MONTHLY QUIZ: Defendant-policyholders’ application for auto insurance included material misrepresentations intended to procure a lower premium rate. Relying on those misrepresentations, Plaintiff-insurer issued a policy of auto insurance. The policy is renewed once, and is in its second term when the policyholders are involved in a car accident. As a result of the accident, the insurer makes payments to the owners of both vehicles for property damage. Additionally, the policyholders are considered potential defendants in a bodily injury suit arising from the accident. After discovering its insureds’ misrepresentations, Plaintiff-insurer brings a complaint for rescission of the policy. Defendant-policyholders raise Section 154 of the Illinois Insurance Code as an affirmative defense, arguing that the statute bars the insurer from rescinding the policy based on the misrepresentation. Who wins? You be the judge. (Answer below).
LEF WINS ARSON TRIAL: Congratulations to Thomas J. Finn and John J. McInerney, who prevailed on behalf of the insurer in a first party breach of contract / bad faith suit filed in the United States District Court for the Northern District of Indiana, South Bend. A jury returned a verdict in favor of the insurer, awarding the insured nothing on her $1.6 million claim. In 2009, the insured’s single family residence burned down. Tom and John prevailed on their arson and fraud affirmative defenses, convincing the jury that the fire was set intentionally, at the insured’s direction. Horvath v. West Bend Mutual Insurance Company, 3:10 C 180 (N.D. Ind., Feb. 6, 2012)
LEF WINS APPEAL: Congratulations to John J. McInerney. John convinced the Court of Appeals for the State of Wisconsin, District II, that the issue of whether a builder's risk policy was in effect at the same time as a homeowner’s policy was an issue of fact for the jury to decide. Consequently, LEF overturned a multi-million dollar verdict against a builder’s risk insurer, remanding the matter back to the lower court for a new trial. Fontana Builders, Inc. v. Assurance Company of America, 2011 WL 6058266 (Wis. App., Dec. 07, 2011)
IMPROPER TENNEY LETTER RESULTS IN REDUCTION OF INSURER’S LIEN BY ONE THIRD: Following auto accident, Insurer A sought reimbursement from Insurer B for medical expense payments. In the process, Insurer A sent a purported Tenney letter to the arbitration panel. A Tenney letter is a prompt and unequivocal notification to plaintiff and/or his attorneys that an insurer desires to represent its own subrogation claim. See Tenney v. Am. Fam. Mut. Ins. Co., 128 Ill.App.3d 121 (4th Dist. 1984). The plaintiff and defendant subsequently settled for an amount that included the medical expenses. The trial court reduced Insurer A’s lien by one third to satisfy plaintiff’s attorney’s right to a fee pursuant to the common fund doctrine. The appellate court affirmed holding that Insurer A failed to notify the parties that it intended to collect its subrogation claim on its own because it only sent the Tenney letter to the arbitration panel. Accordingly, the plaintiff’s attorney was entitled to one-third of the subrogated amount as his attorneys’ fee pursuant to the common fund doctrine. Wajnberg v. Wunglueck, 2011 IL App (2d) 110190, 2011 WL 6849685 (2nd Dist, Dec. 29, 2011).
COURT REJECTS APPLICATION OF “RETAINED CONTROL” EXCEPTION TO SUBCONTRACTOR -Plaintiff ironworker suffers fall from steel beam and files negligence action against General Contractor and Subcontractor who subcontracted steel erection work to the ironworker’s Employer. Plaintiff relied on Section 414 of the Restatement (Second) of Torts, which holds that a party who entrusts work to an independent contractor and “retains the control of any part of the work” is subject to liability for any harm to others caused by failure to exercise the control with reasonable care. The Court found that Subcontractor did not retain sufficient control over the safety of the steel erection work, because its subcontract with the ironworker’s Employer specifically delegated supervision and safety to ironworker’s Employer, and the evidence showed no retained control. Therefore, Subcontractor had no liability to ironworker. Oshana v. FCL Builders, Inc., -- N.E.2d -- (1st Dist, Jan. 27, 2012).
ILLINOIS GUARANTY FUND MAY BE LIABLE FOR CLAIMS UNDER WORKER’S COMPENSATION POLICIES ISSUED BY INSOLVENT INSURERS - The Illinois Insurance Guaranty Fund appealed from the circuit court of Cook County’s ruling that the Fund was obligated to make permanent total disability payments to a workers’ compensation claimant following the insolvency of employer’s excess workers’ compensation insurer. Under the Illinois Insurance Code, the Guaranty Fund is the source of last resort in the event of the insolvency of an insurer. While the Fund argued that its obligation to make payments was limited to claims by employees, the Appellate Court disagreed, holding that the Fund’s liability may extend to claims of policyholders of workers’ compensation policies issued by insolvent insurers. Additionally, as a matter of first impression in Illinois, the Code does not limit the Fund’s obligation regarding excess workers’ compensation policies purchased by self-insuring employers. Skokie Castings v. Illinois Ins. Guaranty Fund, 2012 IL App (1st) 111533 (1st Dist, Jan. 18, 2012).
WORKERS COMPENSATION - “ODD LOT” DISABILITY - BURDEN OF PROOF:Claimant, a former air traffic controller of 27 years took a job driving a van transporting railroad workers to trains. While performing job duties, Claimant stepped onto a frozen clump of ice and rock, twisting his right knee, and ultimately underwent arthroscopic surgery on the right knee, and sought Permanent Total Disability (PTD). An injured employee can establish his entitlement to PTD (benefits under the Act in one of three ways: (1) By a preponderance of medical evidence; (2) By showing a diligent but unsuccessful job search; or (3) By demonstrating that, because of age, training, education, experience, and condition, there are no available jobs for a person in his circumstance (the “odd-lot” category). If a claimant meets his burden on number (3), the burden shifts to the employer to show that some kind of suitable work is regularly and continuously available to the claimant. But in the absence of medical evidence to support a claim of total disability or his having conducted a diligent but unsuccessful job search, the claimant, who is not obviously unemployable, has the burden of proving by a preponderance of the evidence that he is so handicapped that he will not be employed regularly in any well-known branch of the labor market. Held: Medical evidence did not support a finding of disability; Claimant failed to undertake a diligent job search; and, Claimant failed to establish that he was so handicapped that he would not be employed regularly in any well-known branch of the labor market. Claimant was not entitled to PTD. Professional Transportation v. Illinois Worker’s Compensation Commission, 2012 Ill. App. (3d) 100783WC (3rd Dist, Jan. 19, 2012).
ANSWER TO QUIZ: Policyholders win. Section 154 of the Code states that certain types of policies, such as the auto policy at issue, “a policy or policy renewal shall not be rescinded after the policy has been in effect for one year or one policy term, whichever is less." This provision applies regardless of any misrepresentations by the insured. Std. Mut. Ins. Co. v. Jones, - N.E. 2d - , 2012 IL App (4th) 110526 (Feb. 3, 2012)