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State Farm Insurance Co. v. Harmon

November 27, 2002

STATE FARM INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
ROBERT L. HARMON, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. No. 99 M 116779 Honorable John G. Laurie, Judge Presiding.

Modified Upon Motion For Modification

Following mandatory arbitration in a subrogation action for damage to the vehicle of plaintiff's insured, an award was entered in favor of plaintiff State Farm Insurance Company and against defendant Robert L. Harmon. Defendant rejected the award, and the circuit court subsequently barred plaintiff from presenting testimony or evidence at trial and entered summary judgment for defendant Robert L. Harmon. On appeal, plaintiff contends the trial court abused its discretion in finding that plaintiff did not participate in the arbitration hearing in a meaningful manner. Plaintiff further contends that both defendant's notice to produce plaintiff and the trial court order imposing sanctions were invalid for lack of specificity. For the following reasons, the judgment of the circuit court is vacated and the cause is remanded for further proceedings consistent with this opinion.

THE FACTS

Plaintiff filed a subrogation action against defendant for allegedly damaging the vehicle of plaintiff's insured, Giovanni Licciardi. In its complaint, plaintiff alleged that on September 30, 1996, defendant's motor vehicle struck and damaged Licciardi's vehicle on Montrose Avenue in Harwood Heights. Plaintiff sought $1,890.75 in damages to the vehicle, plus costs. There was no claim for damages relating to bodily injury.

Because the request for damages did not exceed $30,000, the parties were required to participate in mandatory arbitration pursuant to Supreme Court Rule 86. 155 Ill. 2d R. 86. See also, Cook Co. Cir. Ct. R. 18.3 (eff. August 1, 2001). Defendant filed a notice to produce pursuant to Supreme Court Rule 237 notifying plaintiff to produce at the mandatory arbitration hearing "Plaintiff(s) and Co-Defendant(s) at the commencement of the case in chief of Defendant(s) Robert L. Harmon." 166 Ill. 2d R. 237. Plaintiff's counsel was present at the arbitration hearing, but plaintiff's insured was not present. The arbitrators entered an award for plaintiff and against defendant in the amount of $1,890.75. The record does not contain a transcript of the arbitration hearing. Defendant filed a timely notice of rejection of the arbitration award and requested a trial.

Defendant then filed a motion for sanctions pursuant to Illinois Supreme Court Rules 237 and 91(b) (166 Ill. 2d R. 237; 145 Ill. 2d R. 91(b)) seeking to bar plaintiff from testifying or producing any evidence at trial. The motion alleged that "plaintiff" failed to appear despite a valid Rule 237 notice and produced no other witness who could testify to the merits of "his claim for bodily injury."

Plaintiff filed a response, alleging that this was a subrogation action in which the plaintiff insurance company sought to recover $1,890.75 in property damage to its insured's vehicle caused when defendant "rear-ended" the vehicle. Plaintiff alleged that it appeared at the arbitration through counsel and participated in good faith as evidenced by the award in its favor. Plaintiff's response further alleged that defendant's Rule 237 notice to produce did not apply to plaintiff's insured, who was not a party to the subrogation and was not named in the notice. Finally, plaintiff alleged that the Rule 237 notice did not designate any officer, director or employee of plaintiff to appear at the hearing.

Defendant did not file any pleading rebutting plaintiff's allegations.

On May 1, 2001, the circuit court entered an order granting defendant's motion for sanctions, stating in part, "Defendant's motion to bar plaintiff from testifying or presenting evidence is, under the circumstances and based on the evidence presented to the court at hearing, granted in that plaintiff has failed to participate in the arbitration system in a meaningful manner under Supreme Court Rule 91(b)." The court did not base the imposition of sanctions on Rule 237(b).

Three days later, plaintiff filed a motion to reconsider or clarify the court's order of May 1, 2001. Plaintiff argued that the court's order did not comply with the specificity requirement of Supreme Court Rule 219(c) (166 Ill. 2d R. 219(c)) because it did not state what "evidence" or "circumstances" it considered in imposing the sanction against plaintiff. Plaintiff again alleged that it was present at the arbitration hearing through its attorney, and defendant's Rule 237 notice did not validly require the presence of either plaintiff's insured or any officer or employee of plaintiff. Plaintiff alleged that it presented at arbitration the adverse witness testimony of defendant as well as a Rule 90(c) (166 Ill. 2d R. 90(c)) package of documents pertaining to damages. The court denied plaintiff's motion to reconsider or clarify the order and subsequently granted defendant's motion for summary judgment.

ANALYSIS

On appeal, plaintiff contends that the trial court abused its discretion in barring it from testifying or presenting evidence at trial because the record fails to support the court's finding that plaintiff did not participate in the arbitration in good faith and in a meaningful manner under Supreme Court Rule 91(b).

Supreme Court Rule 91(b) states that all parties to the arbitration hearing must participate in the hearing in good faith and in a meaningful manner. 145 Ill. 2d R. 91(b). If an arbitration panel unanimously finds that a party has failed to participate in the hearing in good faith and in a meaningful manner, it should state its finding and factual basis on the award. 145 Ill. 2d R. 91(b). Such a finding by an arbitration panel is considered prima facie evidence that the party failed to participate in the arbitration hearing in good faith. 145 Ill. 2d R. 91(b). Possible sanctions for a violation of Rule 91(b) may include barring the losing party from rejecting an award or barring a party from presenting evidence or testimony at trial. 145 Ill. 2d R. 91(b); 166 Ill. 2d R. 219(c).

A trial court's imposition of sanctions under Rule 91 will be reversed only where the court's decision represents an abuse of discretion. Goldman v. Dhillon, 307 Ill. App. 3d 169, 172 (1999). A party is required to participate in an arbitration hearing in good faith by subjecting the case to the type of adversarial testing expected at a trial. Martinez v. Gaimari, 271 Ill. App. 3d 879, 883-84 (1995). A party has acted in bad faith where its actions amount to a deliberate and pronounced disregard for the rules and the court. State Farm Insurance Co. v. Jacquez, 322 Ill. App. 3d ...


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