Limits to Bad Faith Discovery in Illinois?

May 17, 2016 | Blog |

Zagorski v. Allstate Insurance Company, 2016 IL App (5th) 140056 (May 16, 2016) St. Clair Co. (CATES) Affirmed in part, reversed in part, and vacated in part; remanded with directions.  (WELCH and GOLDENHERSH, concurring.)

Plaintiffs filed suit against their insurer, Allstate Insurance Company, alleging vexatious breach of contract and common law fraud, under Section 155 of Insurance Code, in handling of their homeowners’ insurance claim.  Defendant insurer argued that the trial court abused its discretion in permitting the Plaintiffs to discover the number of times in the last five years that Allstate (a) was cited by the Illinois Department of Insurance for vexatious delay or improper claims practices, or (b) was ordered by an Illinois court to pay statutory penalties for vexatious conduct.  Allstate argued that the information is not relevant to any matter at issue in the plaintiffs’ case.  Allstate also contended that the trial court abused its discretion in permitting Plaintiffs to discover information regarding Allstate’s attorney’s involvement in the fire loss investigation.  Allstate argues that the information is irrelevant to any matter at issue and is protected by attorney-client privilege.

The Court summarizes:

Illinois Supreme Court Rule 201(b)(1) addresses the scope of pretrial discovery, and provides that unless otherwise stated in these rules, a party may obtain by discovery full disclosure regarding any matter relevant to the subject matter of the pending action, whether it relates to a claim or defense. Ill. S. Ct. R. 201(b)(1) (eff. July 1, 2014). Rule 201(b)(1) is founded on the basic premise that the object of discovery is the expeditious and final determination of controversies in accordance with the substantive rights of the parties. Owen v. Mann, 105 Ill. 2d 525, 530, 475 N.E.2d 886, 890 (1985); Monier v. Chamberlain, 35 Ill. 2d 351, 357, 221 N.E.2d 410, 415 (1966). Great latitude is allowed in the scope of discovery, and the concept of relevance for purposes of discovery is broader than the concept of relevance for purposes of admissibility at trial. TTX Co. v. Whitley, 295 Ill. App. 3d 548, 556, 692 N.E.2d 790, 796 (1998). Evidence is relevant for trial purposes if it has any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. See Ill. R. Evid. 401 (eff. Jan. 1, 2011). In contrast, relevance for discovery purposes includes not only that which is admissible at trial, but also that which leads to admissible evidence. Whitley, 295 Ill. App. 3d at 557, 692 N.E.2d at 797. With these principles in mind, we first consider whether the requested discovery is germane to any theory of the case or any defense.

When determining whether an insurer’s conduct is vexatious and unreasonable under totality of circumstances, a court may properly consider actions identified as improper claims practices under Section 154.6 of Insurance Code as relevant to, but not dispositive of, a Section 155 claim.

The Court overruled certain of insurer’s objections to interrogatories, and sustains others.  The Court further ordered Allstate to answer four of the interrogatories in their entirety, including all subparts, within 30 days and to further order that no extensions will be granted.

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