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OLD REPUBLIC INS. CO. v. CHUHAK & TECSON

November 27, 1995

OLD REPUBLIC INSURANCE COMPANY, Plaintiff,
v.
CHUHAK & TECSON, P.C., et al., Defendants.



The opinion of the court was delivered by: SHADUR

 This Court's November 2, 1995 memorandum opinion and order (the "Opinion"), as amended on November 8 to correct an inadvertent typographical error, granted the motion of defendants in which they had sought to prevail as a matter of law in this declaratory judgment action brought against them by Old Republic Insurance Company *fn1" --an effort by Old Republic to avoid having "either to defend or to indemnify Josephson against the claims that Kearns has made against Josephson in Circuit Court of Cook County Case No. 95 L 8773 ('1995 Kearns Action')" (Opinion at 1). As the Opinion concluded, there was no question that Old Republic was obligated to defend the 1995 Kearns Action, although of course the very nature of the indemnification obligation under Old Republic's policy precluded the resolution of that issue until the underlying lawsuit is ultimately decided.

 As Opinion at 10 indicates, all that still remains for disposition in this action is the Chuhak Firm-Josephson counterclaim, which asks for a judgment against Old Republic under Illinois Insurance Code § 155(1) ("Code § 155(1)"), 215 ILCS 5/155(1):

 
In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasonable delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:
 
(a) 25% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;
 
(b) $ 25,000;
 
(c) the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action.

 Now the parties have filed cross-motions for summary judgment in that respect and have filed their memoranda in support of their respective positions. Because they have (unsurprisingly) met each other head on, there is no need for further briefing, and this memorandum opinion and order can deal with the matter.

 Although Old Republic splits the "Argument" section of its memorandum into four parts, the second of its contentions (an argument that the "totality of circumstances" controls the matter) really adds nothing substantive to the other three contentions. Thus Old Republic essentially advances these three arguments to resist the application of Code § 155(1):

 
1. Because Old Republic brought this action for declaratory judgment, it is automatically spared any potential liability under Code § 155(1) as a matter of law.
 
2. No statutory liability should be imposed on Old Republic because its refusal to defend had relied reasonably on the orders entered by this Court's colleague Honorable Charles Norgle in the prior litigation between the parties.
 
3. Because the issue facing Old Republic was one of first impression, so that a bona fide dispute existed as to its policy obligations, its conduct was neither vexatious nor unreasonable.

 Under the statute the question whether Old Republic was indeed "vexatious and unreasonable" is for this Court to decide ( Horning Wire Corp. v. Home Indemnity Co., 8 F.3d 587, 590 (7th Cir. 1993)). And because there are no disputed factual issues, this ...


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