interpretation—whether the district court properly awarded extracontractual damages to CSI under Section 155 of the Illinois Insurance Code. Section 155 permits an insured to seek extracontractual damages from an insurer in any case in which at least one of three issues remains undecided: (1) the insurer’s liability under the policy, (2) the amount of the loss payable under the policy, or (3) whether there was an unreasonable delay in settling a claim.

None of these three threshold issues remains undecided here: (1) Selective’s liability under its policy with CSI was resolved by the Illinois Appellate Court in 2015; (2) the amount of loss payable by Selective to CSI under the policy was determined by the Illinois Appellate Court in 2017; and (3) CSI does not seek recovery for any unreasonable delay by Selective in settling CSI’s claim. In summary, none of CSI’s extracontractual issues remains undecided. As a result, CSI cannot pursue Section 155 damages in this action.

This result is admittedly atypical. Section 155 claims usually proceed right alongside breach-of-contract claims, such as the other claim brought by CSI in this suit. But the lengthy history of this case breaks the mold. For the foregoing reasons, we REVERSE the decision of the district court and REMAND the case for the district court to dismiss CSI’s Section 155 claim and to carry out further proceedings consistent with this opinion to resolve the remaining issue of breach-of-contract damages. Further, because this appeal has merit, CSI’s motion for sanctions under Federal Rule is Appellate Procedure 38 is DENIED.

Reversed and remanded in part. Denied in part.

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Derek A Hawkins is Associate Corporate Counsel, IP at Amazon.