MONTHLY QUIZ: Customer purchases a new truck from Insured-Dealership in exchange for $5,000 down, a trade-in vehicle and installment payments. Per the written contract, if the Insured is unable to assign the contract, the transaction would be canceled, with the respective parties to return the vehicles and money. The Insured was unable to obtain financing and Customer returned the truck. However, the Insured-Dealership "refused and continues to refuse" to return Customer's $5,000 or trade-in vehicle. Customer sues Insured-Dealership for fraud under the Consumer Fraud and Deceptive Business Practices Act ((815 ILCS 505/1 et seq., "Act"). Section 2C of the Act provides that "if a seller rejects the credit application of the buyer, the seller must return any down payment, including money, goods, or chattels" and that the failure to do so is an “unlawful practice within the meaning of [the] Act.” Customer's complaint further alleges that the Insured-Dealership's failure to return the trade-in after financing fell through was a "deception." The Dealership-Insured submits the claim to Insurer. Under the policy issued to Insured, coverage is excluded for any suit resulting from “'[a]ctual or alleged criminal, malicious or intentional acts' committed by the insured" ("intentional-acts exclusion"). Upon review, Insurer refuses to defend and denies the claim, reasoning that “[t]he [Insured's] decisions ... to not refund ... the $5000 down payment or to return the [trade-in vehicle were] intentional acts” that fell within the policy's intentional-acts exclusion. The Insured contends that Insurer is wrong and that the claim should be covered, because Customer's complaint does not allege criminal or malicious acts, or acts intended to cause harm and does not describe Insured's conduct as "intentional" or "wilful." Who is right? Are these allegations properly characterized as negligent, or intentional? Under these allegations, does Insurer have a duty to defend? Is this claim covered? You be the judge (Answer below).
INSURER NOT LIABLE FOR PREJUDGMENT INTEREST WHICH ACCRUED PRIOR TO APPRAISAL AWARD UNDER ILLINOIS INTEREST ACT: Insured submitted claim to its property insurer for storm damage to the exteriors of a multi-building condominium complex. Insurer issued payment for the cost to repair certain building components, but denied the remainder based on a determination that they had not been damaged by hail or wind. The insured submitted a rebuttal estimate for the full replacement of all exterior building components on all buildings and demanded that the matter be sent to appraisal. The insurer rejected the demand, and filed suit for declaratory judgment. During litigation, the parties agreed to submit the dispute to appraisal, and the panel issued an award which was subsequently reduced to judgment by the trial court, although the court rejected the insured’s request for prejudgment interest from the date of loss, as opposed to the date the appraisal award was issued three years later. The insured appealed, and the Second Circuit Appellate Court upheld the trial court’s ruling. In doing so, the court noted that the Illinois Interest Act provides that prejudgment interest accrues from the date the amount of claim is liquidated, or may be “easily determinable,” by the insurer. According to the Court, the amount of loss was not “easily determinable” under the circumstances, given that it required the efforts of the appraisal panel to arrive at a value for the damage which was different than the amount submitted by either party. The court also noted that this was consistent with the policy’s payment condition, which provided that payment would be made within 30 days after the parties agreed on the amount of loss, or an appraisal award was entered. According to the court, under this provision, payment from the insurer was not due until 30 days after the award, and because the insurer had made payment within that timeframe, no interest was owed. Greater N.Y. Mut. Ins. Co. v. Galena at Wildspring Condo. Ass'n, 2022 IL App (2d) 210394 (May 23, 2022).
WORKERS’ COMPENSATION: Appellant-Employee (Petitioner), a maintenance worker, and Appellee-Employer (Respondent), a staffing company, alleged that Petitioner sustained injuries at work to his hand, face and torso when he picked up a firework and it exploded. Petitioner testified that while removing branches from a fence and lawn areas prior to mowing the lawn, he picked up a firework and it exploded, resulting in first degree burns to his forehead and torso and severe lacerations to his right hand and fingers. Petitioner’s long and ring fingers were amputated. Petitioner’s co-worker testified that Petitioner carried around a lighter on his tool belt that he used to light cigarettes, although co-worker did not see Petitioner light the firework. Petitioner testified that the wick of the firework was intact when he picked it up. The Decatur Fire Department documented that the lighter was found near the explosion site, evidencing that the lighter was being held in Petitioner’s left hand at the time of the explosion. Petitioner’s pyrotechnic expert testified that spontaneous combustion in fireworks was well known outside of Illinois and he had witnessed on one occasion. Respondent’s expert, a certified bomb technician for the Illinois Secretary of State Bomb Squad, opined that this particular firework could not have exploded without an ignition source and testified that “you could hit [the firework] with a hammer all day long and it will not ignite.” Arbitrator Pulia found Respondent’s expert more credible and that Petitioner failed to prove that he sustained accidental injuries arising out of the course of his employment. A panel of three Commissioner’s affirmed Arbitrator Pulia’s decision. The Circuit Court affirmed the Commission decision. Finally, the Appellate Court affirmed the Circuit Court decision. The Appellate Court held that Petitioner’s injury did not arise out of his employment because he voluntarily exposed himself to an unnecessary danger entirely separate from the activities and responsibilities of his job by lighting the firework. The Court reasoned that Respondent’s expert opinions were more consistent with the physical evidence, and the evidence presented was sufficient to support the Commission’s finding. Dylan Junior v. Ill. Workers’ Compensation Commission, 2022 IL App (4th) 210341WC-U (Jul. 6, 2022).
SUBROGATION - ELECTRIC & AUTONOMOUS VEHICLES: Though the current numbers and percentage of electric vehicles (EVs) on United States' roads is still relatively small, vehicle registrations for EVs in the first quarter of 2022 are up 60%, while overall new vehicle registrations are down almost 20%. According to industry analysts, the "explosion" in EV sales demonstrates that a majority of American consumers now accept EVs as a viable choice. Most of the EVs incorporate a higher degree of automation (e.g. automated braking, "auto-pilot", etc.). Though we welcome and marvel at new EV and driver automation technologies, we must be prepared when these systems fail. In June of 2022, we received a report that an EV's battery compartment re-ignited so many times that the fire department eventually created a small pond to extinguish the 3000 degree fire. In May 2022, an apparent defect at a charging station resulted in the loss of at least five EVs. The number and variety of failed "driverless" technology claims is already too long - and growing! We presently handle claims related to EV and autonomous vehicles and continue to monitor the developing legal and regulatory landscape surrounding them. For questions regarding EV and autonomous vehicle claims, or subrogation in general, please contact us.
ANSWER TO QUIZ: Insurer wins and Insured-Dealership loses. In considering an insurer's duty to defend, Illinois courts compare the allegations of the underlying complaint with the relevant provisions of the policy and if the complaint alleges facts within, or potentially within, the policy’s coverage, the insurer has a duty to defend. The burden is on the insurer to prove that an exclusionary clause applies and that its application is free and clear from doubt. In Illinois, intentional act exclusions will not apply when a claim arises, or could potentially arise, from a merely negligent act or omission. Here, although the complaint did not use the words “intentional” or “willful to describe the Insured's acts, the specific conduct alleged by Customer was based upon Section 2C of the Act - a "refusal" to return money and a trade-in vehicle. According to the Second District Appellate Court, "the term 'refuse' clearly implied intentional or willful misconduct" and thus, the intentional act exclusion applied. Owners Insurance Company v. Don McCue Chevrolet, Inc., 2022 IL App (2d) 210634 (July 7, 2022).
