Court of Appeals of Illinois, First District, Fourth Division
from the Circuit Court of Cook County. No. 13 CH 22883
Honorable Thomas R. Allen, Judge Presiding.
PRESIDING JUSTICE ELLIS delivered the judgment of the court.
Justices Howse and Burke concurred in the judgment and
1 Plaintiff American Access Casualty Company (AACC) appeals
from the trial court's imposition of sanctions against it
and its coverage counsel, James Newman, pursuant to Illinois
Supreme Court Rule 137 (eff. July 1, 2013). The trial court
imposed sanctions in relation to AACC's declaratory
judgment action, which sought a declaration that AACC was not
required to provide coverage for its insured, defendant Jose
Alcauter, for an automobile accident. AACC's coverage
action was premised on the fact that Alcauter willfully
failed to cooperate with an arbitration hearing pursuant to
the policy's cooperation clause. But at trial on
AACC's declaratory-judgment action, it was revealed that,
at the time of the arbitration hearing, Alcauter was in jail
for an unrelated offense. Consequently, Alcauter could not
possibly have willfully failed to cooperate with the
2 Defendant Kimberly Krebs, the other driver involved in the
car accident with Alcauter, filed a motion for sanctions
against AACC and Newman, arguing that she had informed Newman
of Alcauter's arrest and detention prior to trial and
that AACC proceeded to trial anyway. The trial court granted
Krebs's request for sanctions.
3 AACC appeals, arguing that Newman reasonably relied on the
representations of counsel assigned to represent Alcauter at
the arbitration that Alcauter had been contacted about the
arbitration. While conceding that the facts did not support
its declaratory-judgment action, AACC argues that it should
not be faulted simply for advocating a losing cause.
4 We affirm the imposition of sanctions. The record shows
that, well before the scheduled trial date, Newman was
informed of the possibility that Alcauter had been
incarcerated. Yet Newman did no serious investigation of that
possibility and failed to forthrightly bring Alcauter's
arrest to the attention of the trial court. Instead, AACC and
Newman elected to proceed to trial, knowing that its
declaratory-judgment claim lacked factual support.
5 I. BACKGROUND
6 AACC issued an automobile insurance policy to Alcauter that
included a cooperation clause requiring Alcauter to assist
AACC "in making settlements, securing and giving
evidence, obtaining the attendance of witnesses and in the
conduct of any legal proceedings in connection with the
subject matter of [the policy]." The policy said that
AACC could deny Alcauter coverage in the event that he failed
to cooperate with AACC in any legal proceeding.
7 On September 30, 2011, Alcauter and Krebs got into a car
accident with each other, which led to Krebs pursuing
arbitration against Alcauter. But Alcauter did not appear at
the arbitration hearing. The arbitrators' award indicates
that "no evidence was presented" at the hearing and
that Alcauter did not appear "despite having received a
[Illinois Supreme Court Rule 237 (eff. July 1, 2005)] notice
to appear." The arbitration panel awarded Krebs $10,
000, which was confirmed in the trial court.
8 On October 8, 2013, AACC filed a declaratory judgment
complaint, seeking a declaration that it was not required to
cover the $10, 000 judgment because Alcauter had failed to
cooperate with the arbitration. The complaint alleged that
Alcauter "was given notice of the mandatory arbitration
date and time" and that Alcauter failed to appear at the
arbitration hearing "despite notice of the same."
AACC alleged that Alcauter's failure to appear
constituted a material breach of the cooperation clause.
9 Alcauter failed to appear in the declaratory-judgment
action, and on January 17, 2014, the trial court found him to
be in default.
10 On October 17, 2014, AACC moved for summary judgment on
its declaratory-judgment complaint. In the motion, AACC
alleged that it requested that Alcauter attend and assist
with the arbitration and that Alcauter received "ample
notice of the mandatory arbitration date and time by both his
counsel and by AACC." Specifically, AACC alleged:
"[A]t least two letters, mailed on March 27, 2013 [and]
May 9, 2013, were sent to Alcauter's verified address by
his counsel, and at least one letter was sent to Alcauter by
AACC on May 8, 2013. *** Notably, none of the letters were
returned by the post office. *** Furthermore, Alcauter's
counsel called [his] client approximately 24 hours prior to
the arbitration to remind him to attend. *** Still, Alcauter
failed to appear for the mandatory arbitration, [and] counsel
was unable to present Alcauter's version of the events,
which specifically were that [Krebs] was traveling too fast
for conditions and not paying attention."
AACC's coverage counsel, James Newman, signed the motion.
11 AACC attached an affidavit from Cliff Panek, an attorney
at the law firm retained to represent Alcauter at the
arbitration. Panek said that his firm followed "certain
procedures" when preparing for arbitration, including
sending its clients two letters informing them of the date
and time of the arbitration hearing and calling their clients
24 hours before the hearing. Panek attested that he found the
two letters in Alcauter's case file and that he did not
find a motion to continue the arbitration in the file.
According to Panek, the absence of a motion to continue
showed that, "based upon [his firm's] practice and
procedures, [the firm] called Jose Alcauter the day before
the arbitration and confirmed his attendance."
12 At the hearing on AACC's motion for summary judgment
on March 9, 2015, Newman asserted that Alcauter
"received a phone call approximately 24 hours before the
arbitration in which he confirm[ed] his attendance."
Newman argued that "there [was] no dispute *** that
[Alcauter] was aware of the arbitration and he didn't
attend." The court denied the motion for summary
judgment, noting that it had "some unanswered ...