N.E.2d 839, 842 (Ill. App. Ct. 1981).

Northwestern argues that Leona’s has alleged no more than a

straightforward. breach of contract claim, which is not cognizable
under the Act and which is preempted by the Illinois Insurance
Code, 215 ILCS 5/155. Section 155 of the Insurance Code “provides
an extracontractual remedy to policyholders whose insurer’s refusal
to recognize liability and pay a claim is vexatious and

unreasonable.”..Cramer v. Insurance Exch. Agency, 675 N.E.2d 897,

900 (Ill. 1996). The Illinois Supreme Court has recognized that:

an insurer’s conduct may give rise to both a breach of
contract_action and a separate and independent tort action.
Mere allegations of bad faith or unreasonable and vexatious
conduct, without more, however, do not constitute such a tort.
Courts..therefore should look beyond the legal theory asserted
to the conduct forming the basis for the claim. In cases where
a plaintiff actually alleges and proves the elements of a
separate tort, a plaintiff may bring an independent tort
action, such as common law fraud, for insurer misconduct.

Id. at 904 (citations omitted). The conduct forming the basis of
Leona’s claim, as set forth in the complaint, includes: failure to
advise Leona’s..of Northwestern’s financial problems; bad faith
failure to pay a claim; delay of the claim by a sham investigation;
failure to engage in meaningful settlement negotiations or to
respond to legitimate inquiries about the claim; and libel and
slander of Leona’s. Compl. 9 S56,

With the. exception of the failure to disclose the financial
problems, none...of Leona’s claims amount to more than a claim for

bad faith denial of a claim under the policy. A claim that an


fat

claim, Northwestern’ s financial rating was downgraded to a “C-,”
and that it_was. because of the downgrade in its own rating that it
denied Leona’s claim.

For the ptitboses of this motion, I take the allegations in the
complaint as true, draw all reasonable inferences in favor of
Leona’s, and. dismiss only where it is clear that Leona’s could
prove no set of facts consistent with its complaint that would
entitle it to relief under the Act. First Ins. Funding Corp. v.
Federal Ins. Co., 284 F.3d 799, 804 (7th Cir. 2002).

II.

The Act provides a cause of action for “{a]ny person who
suffers actual ,damages as a result of a violation of this Act
committed by any other person.” 815 ILCS 505/l0a(a). The Act is
violated when a defendant uses or employs “any deception, fraud,
false pretense, false promise, misrepresentation or the
concealment, suppression or omission of any material fact” in the
conduct of trade. or commerce with the intent that others rely on
the fraud, though no person need actually have relied on the fraud.
§ 2. “Consumer” means any person or corporation “who purchases or
contracts for the purchase of merchandise not for resale in the
ordinary course of his business.” § l(c), (e). “Merchandise”
includes services, § l(e), and “[t]he sale of insurance is clearly
a service and insureds are thus consumers and within the protection

of the Consumer,.Fraud Act.” Fox v. Industrial Cas. Ins. Co., 424


insurer is “lying after the fact to avoid paying [a] claim” amounts
to no more..than claim for denial of benefits and breach of
contract, and is preempted by § 155. Cramer, 675 N.E.2d at 905. See
also Combs v...Insurance Co. of Ill., 497 N.E.2d 503, 508 (Ill. App.
Ct. 1986) (cited with approval in Cramer, 675 N.E.2d at 904)
(holding that. claim of bad faith denial of benefits, framed as
claim for intentional infliction of emotional distress, was
preempted by 5. 155). Even if those claims were not preempted,
however, they would fail to state a claim for consumer fraud
because they amount to no more than a breach of contract. See
Nillson v. NBD Bank of Ill., 731 N.E.2d 774, 784-85 (Ill. App. Ct.
1999) (holding that simple breach of contract claim is not
cognizable under the Act).

Nonetheless, § 155 leaves the door open for claims that truly
sound in tort, particularly fraud. See Cramer, 675 N.E.2d at 902.
Leona’s claims. that it was induced to enter the contract by
Northwestern’s fraudulent suppression of information about its poor
financial condition. At least one court in this district has
recognized that élaims for fraud in the inducement of an insurance
policy are not preempted by § 155 and may be cognizable under the
act. See Coininonwealth Ins. Co. v. Stone Containter Corp., No. 99 C
8471, 2001. WL..477151, at *3 (N.D. Ill. May 3, 2001). However, “any
count alleging nothing more than the conduct proscribed by section

155 is preempted by the statute.” Mazur v. Hunt, 592 N.E.2d 335,


Minuteedrder Form (08/6)

United States District Court, Northern District of IHinois

Name of Assigned Jud; i Sitting Judge if Oth
‘Mow Magistrate Judge Elaine E. Bucklo than Assigned Judge
CASE NUMBER 01 C 9652 DATE 5/17/2002
CASE Leona’s Pizzeria, Inc. vs. Northwestern National Casualty
TITLE

[In the following box (a) indicate the party filing the motion, c.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented, |

MOTION:

DOCKET ENTRY:

qd) Oo Filed motion of [ use listing in “Motion” box above.]

(2) 0 Brief in support of motion due

(3) Oo Answer brief to motion due__.. Reply to answer brief due

(4) Oo Ruling/Hearingon set for at.

(5) = Status hearing set for 6/7/02 at 10:00 A.M..

(6) Oo Pretrial conference[held/continued to] [set for/re-set for]on____—ssetfor at

(7) o Trial[set for/re-set for}on at

(8) im [Bench/Jury trial] [Hearing] hetd/continued to at_—

(9) Q This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
CUFRCP4(m) OC General Rule21 CFRCP41(a)(1) OO FRCP41(a)(2).

(0) =x [Other docket entry] | Enter Memorandum Opinion and Order granting defendant’s motion to

dismiss count II of the complaint (4-1). Ruling on that motion set for 5/10/02 was vacated. At the status
hearing the court will set discovery and trial schedules in this case. Prior to the status hearing, the parties
shall confer and provide the court with a written proposed discovery schedule. Any motion for summary
judgment must be filed within 14 days after the date set in the scheduling order for close of discovery.
Any extension of discovery will not extend the time for filing motions for summary judgment.

gl) ff {For further detail see order attached to the original minute order.]

Document
Number

No notices required, advised in open court.

No notices required. number of notices

MAY 23 200.

Notified counsel by telephone. date docketed

V | Notices mailed by judge’s staff.

Docketing to mail notices. S

Mail AO 450 form.

dockoting deputy initials

Copy to judge/magistrate judge.
sii7ne02

late mailed notice

courteoom : : .
MPI deputy’s _ py
initials

Date/time received in -
central Clerk’s Office ” ‘mailing deputy initials



340 (Ill. App. ét. 1992) (cited with approval in Cramer, 675 N.E.2d
at 905) . Although Leona’ s does allege that it acted in reliance on
the alleged fraudulent omission (I need not decide here whether
there was in_ fact any duty to reveal this information), it claims
no additional damages from the fraud itself, beyond what it is
already entitled to for a bad faith denial under the Insurance
Code. See Mazur, 592 N.E.2d at 339. The ad damnum clause seeks
compensatory and punitive damages in the amount of the loss or the
amount dué on the policy; the alleged fraud has added nothing, and
artful pleading will not save the claim. See id.
Iii.

I Grant the motion to dismiss Count II.

ENTER ORDER:

Elaine E. Bucklo
United States District Judge

Dated: May I] , 2002


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

LEONA’S PIZZERIA, INC., an

Illinois corporation, iu
MAY o |

)
)

: oo. ) eb 2A9

Plaintiff, ) C007
)
v. )

) No. O01 C 9652
NORTHWESTERN NATIONAL CASUALTY )
COMPANY, a Wisconsin insurance )
corporation,
Defendants. )
MEMORANDUM OPINION AND ORDER
Leona’s Pizzeria, Inc. (“Leona’s”), an Illinois corporation,
sues Northwestern National Casualty Co. (“Northwestern”), a

Wisconsin insurance corporation, for breach of an insurance policy
and for violations of the Illinois Consumer Fraud and Deceptive
Business Practices Act, 815 ILCS 505/1 et seg. (the “Act”).!
Northwestern answered the complaint with regard to the breach of
contract claim, but moves to dismiss the claim under the Act. I
grant the motion.
I.

Leona’s operates thirteen restaurants in the Chicago,
Illinois, metropolitan area, and operates a commissary at 3931
South Leavitt in Chicago, where it stores and prepares food for its

restaurants. The commissary also houses and operates a laundry for

1 IT have jurisdiction over this action under 28 U.S.C. § 1332.


restaurant...linens. Leona’s had a fire insurance policy with
Northwestern, that covered the commissary. On October 18, 2000, a
fire broke out,.in the laundry of the commissary, damaging the
building to the extent that business could no longer be conducted
there and destroying significant amounts of food inventory. Leona’s
moved the. food. storage and preparation operations previously
performed at the commissary to other restaurant locations and
purchases substitute food from outside vendors.

The commissary was shut down for seventeen weeks for repairs,
and Leona’s. incurred $982,944.32 in food costs to outside vendors
and business interruption losses, in addition to repair costs of
$1,343,525.24. ‘Leona’ s insurance coverage with Northwestern was
sufficient.to.cower its losses. Leona’s made a claim on its policy,
and Northwestern made an advance payment of $1,113,370.69 toward
the losses. After an investigation, however, Northwestern accused
Leona’s of falsely and fraudulently inflating its claim, declared
the policy void from the outset, and denied the claim in full,
demanding a return of $966,631.69. Leona’s claims that the
investigation was a sham, that there is no evidence to support the
allegation that it falsified its claim, and that Northwestern acted
in bad faith..In addition, Leona’s claims that Northwestern and its
parent company were undergoing financial difficulties, of which it
did not inform Leona’ s prior to the purchase of the policy. Leona’s

also alleges that, two weeks before denying Leona’s insurance