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American Access Casualty Co. v. Alcauter

Court of Appeals of Illinois, First District, Fourth Division

February 9, 2017

JOSE ALCAUTER, KIMBERLY KREBS, and THE VILLAGE OF BROADVIEW, Defendants. Kimberly Krebs, Defendant-Appellee.

         Appeal 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 opinion.



         ¶ 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 arbitration.

         ¶ 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 ...

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