Opinion ID: 1434546
Heading Depth: 2
Heading Rank: 3

Heading: Statutory Fees and Costs under Section 5/155

Text: MedPro's final issue on appeal is a challenge to the district court's imposition of statutory penalties in the form of attorney's fees and costs. We review the district court's award for abuse of discretion. See Citizens First Nat'l Bank of Princeton v. Cincinnati Ins. Co., 200 F.3d 1102, 1109 (7th Cir.2000). The Illinois insurance code allows courts to award costs and attorney's fees to an insured when an insurer's action is deemed vexatious and unreasonable. 215 ILL. COMP. STAT. ANN. 5/155 (West 1997). Whether an insurer acted unreasonably or vexatiously presents an issue of fact, see Boyd v. United Farm Mut. Reins. Co., 231 Ill.App.3d 992, 173 Ill.Dec. 465, 596 N.E.2d 1344, 1349 (Ill.App.Ct.1992); Bernstein v. Genesis Ins. Co., 90 F.Supp.2d 932, 940 (N.D.Ill.2000), requiring courts to consider the totality of circumstances, see Smith v. Equitable Life Assurance Soc'y of U.S., 67 F.3d 611, 618 (7th Cir.1995); Knoll Pharm. Co. v. Auto. Ins. Co. of Hartford, 210 F.Supp.2d 1017, 1028 (N.D.Ill.2002); Fassola v. Montgomery Ward Ins. Co., 104 Ill.App.3d 825, 60 Ill.Dec. 581, 433 N.E.2d 378, 383 (1982). If there is a bona fide dispute regarding coverage  meaning a dispute that is [r]eal, genuine, and not feigned, see McGee v. State Farm Fire & Cas. Co., 315 Ill.App.3d 673, 248 Ill.Dec. 436, 734 N.E.2d 144, 153 (2000) (citing BLACK'S LAW DICTIONARY 177 (6th ed.1990))  statutory sanctions are inappropriate, see State Farm Mut. Auto. Ins. Co. v. Smith, 197 Ill.2d 369, 259 Ill.Dec. 18, 757 N.E.2d 881, 887 (2001). The district court's ruling on the issue of statutory penalties is conclusory; the court did not address whether MedPro's arguments against coverage raised a bona fide dispute  i.e., one that is real, genuine, and not feigned  notwithstanding that the arguments failed. Although MedPro has not convinced us to reverse the judgment on the merits, we cannot agree that MedPro's conduct was vexatious or unreasonable. Its arguments were presented with reasoned support, Citizens First Nat'l Bank, 200 F.3d at 1110, and the coverage question was a difficult one; although MedPro was unsuccessful, this was a bona fide dispute regarding coverage, and that is all Illinois law requires to avoid the imposition of section 5/155 penalties. The district court abused its discretion by awarding statutory penalties, and that aspect of the judgment must be vacated. The district court also awarded the Guaranty Fund's attorney's fees and costs in the underlying Jennings litigation, which is not challenged on appeal as it was the product of the parties' pretrial agreement. But the district court went further and granted the Fund's motion for its attorney's fees incurred in defending the declaratory judgment action. Neither the Fund nor the district court expressly identified the authority for this award, although it appears to be based on the court's finding that MedPro's conduct was vexatious and unreasonable. It is unclear whether the Fund, as a noninsured, is entitled to make a claim under section 5/155. But because section 5/155 penalties were unwarranted here, the order granting the Fund's motion for attorney's fees in the present action must also be vacated. For the foregoing reasons, the judgment of the district court is AFFIRMED, with the exception of the award of damages, costs, and attorney's fees under section 5/155; we VACATE that aspect of the judgment and remand for entry of an amended judgment consistent with this opinion.