Madison - St. Clair Record

Wednesday, November 13, 2019

Appeals court backs American Family Insurance in dispute over delay in settling fire claim

State Court

By John Breslin | Oct 15, 2019

Madisoninsurance

MOUNT VERNON - An insurance company did not unreasonably delay a payout following a house fire because there was a real and true dispute over the amount, an appeals court has ruled.

Homeowner Jeffrey Patzius sued American Family Insurance in St. Clair County Circuit Court, where Associate Judge Julie Katz denied his request to sanction the company for "unreasonable and vexatious delay in settling the claim."

The Illinois Fifth District Appellate Court, with Justice Thomas Welch writing the judgment and justices John Barberis and Mark Boie concurring, affirmed the Katz's decision. The court found that because there was a "bona fide dispute concerning the amount of the loss for which coverage was available … an award of sanctions … was inappropriate."

"The trial court did not abuse its discretion in finding that the plaintiff was not entitled to sanctions" under a section of the Illinois Insurance Code, Welch concluded.

The dispute centered on an insurance claim following a January 2016 fire that was caused by electrical fault at a home the plaintiff owned, and his son rented, in Benld. The fire damage was limited to the bathroom, but Patzius alleged the entire residence was no longer inhabitable and that his son and family were forced to move.

Following an investigation, it emerged that the entire property needed to be rewired to comply with the city code. Arguments began over for what and how much American Family should pay.

The insurer cited provisions of its contract that a homeowner must pay for costs of compliance if it was required before the loss. American Family estimated the rewiring of the bathroom at $400 and fire damage at more than $3,800, and cut a check for the total.

The plaintiff, unhappy with the amount and frustrated at the length of time it was taking to resolve the matter, went to court to ask for the appointment of an appraisal umpire, who issued his finding in December 2017. It favored Patzius, estimating his total loss at $55,564, including the amount already paid by the insurance company.

This was disputed by American Family, but the appraisal umpire, retired St. Clair County circuit judge Lloyd Cueto, once again issued an award of the same amount.

In June 2018, Patzius filed a petition for sanctions against the insurance company, citing the defendant’s “low” initial offer, its "prolonged refusal to agree to the selection of an umpire, refusal to name its own appraiser ... and its delayed payment following the issuance of the appraisal award."

Both the trial court and the appeals court found that the sanctions were not appropriate in this case because the insurance company was able to craft a reasonable argument.

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