Category Archives: Insurance Coverage

Brown v. Advocate Health – Trial Court Did Not Abuse Discretion in Requiring In Camera Inspection of Self-Insured Trust Documents Withheld by Defendant Hospital

Brown v. Advocate Health and Hospitals Corporation, No. 1-16-1918.

Facts:  Defendant identified a self-insured trust with coverage of $14.5 million but refused to produce the corresponding documents.  Plaintiff presented a motion to compel and the trial court ordered that defendant produce the documents for in camera inspection.  Defendant refused and requested a friendly contempt finding in order to appeal the order.

Holding:  Trial Court did not abuse discretion in requiring defendant to produce the documents for in camera inspection and defendant’s argument that the documents were not relevant is incorrect as the amounts of available insurance coverage for a claim is important information for litigants as a practical matter and should be fully disclosed.

Filed in Trial Book Under:  Discovery; Insurance Coverage

Commentary:  I have not run into this specific response from a defendant to a request for insurance information but often get some type of “relevance” objection to the production of actual policy documents.  Typically, the defendants will disclose the amount of insurance and excess policies in their answers to interrogatories and then file a pro-forma objection when the documents are requested in a 214 Request for Production.  As a practical matter, this non-disclosure tactic works because the insurance coverage is adequate to satisfy any judgment and/or the actual insurance contract documents are not particularly needed to determine whether there is coverage or not so it’s not worth fighting over in a motion to compel.  In cases where there may be a coverage issue, like construction claims where there are tenders from the general to a sub-contractor, it is important to actually see the language in the contract, so this case could be helpful in the event that there is push back in producing it.   Moreover, in a case where the damages are extensive and could easily exceed the different policies it would be a good idea to have access to the actual agreements so this case could be useful in that type of dispute.  Also of interest in this case is that Justice Gordon filed a dissenting opinion finding that the documents would likely be confidential financial documents that should not have been produced.

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Filed under Discovery, Insurance Coverage, Uncategorized

Rogers v. Imeri – Illinois Supreme Court Resolves Split in Circuits over How to Apply Set-Off’s When the Guaranty Fund Defends a Dram Shop Defendant

Rogers v. Imeri, 2013 IL 115860 (Theis)

Facts:  Plaintiff’s decedent was killed in a head-on motor vehicle collision with an intoxicated driver. The Estate had two available claims, the automobile negligence claim against the driver and a dram shop claim against the bar that served him alcohol.  The dram shop claim included claims for injury and loss of society thereby making $130,335.51 the total statutory amount available to the plaintiff under the Dram Shop Act.  The Estate obtained $26,550 from the driver’s insurance policy and an additional $80,000 in underinsured coverage from its own policy.  The insurer for the dram shop defendant was insolvent and so the Illinois Insurance Guaranty Fund was defending the case.  It sought a ruling from the trial court that pursuant to section 546(a) of the Illinois Insurance Guaranty Fund Act the $106,550 recovered by the plaintiff should be set off as “other insurance” from the $130,335.51 statutory cap amount such that the total recoverable to the plaintiff would be only $23,788.51.  The plaintiff argued that the “other insurance” set off should not be applied until after a jury verdict.  The trial court agreed with the plaintiff and ruled that the request was pre-mature and set-offs would be determined after a jury determined the total damages, however, it approved a 308 certified question which was accepted and affirmed by the appellate court.  The defendant petitioned the Illinois Supreme Court for review which due to a split in authority between the First District and Fifth District was accepted.

Holding:  When the Illinois Insurance Guaranty Fund is defending a claim under the Dram Shop Act, the set-off from other insurance are reduced from the total available limits under the Dram Shop Act, not from the verdict.

Filed in Trial Book Under:  Dram Shop Act, Illinois Insurance Guaranty Fund, Statutory Interpretation, Set-Offs

Commentary:  Add this decision to the long list of reasons that Dram Shop cases are generally unappealing for plaintiffs.  Under the approach adopted by the plaintiff, and followed by the 5th District, the plaintiff would be able to try the case to a verdict and if the result were say $500,000, the $106,550 in other insurance would then be applied to that total, and the Guaranty Fund would be required to underwrite the entire statutory limit under the Dram Shop because the verdict was much higher than the “other insurance” set-off.  Instead, they are left with only $23,788.51 in coverage because the court is to apply the other insurance to the statutory limits of the Dram Shop Act first.  I certainly understand the logic of the plaintiff and the Fifth District here, and wish that the Supreme Court had followed it, but at the end of the day the statutory purpose of the Guaranty Fund is to be an insurer of last resort and not to make the plaintiff whole, or “more whole” in this particular case.

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Filed under Dram Shop, Insurance Coverage, Statutory Interpretation

Delatorre v. Safeway Insurance Co. – Sub-Standard Defense Results in Excess Judgment Against Sub-Standard Insurer

Delatorre v. Safeway Insurance Company, 2013 IL App (1st) 120852 (Hyman)

Facts: Plaintiff was injured in a car accident in September 1991 while a passenger in a vehicle.  The driver and passenger of the other vehicle were also injured, resulting in 3 claims against plaintiff’s driver, who carried a policy of insurance with defendant Safeway Insurance Company with limits of $20,000 per person and $40,000 per occurrence.  Like all insurance policies, the Safeway policy required the carrier to defend its insured in the event of a claim or lawsuit brought against its insured.  Plaintiff made a policy demand in December 1991, which was refused by defendant. Plaintiff then filed suit against the driver of his vehicle and after its insured was served Safeway agreed to defend under a reservation of rights and informed its insured that it retained attorney I.R. Strizak to defend the case.  Strizak filed an appearance and answer on December 15, 1992, and then apparently did nothing further. On October 4, 1994, the plaintiff obtained sanctions against the defendant driver for his failure to answer discovery and an order of default was entered by the trial court.  Plaintiff forwarded the default order to Safeway Insurance Company who in return forwarded a copy to Strizak, and then did nothing to follow-up on whether the default was being addressed by Strizak. In November 1995, the plaintiff obtained a default judgment against the driver for $250,000.00.

Concurrently with the personal injury case set forth above, a declaratory judgment action was also pending whereby Safeway claimed that the policy was void as a result of the driver misrepresenting his marital status on his insurance application. The trial court granted summary judgment against Safeway, finding that the carrier was bound by the actual knowledge of its agent who knew that the driver was married at the time the policy was issued. Safeway appealed this ruling and lost its appeal on March 20, 1998.  Several days after the appellate court ruling, Safeway attempted to tender its limits to plaintiff, which was rejected.  Safeway then paid its policy limits to the remaining 2 claimants.  In the meantime, plaintiff received an assignment from the Safeway insured and filed suit against Safeway, which was non-suited and then later re-filed.

Plaintiff brought a 3 count complaint against Safeway: one count for breach of contract, one count for vexatious delay and one count for punitive damages.  The breach of contract count alleged that Safeway breached its duty to defend under the contract when it ignored notice that Strizak was not providing its insured with a meaningful defense and that as a result of the inadequate defense, the insured became subject to a default judgment in the amount of $250,000. Plaintiff moved for summary judgment on count I, which was granted, and then filed a supplemental summary judgment motion on the issue of damages.  Safeway filed a cross motion for summary judgment on the damages, arguing that it had exhausted its limits and could not contractually be liable in excess of the limits. The trial court granted plaintiff’s motion and denied defendant’s cross motion and entered judgment against the defendant in the amount of $250,000.

Holding:  “An insurer’s promise to defend entitles the insured to expect that its insurer will retain an attorney who will in fact take action to defend the insured in the face of a default order. The insurer’s duty, after all, is to defend, not merely to provide representation, and is an ongoing duty throughout litigation.”

Filed in Trial Book Under: Insurance Coverage, Duty to Defend

Commentary: One word that will come to mind for many in the plaintiffs bar when reading this opinion is “karma.”  Safeway has ruffled some feathers over the years and I suspect that many attorneys in Chicago and beyond are rejoicing over the result in this case.  Oddly, Safeway may also be one of the victims here because the conduct of the attorney retained to defend the case is really inexcusable.  Although you’ll be hard pressed to find anyone crying for the injustice done to Safeway here, at the end of the day, it would appear that they have a pretty strong malpractice case against Strizak for the handling of the underlying case and they might not be left holding the bag after all, assuming, of course, that the statute of limitations has not tolled on this very old case.  Schadenfreude aside, I think that the appellate court got it right by holding the insurance carrier responsible for its complete failure of oversight in the defense of the case.  The duty to defend is not met simply by hiring an attorney and then burying your head in the sand.  I can understand that the carrier has a right to assume that the attorney they have hired is going to do their job and actually defend the case, but this only flies up to a certain point.  Over the three years between Strizak being retained and the default judgment being entered Safeway received no billing statements from him and he received no payments from them.  This should have raised some red flags and triggered some type of inquiry on the part of the carrier to see what was going on with the defense.  More importantly, the carrier had actual notice that something very unusual had occurred when the plaintiff’s attorney sent them a copy of the default order based upon discovery sanctions.  You would think that the adjustor managing the claim would pick up the phone and find out why the court had taken such a drastic measure.  Still, over one year went by between the initial order of the default and the $250,000 judgment being entered on the default and there was absolutely no inquiry into the status of the defense whatsoever.  This is not fair to the insured and it simply does not meet the obligation of the carrier to defend him.

Another interesting part of the case was the attempted tender of the policy by the carrier after they lost the appeal on their declaratory judgment action. The time to settle the case was when the plaintiff made the initial demand. I think that many insurance carrier’s assume that they can get out of most binds simply by tendering their policy limits.  In many cases, this is probably true, but here, the plaintiff had the resolve to pursue the case fully and was rewarded with a judgment that is over 20 times the policy limits.  It’s cases like these that can serve to change the more indifferent practices of a carrier and the plaintiff’s attorneys that worked on this case should be commended for sticking to their guns and rejecting the late tender of the policy limits.

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Filed under Civil Procedure, Insurance Coverage

Edwards v. State Farm Insurance Co. – Summary Judgment and Sanctions for Insured Based Upon Implied Waiver by Insurance Company of Policy Cancellation is Reversed and Remanded

Edward v. State Farm Insurance Co, 2012 IL App (1st) 112176 (Quinn)

Facts:  The plaintiff was insured by State Farm but permitted her policy to lapse on October 5, 2008 due to non-payment.  State Farm sent a notice 5 days later indicating that the policy would be cancelled effective October 23, 2008 if the premium was not paid by that time.  The notice specifically informed the plaintiff that there would be no insurance coverage between the date of the cancellation and the date of the reinstatement.  The plaintiff did not pay the premium by October 23, 2008 so the policy was cancelled for non-payment of premium.  The plaintiff was then involved in a car accident with an uninsured driver on November 20, 2008.  Two days later she called State Farm to inform them of the accident and to make payment on her premium.  Plaintiff was informed that the claims department would determine if it would provide coverage.  Without any assurance from State Farm on the issue of coverage the plaintiff sent a cyercheck for the premium but it failed to clear due to insufficient funds so she brought cash to her agent’s office and paid the premium in full on November 28, 2008, at which time her policy was reinstated.  On December 3, 2008 State Farm sent plaintiff a check for $96.65, which represented the pro-rate amount of the premium for the period of non-coverage from October 5, 2008 to November 28, 2008.  After State Farm denied coverage for her uninsured motorist claim, plaintiff filed a declaratory judgment action and filed a motion for summary judgment arguing that State Farm waived its right to enforce the cancellation when it accepted the late premium payment.  Plaintiff submitted evidence that the clerk at the State Farm agents office made comments about reinstatement that caused her to believe that coverage would be afforded for the accident, but State Farm asserted that the agents denied making such statements.  The circuit court awarded judgment in favor of the plaintiff and awarded $28,957.50 in attorneys fees, $361 in costs, and $50,000.00 in sanctions pursuant to section 155 of the Illinois Insurance Code and State Farm appealed.

Holding:  Summary judgment was improper because there were genuine issues of material fact regarding the plaintiff’s theory of implied waiver of the policy cancellation and there was no evidence o f vexatious conduct on the part of the insurance company to support a finding of fees, costs and sanctions pursuant to section 155.

Filed in Trial Book Under:  Insurance Coverage – Cancellation for Non-Payment; Section 155 of Insurance Code

Commentary:  This seems like a no brainer and a case that the plaintiff will likely lose on remand. First, if the circuit court was basing its decision on statements plaintiff claims to have been made by the clerk at the agents office, and that clerk denied making such a statement, then there were issues of fact that required a trial and summary judgment was not proper.  However, as the appellate court points out, it is questionable that an insurance agent’s clerk can bind the company to a coverage decision like this, particularly in light of the clear written notice that was sent to the plaintiff regarding the period of non-coverage once payment was made.  The bigger surprise here was the circuit court’s position on the section 155 sanctions.  The notice by the insurance company was clear that the coverage would not apply during the lag between cancellation and payment and, more importantly, the insurance company refunded the pro-rata portion of the premium for the uncovered period.  From the recitation of facts available in reading the opinion it appears as if the insurance company’s position is correct and there is no support at all for a finding of vexatious conduct.

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Filed under Bad Faith and Section 155, Insurance Coverage

American Service Insurance Company v. Arive – Failure of Insurance Company to List an Excluded Driver on the Insurance Card Pursuant to 7-602 of the Insurance Code Does Not Render a Named-Driver Exclusion Unenforceable

American Service Insurance Company v. Arive, 2012 IL App (1st) 111885 (Epstein)

Facts:  The defendant was injured in a car accident with a driver that had been excluded from coverage through a named-driver exclusion to the insurance policy issued by the plaintiff.  The policy itself listed the driver as being excluded from coverage but the insurance card issued by the plaintiff did not list the driver as excluded.  After a lawsuit for personal injuries was filed by the defendant, the plaintiff filed a declaratory action arguing that it had no duty to defend or indemnify the defendants in the underlying lawsuit.  The defendant filed a counter-claim and argued that the named-driver exclusion was unenforceable because the insurance card did not list the driver as an excluded driver as required by section 7-602 of the Insurance Code.  The circuit court granted plaintiff’s motion and denied defendant’s motion, ruling that the named-driver exclusion was enforceable.  Defendant appeals.

Holding:  Despite requirement of Illinois Insurance Code to identify excluded drivers on the insurance card, the failure to do so does not render an otherwise valid named-driver exclusion unenforceable as the General Assembly has never expressed an intent to impose such a drastic result based upon noncompliance with the insurance requirement in section 7-602.

Filed in Trial Book Under: Insurance Coverage – Named-Driver Exclusion

Commentary:  The insurance company dodged a bullet here.  Section 7-602 of the Illinois Insurance Code requires that an excluded driver be listed on the insurance card, however, it is apparently silent on what the penalty or result should be if there is non-compliance.  The appellate court reached the conclusion that the most plausible reading of the Code is that section 7-602 is merely meant to inform others, like law enforcement officers, whether the driver of the vehicle is covered or not, and could not be used to invalidate the actual policy terms itself.  I don’t necessarily agree with that, but it’s not an unreasonable conclusion. I think that most insured’s rely upon their insurance card as well, and that if the card lists the excluded driver it serves as a reminder for them not to permit that driver to use the card.  You can be sure that if the shoe was on the other foot, and the consumer had failed to strictly comply with a provision of the contract or the Code, that the insurance company would have no qualms in arguing that the failure to comply fully with a provision renders it unenforceable.  At the end of the day, this is the types of case that would have very little long term impact on coverage disputes because every company underwriting automobile policies will merely be more vigilant in making sure that their insurance cards complied with the law.

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Filed under Insurance Coverage

Pekin Insurance Co. v. Tovar Snow Professionals – A Caption or Section Heading in Insurance Contract Cannot Be Used to Limit Coverage That is Not Explicitly Limited in Text of the Insurance Contract

Pekin Insurance Co. v. Tovar Snow Professionals, 2012 IL App (1st) 111136 (Quinn)

Facts: Dunleavy Concrete, Inc. had a commercial general liability insurance policy with the plaintiff Pekin Insurance Company that included a blanket automatic additional insured endorsement applicable to any written contract Dunleavy entered into that required such coverage.  Dunleavy entered into a sub-contract with defendant Tovar Snow Professionals, Inc. that included a requirement for them to be named additional insured.  The insurance contract included a heading that appeared to limit the additional insured provision to written construction contracts, but the underlying text did not contain this limitation and merely referred to written contracts.  Defendant Tovar was named as a defendant in a slip and fall lawsuit that alleged negligence in their snow removal and it tendered its defense to Pekin, who then filed a declaratory judgment action arguing that there was no coverage for snow removal activities, only construction activities.  The circuit court disagreed and filed summary judgment against the insurance company.

Holding:  Insurance carrier had a duty to defend and summary judgment was proper because a heading or caption to a section of an insurance policy does not modify the coverage of actual text language appearing in the policy.

Filed in Trial Book Under: Insurance Coverage – Duty to Defend; Insurance Contract – Ambiguity

Commentary: The law in Illinois will broadly interpret insurance contracts in favor of coverage and will strictly construe the policy language against the insurance carrier that drafted the language.  There is probably some lawyer that drafted this provision that is in a little bit of hot water over this case.  The attorneys for the insurance carrier in the declaratory action were left with the unenviable argument that the section heading was actually a part of the text of the contract.  The appellate court quickly dismissed this argument and concluded that the language had all ofhte stylistic conventions of a heading/title/caption, i.e. bold print, each word began with a capital letter, etc, and that “when attempting to actually read the above quoted words as the first part of each subsection that follows, we are left with an ungrammatical, poorly punctuated jumble of sentences that would be the antithesis of a clearly written policy of insurance coverage.”  Sounds a lot like a critique of my writing for this blog.

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Filed under Insurance Coverage