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State Farm Mutual Insurance Co. v. Koscelnik

August 19, 2003

STATE FARM MUTUAL INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
ANTON KOSCELNIK, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. Honorable James P. McCarthy, Judge Presiding.

The opinion of the court was delivered by: Justice Burke

UNPUBLISHED

Plaintiff State Farm Mutual Insurance Company appeals from an order of the circuit court debarring it from rejecting an arbitration award issued in favor of defendant Anton Koscelnik. On appeal, plaintiff contends that the trial court abused its discretion in finding that plaintiff failed to participate in the arbitration hearing in good faith and in barring plaintiff from rejecting the award. For the reasons set forth below, we affirm.

Plaintiff filed a subrogation action against defendant, alleging that defendant carelessly and negligently caused a collision between plaintiff's insured's vehicle and defendant's vehicle on June 1, 1996, which resulted in personal injury and property damage to plaintiff's insured. Pursuant to Illinois Supreme Court Rule 86 (155 Ill. 2d R. 86), the matter was set for arbitration on October 17, 2001.

Prior to the arbitration, both parties served Illinois Supreme Court Rule 237 (166 Ill. 2d R. 237) notices to produce. Plaintiff, in its notice to produce, specifically requested defendant's presence at the arbitration. Defendant requested the presence of "plaintiff(s) or if the plaintiff is a corporation, then the employee of the plaintiff who is its designated representative, or if none named, the adjuster with the most knowledge of the claim." Both plaintiff and defendant's counsel appeared at the arbitration hearing. Plaintiff's representative, a claims adjuster, also appeared at the hearing. Neither defendant nor plaintiff's insured attended the arbitration.

The arbitration began at 8:45 a.m. and, at 9 a.m., the arbitrators entered an award in favor of defendant. The arbitrators wrote only the following on the award: "Award for defendant. Defendant present through counsel only. Plaintiff present through counsel only. 237 notices were served on both parties." The record on appeal does not contain a transcript of the hearing.

On October 31, plaintiff filed a notice of rejection of the arbitration award pursuant to Illinois Supreme Court Rule 93 (166 Ill. 2d R. 93). On December 18, pursuant to Illinois Supreme Court Rule 91 (145 Ill. 2d R. 91), defendant filed a motion to bar plaintiff's rejection of the award. Plaintiff filed a response to defendant's motion and a motion for sanctions against defendant for failing to appear at the arbitration in violation of plaintiff's Rule 237 notice.

On January 17, 2002, the trial court heard both defendant's motion to bar plaintiff from rejecting the arbitration award and plaintiff's motion for sanctions. Defendant argued that plaintiff failed to participate in the arbitration hearing in good faith and in a meaningful manner because it did not produce its insured and, therefore, it failed to present any evidence with regard to defendant's liability. Plaintiff responded that the evidence it had intended to produce at the arbitration hearing--its claims adjuster's testimony, an Illinois Supreme Court Rule 90(c) (166 Ill. 2d R. 90(c)) package which included pictures of the damage to plaintiff's insured's vehicle and plaintiff's insured's personal injury and property damage bills, and the adverse testimony of defendant--was sufficient to constitute good faith participation. Plaintiff further argued that because defendant did not appear at the arbitration, in violation of plaintiff's Rule 237 notice, court-ordered sanctions were warranted. The trial court ruled in favor of defendant on both motions, finding that plaintiff failed to participate in the arbitration hearing in good faith and that the issue of plaintiff's motion for sanctions against defendant was "moot." This appeal followed.

Plaintiff contends that the trial court abused its discretion in finding that plaintiff failed to participate in the arbitration hearing in good faith and in barring plaintiff's rejection of the arbitration award. Defendant contends that the trial court properly barred plaintiff from rejecting the award because plaintiff presented no evidence at the arbitration hearing with regard to liability for the accident.

A trial court's imposition of sanctions pursuant to Supreme Court Rule 91 will be reversed only where the court's decision was an abuse of discretion. Goldman v. Dhillon, 307 Ill. App. 3d 169, 172, 717 N.E.2d 474 (1999). An abuse of discretion will be found only if the trial court's ruling was arbitrary or if it exceeded the bounds of reason. Schmidt v. Joseph, 315 Ill. App. 3d 77, 81, 733 N.E.2d 694 (2000). The supreme court rules regarding mandatory arbitration are designed to prevent abuse in, and to uphold the integrity of, the arbitration process. State Farm Insurance Co. v. Rodrigues, 324 Ill. App. 3d 736, 740, 756 N.E.2d 359 (2001).

Under Illinois Supreme Court Rule 91, a party waives the right to reject an arbitration award when the party fails: (1) to appear, either in person or by counsel, at the arbitration hearing; or (2) to participate in the arbitration hearing in good faith and in a meaningful manner. 145 Ill. 2d R. 91(a),(b). In the present case, the trial court debarred plaintiff from rejecting the arbitration award on the second ground, i.e., it found that plaintiff failed to participate in the arbitration hearing in good faith and in a meaningful manner.

Plaintiff first argues that because the arbitrators did not make an express written finding that plaintiff failed to participate in the arbitration hearing in good faith, the trial court abused its discretion in finding that plaintiff failed to participate in good faith and in debarring plaintiff's rejection of the award. Contrary to plaintiff's argument, however, it is well-settled that even where the arbitrators do not include a written finding that the plaintiff failed to participate in good faith, the trial court may bar rejection of an award on the basis of lack of good faith. Goldman, 307 Ill. App. 3d at 172; Saldana v. Newmann, 318 Ill. App. 3d 1096, 1098, 743 N.E.2d 663 (2001).

Plaintiff next argues, citing West Bend Mutual Insurance Co. v. Herrera, 292 Ill. App. 3d 669, 686 N.E.2d 645 (1997), that because the arbitrators did not find that plaintiff failed to participate in good faith and because no transcript of the hearing existed, the trial court had no basis upon which to determine whether plaintiff participated in the hearing in good faith and, therefore, it abused its discretion in holding that plaintiff did not. In West Bend, one of the defendants appeared at the arbitration hearing pursuant to the plaintiff's Rule 237 notice, but he could not speak English and he had no translator. At the hearing, the defendants' attorney made an opening statement, cross-examined the plaintiff, and made a closing argument in behalf of the defendants. The arbitrators ruled in favor of the plaintiff, but made no express finding that either of the defendants failed to participate in good faith. The plaintiff moved to have the defendants barred from rejecting the arbitration award and the trial court, without the benefit of a hearing transcript, granted the motion with respect to the non-English speaking defendant. The trial court found that the defendant "'failed to participate in a meaningful manner and in good faith by failing to testify at the arbitration hearing in both Plaintiff[']s case pursuant to plaintiff[']s 237 notice and in Defendant[']s case in chief'." West Bend, 292 Ill. App. 3d at 672. The West Bend court reversed the trial court's decision, stating that "the arbitration panel is in the best position to determine whether a party has failed to participate in an arbitration hearing in good faith or in a meaningful manner, and without an adequate record of the proceedings or a finding by the panel of a failure to participate in good faith and in a meaningful manner, the trial court cannot make its own determination of bad faith participation." West Bend, 292 Ill. App. 3d at 674-75.

West Bend is distinguishable from the instant case. In West Bend, the issue was whether the defendant's inability to speak English and his failure to bring an interpreter to the arbitration hearing constituted bad faith participation. The West Bend court held that it did not because, despite the defendant's inability to testify, the defendant's attorney made an opening statement, cross-examined the plaintiff, and made a closing argument in behalf of the defendant. West Bend, 292 Ill. App. 3d at 674. In the case at bar, the issue is whether plaintiff failed to participate in good faith and in a meaningful manner by failing to produce its insured at the arbitration hearing. Here, unlike the situation in West Bend, plaintiff, the party seeking to reject the arbitration award, had the burden of producing sufficient evidence to support its claim at the arbitration hearing. As discussed below, a thorough review of the record reveals that plaintiff could only have met its burden by producing its ...


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