July 2021 Case Notes & Comments

"I won't wait." ~ McKenzie Scott, speaking on her recent donations of more than $6 billion

MONTHLY QUIZ: Bank files mortgage foreclosure action in Kankakee County, where the properties are located, against property Owner, a Kankakee resident. Without getting an appointment from the court to serve process, Bank hires private Detective. Detective serves the summons and complaint on Owner in a Cook County hospital (i.e. a county with more than 2M residents), while Owner is convalescing in the nursing care wing. Owner does not appear in the foreclosure proceeding and Bank moves for entry of judgment of foreclosure and sale, which the court grants. When Bank moves to confirm the sale of the property, Owner appears and moves to vacate the default and sale. Owner argues that he has no memory of being served and that he was not properly served, because the court never appointed Detective. Bank argues that the court did not need to appoint Detective because  the action was filed against a Kankakee resident in Kankakee county, which has less than 2M residents. Pursuant to Illinois statute (i.e. 735 ILCS 5/2-202), process "shall be served by a sheriff", though in counties of less than 2M people, sheriffs "may employ [licensed] civilian personnel to serve process....without appointment ...Summons may be served ...whereever [the defendants] may be found in the State....by any person authorized to serve process." Was Owner properly served? Was court appointment required for Detective to serve Owner in a Cook County even though the complaint was filed in Kankakee and Owner is a Kankakee County resident? Which factor controls - where process is served, residency or where the complaint is filed? Who is right, Bank or Owner? You be the judge. (Answer Below).

LEF PREVAILS ON APPEAL OF LANDOWNER’S PROPERTY DAMAGE CLAIM: Jon Schaefer and Jeff Pavlovich successfully argued before the Illinois Third Appellate District in the defense of a restaurant owner sued for property damage to the neighbor plaintiff’s building caused by a patron’s negligent driving. After exiting the restaurant, the patron drove his pick-up over a parking spot concrete bumper, and into the plaintiff’s wall. The plaintiff claimed that LEF’s client failed to erect barriers and arrange the parking spaces on his lot to prevent “unauthorized encroachments of vehicles invited to his restaurant” onto the plaintiff’s land. The trial court granted LEF’s motion to dismiss on the ground that the restaurateur owed no duty to the neighbor for the patron’s negligent driving. The Third District agreed, noting that the parking lot posed no danger absent the independent, negligent act of the patron, and the ensuing damage to the building was not reasonably foreseeable. The Court further noted that the magnitude of the burden required to guard against the occurrence would be intolerable. Since the complaint failed to plead a legally cognizable duty owed by the restaurant owner to the plaintiff, the Third District upheld the trial court’s dismissal of the Complaint with prejudice. Guyon v Hernandez, 2021 IL App (3rd) 200141-U (Rule 23 order).

SUBROGATION - COURT EXTENDS ANTI-SUBROGATION PROTECTIONS TO COLLEGE STUDENTS WHO NEGLIGENTLY CAUSED DORM FIRE AND DISMISSES INSURER'S $4.5M SUBROGATION SUIT: Two Students, both of whom paid College for room, board and tuition, negligently left a burning charcoal grill on a platform outside a dormitory window that started a fire that spread from the platform to the roof, causing significant fire damages. The student handbook, which was signed and acknowledged by both Students, prohibited such grills and stated that: 1) violations of the open flame policy "may" result in liability for damage due to fire; and, 2) students "assume any and all liability for damage or claims that result from their own negligence." Insurer paid College and then filed a subrogation suit against Students. Students filed a declaratory action, seeking coinsured status under New Hampshire's anti-subrogation doctrine (i.e. the Sutton doctrine). Under the Sutton doctrine, which was created in a 1975 Oklahoma appellate opinion, a tenant is considered a coinsured of a landlord with respect to the leased premises, and, therefore, the landlord's insurer has no  subrogation rights against tenants whose negligence causes fire damage absent an express agreement to the contrary. The trial court granted summary judgment in favor of Students, concluding that “the expectations and equitable considerations" involved in tenant-landlord lease agreements also applies "with equal force in the context of on campus housing agreements with college students." On appeal, Insurer argued that New Hampshire's anti-subrogation law did not apply because Students were not "tenants" with possessory interests in the property, but more akin to hotel guests. Further, Insurer contended that Students contracted out of the Sutton doctrine via the student handbook. In rejecting Insurers' arguments, the New Hampshire court reasoned that the relationship between College and Students was "sufficiently similar to that of landlord and tenant to apply landlord/tenant-related doctrines despite the absence of a technical landlord/tenant relationship." Further, the court stated that "[n]one of the policies … explicitly required [Students] to purchase fire insurance on their respective dormitories” and that "the subject of insurance in the student handbook and other college documents reinforced a reasonable expectation that the responsibility to insure dormitory buildings was allocated to [College].” Ro v. Factory Mut. Ins. Co., No. 2019-0620 (S.Ct. New Hampshire, Mar. 10, 2021).

ILLINOIS SUPREME COURT REJECTS “TESTING THE WATERS” DOCTRINE AS BASIS TO DENY MOTION FOR SUBSTITUTION OF JUDGE AS OF RIGHT: Palos Community Hospital sued Humana, alleging that it underpaid for medical services provided to members of Humana’s health plans. Following protracted discovery motion practice, the motion judge appoint a retired judge as a discovery master. The case was then assigned to a new motion judge, who heard oral arguments on Palos’ motion to strike the discovery master. Following the hearing, but before a ruling was entered, Palos moved for substitution of judge as of right, under 735 ILCS 5/2-1001(a)(2)(i). The motion judge noted that, although a substantive ruling had not yet been made, she concluded that Palos had formed an opinion as to her disposition of the case. For that reason, she denied the motion for substitution, citing the “testing the waters” doctrine, which provides that a motion to substitute is untimely when the judge had indicated a position on a particular point. Following this ruling, the case continued to proceed, with a jury eventually finding for Humana. On appeal, the First District Appellate Court upheld the denial. The Illinois Supreme Court, noting that it had never before considered the “test the waters” doctrine, reversed. The Court noted that the plain language of the court’s rules for civil procedure allowed one judicial substitution without cause, by right, as long as certain conditions were met. Although Palos may in fact have formed an opinion as to the motion judge’s position, that was not one of the stated conditions precluding the right to substitution. Accordingly, the Supreme Court held that the “test the waters doctrine” was an improper basis on which to deny a motion for substitution of judge as of right. (As a result of its ruling, the Supreme Court remanded the case back to the trial court with directions to vacate every order entered since the improper denial, including the jury’s verdict against Palos.) Palos Community Hospital v. Humana Ins. Co., Inc., 2021 IL 126008 (May 20, 2021).  

CGL INSURER OWES DUTY TO DEFEND BIOMETRIC INFORMATION PRIVACY ACT CLASS ACTION: Class action filed against Tanning Salon alleged that its membership program violated the Biometric Information Privacy Act (BIPA). Members were required to scan their fingerprints for identification purposes in accessing tanning services at franchisee locations nationwide. The fingerprints were contained in a database maintained by a third party vendor. The complaint alleged that the Tanning Salon violated the Act by the disclosure of the fingerprint scans to the vendor. The Illinois Supreme Court affirmed the lower courts’ determination that the complaint alleged a “publication of material that violates a person’s right of privacy” within the definition of personal and advertising injury under Coverage B of the general liability policy. The Court rejected the insurer’s argument that a communication to a single party such as the vendor in the underlying suit did not involve a publication of material. According to the Court, both dictionaries and legal treatises define publication as including communications to the public at large, as well as, a single party. It further held that privacy rights were in issue as the BIPA protects the right of an individual to keep biometric information secret. The Court also agreed with the lower courts’ ruling that the “Violation of Statutes” exclusion was limited to Acts which regulate methods of communication such as at issue in the statutes specified in the exclusion, the TCPA (faxing statute) and the CAN SPAM Act (emails). The BIPA deals with the collection, use, safeguarding, handling, storage and destruction of biometric identifiers and information as opposed to a method of communication and therefore did not fall within the terms of the “catch all” provision of the exclusion dealing with similar statutes. West Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc, 2021 IL 125978 (Mar. 10, 2021).

ANSWER TO QUIZ: Owner wins, bank loses. The Illinois Supreme Court recently held that the language of the Illinois service statute is concerned with where process is served, but does not discuss where the complaint is filed. According to a majority of the Illinois Supreme Court, because Cook County has more than 2M residents, court appointment of Detective was necessary before service upon Owner. EDITOR'S NOTE: Both Illinois Supreme Court Justices Carter and Garman dissented from the majority, concluding that the Illinois service statute "unambiguously “empower[ed] ‘any person authorized to serve process’ to do so on ‘defendants wherever they may be found in the State", without limitation. Municipal Trust & Savings Bank v. Moriarty, 2021 IL 126290 (June 17, 2021).

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