FOURTH DIVISION
JUNE 28, 2001

1-00-0652)
1-00-0654)
1-00-0656) Cons.

Defendants Hill Mechanical Group, Hill Mechanical Operations,Inc., L.C. Kohlman, Inc., Hill/Wendt Corporation, Kohlman-Hill,Inc., Federal Ventilating Company, and Kohlman EngineersCorporation (collectively Hill) appeal from the dismissal of their1999 complaint and count I of their 1999 counterclaim filed againstplaintiff Casualty Insurance Company (Casualty). Hill also appealsthe circuit court's denial of its motion to reconsider the earlierdenial of leave to file counts II and III of the 1999 counterclaim.

Casualty issued worker's compensation insurance policies to Hill for each policy year from April 1, 1988, through April 1,1993. Each policy contained an identical "high-low endorsement"that allowed Casualty to adjust retrospectively the premiums oneach policy to cover costs, expenses, and liabilities incurredduring each policy period. On January 10, 1996, Casualty filed abreach of contract action against Hill to collect an unpaid finaladjusted premium of $446,635, under the 1992-93 worker'scompensation policy (the 1996 complaint).

Hill made repeated attempts to obtain discovery from Casualty,including claim files for policy years prior to 1992-93. Casualtyobjected on the grounds that the pre-1992-93 claim files were notrelevant to the 1996 complaint which involved only the 1992-93policy. On January 12, 1998, Hill's motion to compel production ofthe pre-1992-93 claim files was denied, with the exception of pre-1992-93 claim files relating to Randy Brien.

On February 24, 1998, Hill unsuccessfully sought leave to filea one count counterclaim sounding in breach of contract (the 1998counterclaim), in which Hill alleged that Casualty mishandledclaims in four prior policy years, as well as in the 1992-93 policyyear, resulting in damages in excess of $1 million.

On August 17, 1998, the circuit court entered an orderrequiring Casualty to submit to Hill's attorney the pre-1992-93claim files "for attorney's eyes only." The order further requiredHill's attorney to file a document with the court stating why anyof the produced material was relevant. On October 23, 1998, thecourt considered the relevance of the pre-1992-93 claim files andfound that the request for their production remained denied.

On February 9, 1999, Hill sought leave to file anothercounterclaim (the 1999 counterclaim), which involved only the 1992-93 policy. Count I alleged that Casualty breached its contractualobligations to Hill by failing to investigate adequately worker'scompensation claims; failing to interview witnesses and takewitness statements; paying worker's compensation claims that shouldnot have been paid because there was no statutory or factual basisfor the claims; overpaying claims; failing to adequately verifywages; failing to monitor the medical management of claims in aproper or timely manner resulting in overpayment of both medical,temporary total, and permanent partial disability payments; failingto calculate the total temporary disability and partial permanentdisability benefits in accordance with the Worker's CompensationAct; failing to properly categorize unallocated costs and legalexpenses under the policy; failing to thoroughly or adequatelydefend proceedings or suits brought against Hill for benefitsclaimed under the policy; failing to supervise and coordinate theinvestigation, administration, management, defense, and settlementof claims; unreasonably settling worker's compensation claimswithout any adequate factual, medical, legal, or statutory basis;establishing unreasonably large loss reserves; improperlycalculating the final adjustment by using a reference date beyondone allowed under the terms of the high/low plan endorsement;wrongfully calculating and charging premiums pursuant to manuals,rates, rules, classifications, rating plans, system of adjustmentof premiums, and systems which had never been submitted to theState of Illinois for approval nor been approved by the State ofIllinois; wrongfully refusing to allow Hill access to evaluateinsurance claim files to determine the accuracy, reliability, andgood faith of the determinations made by Casualty; and wrongfullydenying Hill access to the claim files created under the policy andwrongfully failing to preserve them. Hill alleged that these actsresulted in payment and overpayment of claims that were notcompensable under the Worker's Compensation Act and higher premiumsand higher future premiums because of the distorted experiencemodification factors calculated from the excessive claims paid.

Counts II and III of the 1999 counterclaim sought refunds ofpremiums and alleged a violation of section 505/2 of the IllinoisConsumer Fraud and Deceptive Business Practices Act (the ConsumerFraud Act) (815 ILCS 505/2 (West 1998)), respectively, based uponCasualty's alleged failure to comply with Illinois Department ofInsurance (the Department) filing requirements.

On March 16, 1999, leave to file counts II and III of the 1999counterclaim was denied on the ground that Hill failed to exhaustall administrative remedies. The order also required Casualty toproduce all remaining claim files for the 1992-93 policy year.

On March 26, 1999, Hill filed an independent complaint againstCasualty (the 1999 complaint), which was identical to the 1999counterclaim, except that it involved the 1988-89, 1989-90, 1990-91, and 1991-92 policies. Casualty successfully moved toconsolidate the 1999 complaint with the 1996 complaint.⁽¹⁾ On July23, 1999, Hill was granted leave to file count I of the 1999counterclaim.

On August 16, 1999, Hill filed a motion to reconsider theMarch 16, 1999 order denying leave to file counts II and III of the1999 counterclaim. Casualty filed a motion to dismiss the 1999complaint under section 2-619 of the Code of Civil Procedure (theCode) (735 ILCS 5/2-619 (West 1998) (section 2-619)) and a separatesection 2-619 motion to strike or dismiss the 1999 counterclaim. On January 28, 2000, the 1999 complaint and the 1999 counterclaimwere dismissed pursuant to section 2-615 of the Code (735 ILCS 5/2-615 (West 1998) (section 2-615)), and Hill's motion to reconsiderthe March 16, 1999 order was denied.⁽²⁾ The January 28, 2000 orderincluded a Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a))finding. Hill filed three separate notices of appeal, which wereconsolidated on February 24, 2000.

Hill first contends that the circuit court erred in dismissingthe 1999 complaint and count I of the 1999 counterclaim undersection 2-615. Casualty responds that the court properly dismissedthe pleadings as factually deficient.

A complaint dismissed under section 2-615 requires thereviewing court to apply a de novo standard of review. Meng v.Maywood Proviso State Bank, 301 Ill. App. 3d 128, 702 N.E.2d 258(1998). The question presented by a section 2-615 motion todismiss is whether sufficient facts have been pled in the complaintwhich, if proved, would entitle plaintiff to relief. Boyd v.Travelers Insurance Co., 166 Ill. 2d 188, 652 N.E.2d 267 (1995). All well-pleaded facts in the complaint are taken as true and areconstrued in the light most favorable to the plaintiff. Lagen v.Balcor Co., 274 Ill. App. 3d 11, 653 N.E.2d 968 (1995). Acomplaint is susceptible to dismissal under section 2-615 forfailure to state a cause of action only when it clearly appearsthat no set of facts could be proved under the pleadings that wouldentitle plaintiff to relief. Board of Directors of Bloomfield ClubRecreation Ass'n v. The Hoffman Group, 186 Ill. 2d 419, 712 N.E.2d330 (1999).

According to Hill, it properly stated claims for breach ofcontract in counts I, IV, VII, and X of the 1999 complaint and incount I of the 1999 counterclaim. The allegations in each countare identical, except that each count refers to a different policyyear. To state a cause of action, the claim must be both legallyand factually sufficient, setting forth a legally recognized claimas its basis, as well as pleading facts which are cognizablelegally. Nuccio v. Chicago Commodities, Inc., 257 Ill. App. 3d437, 628 N.E.2d 1134 (1993).

The parties agree that Hill's claims were legally sufficient. In National Surety Corp. v. Fast Motor Service, Inc., 213 Ill. App.3d 500, 572 N.E.2d 1083 (1991) (National Surety), the appellatecourt recognized that a cause of action is stated in eithercontract or tort when an insured sues his insurer for a breach ofduty for settling claims in an unreasonable manner when the policyof insurance contains a retrospective premium feature. At issue iswhether Hill's claims were factually sufficient. In NationalSurety, defendant's counterclaim alleged that plaintiff breachedits contractual duty under the policy by failing to investigateclaims properly, failing to obtain wage statements, failing toobtain witness statements, overreserving claims, and overpayingclaims resulting in higher premiums and higher future premiums forthe defendant because of the distorted loss experience calculatedfrom the excessive claims paid. Similarly, in the present case,Hill specifically alleged that Casualty settled claims in anunreasonable manner by inter alia, settling matters at higher thanjustifiable amounts; settling cases with claimants who had noentitlement to receive anything; and improperly investigatingalleged claims.

Casualty responds that Hill's breach of contract claimscontained nothing more than conclusional allegations that failed toset forth sufficient facts. According to Casualty, Hill providedonly a laundry list of everything an insurance company couldpossibly do wrong with respect to insurance claims handling. Nothing in the 1999 complaint or the 1999 counterclaim, Casualtymaintains, demonstrated that the generalized allegations of claimsmishandling had any good faith factual basis in Casualty's actualpractices or were grounded in real occurrences. Yet, Casualtyfailed to move to make the pleadings more definite and certain (735ILCS 5/2-615(a) (West 1998)) or demand a bill of particulars (735ILCS 5/2-607(a) (West 1998)).

A pleader is not required to set out his evidence. Only theultimate facts to be proved need be alleged, not the evidentiaryfacts tending to prove such ultimate facts. People ex rel. Fahnerv. Carriage Way West, Inc., 88 Ill. 2d 300, 430 N.E.2d 1005 (1981);Board of Education v. Kankakee Federation of Teachers, 46 Ill. 2d439, 264 N.E.2d 18 (1970); Rodgers v. Whitley, 282 Ill. App. 3d741, 668 N.E.2d 1023 (1996); Roark v. Macoupin Creek DrainageDistrict, 316 Ill. App. 3d 835, 738 N.E.2d 574 (2000). Hill hasalleged the ultimate facts that Casualty breached the contract ina number of ways by failing to investigate claims, failing tointerview witnesses, paying claims not covered under applicablestatutes, and failing to verify workers' wages, among others.

The circuit court erred in dismissing counts I, IV, VII, andX of the 1999 complaint and count I of the 1999 counterclaim.

Hill contends that the circuit court erred in dismissing therefund claims brought under section 462b of the Illinois InsuranceCode (Insurance Code) (215 ILCS 5/462b (West 1998) (section 462b)),in counts II, V, VIII, and XI of the 1999 complaint for failure tostate a cause of action.⁽³⁾ There are no Illinois cases thatestablish what allegations are requisite to state a claim for arefund, however, the statute suggests that the elements include:(1) the existence of an insurance contract; (2) allegations ofincorrect application of classification, payroll, or other factorsof a ratings system to compute premiums and/or the application ofan incorrect classification, payroll, or other factors of anincorrect ratings system to compute premiums, and (3) such conductresulted in overpayment by the insured. In each of the refundcounts, Hill alleged that Casualty "failed to file or otherwiseadvise the Illinois Department of Insurance of the existence of itsclassification plans, special risks, payrolls, and any and allother factors related to the rating system relied upon to computepremiums *** in violation of its obligations under 215 ILCS5/457."⁽⁴⁾ Hill further alleged that as a result of the specificacts of claims mishandling alleged in count I of the complaintCasualty "further failed to calculate premiums by employing correctclassifications, payrolls, and other factors in violation of 215ILCS 5/462b." Because of Casualty's failure to comply withsections 457 and 462b, Hill was overcharged premiums. Theseallegations reasonably informed Casualty of the nature of the claimit was required to meet. 735 ILCS 5/2-612(b) (West 1998) (section2-612(b)).

The circuit court erred in dismissing counts II, V, VIII, andXI of the 1999 complaint.

Hill maintains that the circuit court erred in dismissingcounts III, VI, IX, and XII of the 1999 complaint which allegedviolations of section 505/2 of the Consumer Fraud Act (815 ILCS505/2 (West 1998) (section 505/2)). The elements of a cause ofaction under the Consumer Fraud Act include: (1) a deceptive actor practice, including concealment or omission of any materialfact; (2) defendant's intent that plaintiff relies on theconcealment; (3) the concealment occurred in the course of conductinvolving trade or commerce; and (4) the concealment proximatelycaused injury to plaintiff. Washington Courte Condominium Ass'n-Four v. Washington-Golf Corp., 267 Ill. App. 3d 790, 643 N.E.2d 199(1994); Pawlikowski v. Toyota Motor Credit Corp., 309 Ill. App. 3d550, 722 N.E.2d 767 (1999). The Consumer Fraud Act applies tounfair practices in adjusting insurance claims. Elder v. CoronetInsurance Co., 201 Ill. App. 3d 733, 558 N.E.2d 1312 (1990).

In the present case, Hill alleged that Casualty violatedsection 505/2 by failing to advise Hill of the following materialfacts: (1) Casualty's failure to comply with the filingrequirements of section 457 of the Insurance Code (215 ILCS 5/457(West 1998) (section 457)) and (2) Casualty's claims mishandling asset forth in Count I of the 1999 complaint. Hill further allegedthat the concealed, omitted, and suppressed information was thetype of information upon which an employer would be expected torely when deciding whether to purchase worker's compensationinsurance from a particular carrier. These allegations also metthe standards of section 2-612(b).

The circuit court erred in dismissing counts III, VI, IX, andXII of the 1999 complaint.⁽⁵⁾

Hill next contends that the circuit court erred in denying itsmotion to reconsider the denial of leave to file counts II and IIIof the 1999 counterclaim. Counts II and III rely on allegationsthat Casualty failed to comply with filing requirements and/or todisclose information under section 457. Due to the allegedviolations of section 457 and the claims mishandling contained inthe breach of contract counts, Hill sought a full refund of premiumpursuant to section 462b in count II and damages under the ConsumerFraud Act in count III. On March 16, 1999, the court entered anorder denying leave to file "all counts of the proposedcounterclaim to the extent they rely upon alleged violations of 215ILCS 5/457 as defendants have not exhausted their administrativeremedies."

The circuit court's decision to deny leave to amend pleadingsis a matter of discretion and will not be reversed absent an abuseof discretion. Loyola Academy v. S & S Roof Maintenance, Inc., 146Ill. 2d 263, 586 N.E.2d 1211 (1992). Hill argues that the courtabused its discretion because its denial was based on an error oflaw. People ex rel. Hartigan v. E & E Hauling, Inc., 153 Ill. 2d473, 607 N.E.2d 165 (1992); People v. Brockman, 143 Ill. 2d 351,574 N.E.2d 626 (1991); McCastle v. Mitchell B. Sheinkop, M.D.,ltd., 121 Ill. 2d 188, 520 N.E.2d 293 (1987); People ex rel.Chesapeake & O. R. Co. v. Donovan, 30 Ill. 2d 178, 195 N.E.2d 634(1964). Specifically, Hill contends that it was not required topursue its claims before the Department, because those claimsrelied on sections 457 and 462b, neither of which makes anyreference to the necessity for or the availability of anadministrative remedy. The court cited no section of the InsuranceCode, nor any case law, to support its ruling that the Departmentwas an appropriate, let alone the exclusive, forum to hear Hill'sallegations.

The Department confirmed that there was no administrativeremedy for Hill's claims. Following the circuit court's March 16,1999 order, Hill filed a complaint with the Department. In aletter dated July 9, 1999, the Department responded that it doesnot have a remedy it can provide for past violations of section 457of the Insurance Code.⁽⁶⁾

Hill admits that section 457 does not provide expressly for aprivate right of action, but argues that the statute creates animplied private right of action because such a right is necessaryto effectuate the purpose of the statute.

A private cause of action may be implied under a statute when:(1) plaintiff is a member of the class for whose benefit thestatute was enacted; (2) it is consistent with the underlyingpurpose of the statute; (3) plaintiff's injury is one the statutewas designed to prevent; and (4) it is necessary to provide anadequate remedy for violations of the statute. Rodgers v. St.Mary's Hospital of Decatur, 149 Ill. 2d 302, 597 N.E.2d 616 (1992);Haft v. Charter Oak Fire Insurance Co., 262 Ill. App. 3d 933, 635N.E.2d 843 (1994).

Casualty responds that no private right of action existsbecause the Insurance Code specifically empowers the Director totake the necessary actions to enforce all provisions of theInsurance Code.⁽⁷⁾ Casualty relies on several cases which hold thatno private right of action exists where the Insurance Code providesfor a specific administrative remedy. Van Vleck v. Ohio CasualtyInsurance Co., 128 Ill. App. 3d 959, 471 N.E.2d 925 (1984); Hoffmanv. Allstate Insurance Co., 85 Ill. App. 3d 631, 407 N.E.2d 156(1980); Hamilton v. Safeway Insurance Co., 104 Ill. App. 3d 353,432 N.E.2d 996 (1982); Lagendorf v. Travelers State Insurance Co.,625 F. Supp. 1103 (N. D. Ill. 1985). The July 9, 1999 letter fromthe Department, however, establishes that no specificadministration remedy exists for the wrongful acts alleged in thiscase.

The circuit court erred in denying Hill leave to file countsII and III of the 1999 counterclaim.

Accordingly, for the reasons set forth above, the judgment ofthe circuit court of Cook County is reversed and the cause isremanded for further proceedings.

Reversed and remanded.

SOUTH and BARTH, JJ., concur.

1. While the motion to consolidate was pending, the circuitjudge then considering the case retired, and the present circuitjudge was assigned to the case.

2. The circuit court sua sponte converted Casualty's section 2-619 motions into section 2-615 motions. See B.C. v. J.C. PenneyCo., 205 Ill. App. 3d 5, 562 N.E.2d 533 (1990).

3. Section 462b provides:

"Insurance companies shall apply correct classifications, payrollsand other factors of a rating system to compute premiums. If theapplication of incorrect classifications, payrolls or any otherfactors of a rating system results in the payment by an insured ofpremiums in excess of the premiums that would have been paidutilizing the correct applications of classifications, payrolls andother factors of a rating system, the insurer shall refund to theinsured the excessive premium paid for the period during which theincorrect application of classifications, payrolls or other factorsof a rating system were applied. This Section is intended tocodify existing law and practice."

4. Section 457 provides in pertinent part:

"Rate filings. (1) Beginning January 1, 1983, every company shallfile with the Director every manual of classifications, everymanual of rules and rates, every rating plan and every modificationof the foregoing which it intends to use. Such filings shall bemade not later than 30 days after they become effective." 215 ILCS5/457 (West 1998).

5. Casualty further argues that the 1999 complaint was nothingmore than an effort by Hill to circumvent prior circuit courtrulings regarding the 1998 counterclaim. The breach of contractcounts in the 1999 complaint contain the same allegations of pre-1992-93 claims mishandling as were rejected by the circuit court.Casualty argues that the present circuit judge, succeeding thefirst circuit judge, was required to honor those prior rulings,citing several cases which hold that a successor judge should notreverse the discretionary ruling of a prior judge unless there isa change of circumstances or additional facts which warrant suchaction and there is no evidence of judge shopping. See Bailey v.Allstate Development Corp., 316 Ill. App. 3d 949, 738 N.E.2d 189(2000) (Bailey); Lake County Riverboat L.P. v. Illinois GamingBoard, 313 Ill. App. 3d 943, 730 N.E.2d 524 (2000) (Lake County);Marcy v. Markiewicz, 233 Ill. App. 3d 801, 599 N.E.2d 1051 (1992);Falstad v. Falstad, 152 Ill. App. 3d 648, 504 N.E.2d 908 (1987);Balciunas v. Duff, 94 Ill. 2d 176, 446 N.E.2d 242 (1983). None ofthese cases, however, involve a situation where the successorjudge's ruling comes in an independent cause of action.

A successor judge should overturn a previous judge'sinterlocutory order when the prior order was erroneous as matter oflaw. Bailey, 316 Ill. App. 3d at 957; Lake County, 313 Ill. App.3d at 950. As discussed above, Hill's breach of contract claimswere factually sufficient and any finding to the contrary by theoriginal judge was erroneous.

6. The July 9, 1999 letter stated in pertinent part:

"Moreover, the Department will not hear this matter in the future,because we find there is no basis for concluding that your clienthas specified grounds that would warrant the initiation of ahearing due to the asserted violation of Section 457 of theIllinois Insurance Code, in that, inter alia, there is no remedywhich the Department is authorized to employ which could provide a'remedy' for the wrongful act alleged assuming such violation wereproven."

7. Specifically Casualty points to sections 401(b) and (c) and401.5 of the Insurance Code (215 ILCS 5/401(b) and (c) (West 1998);215 ILCS 5/401.5 (West 1998)), which give the Director the power toinvestigate alleged violations of the Insurance Code. Casualtyfurther argues that section 458(3) of the Insurance Code (215 ILCS5/458(3) (West 1998) (section 458(3)) provides a specificadministrative remedy for those who may be aggrieved by any "ratefilings." By its express terms section 458(3) is limited tochallenges to "any filing which is in effect." Neither the 1999counterclaim nor the 1999 complaint challenge any current filing;therefore, section 458(3) does not apply.