While American Family Insurance may have intentionally chosen to pay less than the full cost of repairing vehicles damaged in collisions with its insured drivers – even when the driver insured by American Family was entirely to blame for a crash – that does not mean the insurer has committed fraud, or that motorists stuck with the remainder of the repair bill should be allowed to sue the insurer under Illinois law, a Chicago federal judge has ruled.

On May 17, U.S. District Judge Elaine E. Bucklo sided with American Family, dismissing a putative class action lawsuit brought by plaintiff Daniel Krug, who claimed the insurer commits fraud by refusing to pay the full cost of auto repairs.

Krug said American Family Insurance offered to pay only 70 percent of the cost to repair his vehicle, even though the insured client admitted to completely causing the parking lot collision. A police report corroborated that admission, Krug said.

Krug, through a lawyer, asked American Family to pay the full reimbursement. After American Family rebuffed that collection attempt, Krug filed a four-claim complaint in federal court. He asserted American Family’s “systematic practice of arbitrarily assigning fault to third-party claimants, regardless of actual fault” violates the Illinois Insurance Act’s prohibition against vexatious and unreasonable conduct. The complaint also included two counts of fraudulent misrepresentation or omission, and allegations the insurer violated the Illinois Consumer Fraud and Deceptive Business Practices Act.

American Family moved to dismiss all four counts. In explaining her reasoning for granting that motion, Bucklo noted the company raised “a battery of arguments … several of which have merit.”

For starters, as a third-party claimant, Krug “has no cognizable claim” for Illinois Insurance Code violations. She cited the 1990 Illinois Supreme Court decision in Yassin v. Certified Grocers of Illinois, which “expressly held that ‘the remedy embodied in section 155 of the Insurance Code does not extend to third parties.’ ”

Bucklo further noted Krug’s attempt to use the 1994 Illinois Appellate Court decision in Garcia v. Lovellette as authorizing his claim to an exception of the Yassin rule fails specifically because that case affirmed the law against “vexatious delay” was “intended for the protection of the insured party,” not for the third party involved in the collision.

She also identified “a fundamental mismatch between (Krug’s) description of the allegedly unlawful scheme and a fraud-based theory of liability. … The essence of fraud is deception, and plaintiff does not claim to have been deceived by defendant’s conduct. To the contrary, the complaint underscores that plaintiff knew at all times that defendant’s insured was wholly at fault for the accident giving rise to his claim.”

While it is true the Illinois consumer fraud law protects against “unfair” conduct, Bucklo said Krug’s complaint fails to raise “a plausible inference that defendant’s conduct offends Illinois’ public policy” or “is ‘so oppressive as to leave the consumer with little alternative except to submit to it.’ ”

Bucklo specifically noted Krug remained free to sue the other driver involved in the collision to attempt to collect the full amount of what he believed he should be owed to repair the damage to his vehicle from the collision.

Bucklo concluded by noting Krug “does not identify any allegations specifically supporting his unjust enrichment claim (but unrelated to his remaining claims).”

Krug was represented in the action by attorneys with the firms of Carey, Danis and Lowe, of St. Louis, and Tira & Tira, of Coal City.

American Family Insurance was defended by the firm of Faegre Baker Daniels, of Chicago.

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