Court of Appeals of Illinois, First District, First Division
from the Circuit Court of Cook County. No. 14 CH 11051
Honorable Peter Flynn, Judge Presiding.
JUSTICE MIKVA delivered the judgment of the court, with
opinion. Presiding Justice Connors and Justice Simon
concurred in the judgment and opinion.
1 The plaintiff insurance company in this case sought a
declaration that it had no duty to provide coverage in
connection with a motor vehicle accident because its insured,
the driver of one of the vehicles, breached the cooperation
clause in the insurance policy. The insured failed to appear
at a mandatory arbitration hearing held in the underlying
personal injury and insurance subrogation litigation,
resulting in an order debarring her from rejecting an
unfavorable arbitration award. At the close of the insurance
company's case-in-chief in this coverage dispute, the
defendants moved for a judgment in their favor. The circuit
court granted their motion, refused to cooperate, the company
had failed to present sufficient evidence to make a prima
facie case that it suffered substantial prejudice as a
result of her breach of the cooperation clause.
2 For the reasons that follow, we affirm the judgment of the
4 A brief discussion of the rules governing mandatory,
court-annexed arbitration is needed to provide context for
the proceedings in this case. Pursuant to Illinois Supreme
Court Rules, certain civil actions are subject to mandatory
arbitration before a panel of three arbitrators. Ill. S.Ct.
R. 86 (eff. Jan. 1, 1994); R. 87 (eff. Feb. 1, 2007).
Following the arbitration hearing, the panel makes an award,
disposing of all claims for relief. Ill. S.Ct. R. 92(b) (eff.
Jan. 1, 1994). The award is generally not binding; any party
present at the arbitration hearing may file a notice of
rejection of the award within 30 days and proceed to trial.
Ill. S.Ct. R. 93(a) (eff. Jan. 1, 1997). Although a party who
is represented at the arbitration hearing by counsel but who
does not personally appear does not waive the right to reject
the award (Hinkle v. Womack, 303 Ill.App.3d 105, 111
(1999)), the circuit court may still, in its discretion,
debar any party from rejecting the arbitrators' award if
that party's failure to personally appear at the
arbitration constituted a failure, under Rule 91(b), "to
participate in good faith and in a meaningful manner"
(Martinez v. Gaimari, 271 Ill.App.3d 879, 883
(1995); Ill. S.Ct. R. 91(b) (eff. June 1, 1993)).
5 On October 31, 2010, defendant Angela Reed, a motorist
insured by plaintiff Direct Auto Insurance Company (Direct
Auto), was making a left turn when her vehicle collided with
another vehicle travelling in the opposite direction.
Following the accident, three lawsuits were filed against Ms.
Reed by Lucretia Rawles, Felicia Cooke, Janet Gibson, Malakia
Winters, and Erie Insurance Company (collectively, claimants)
in the Circuit Court of Cook County (the Although Ms. Reed
was represented by counsel at the arbitration hearing, she
did not personally attend. An award was made against her and,
at the request of one of the other parties, the circuit court
entered an order debarring her from rejecting the award.
Although it is unclear from the record before us what the
specific basis for the debarring order was, that order is not
challenged in this appeal, and the parties do not dispute
that it was entered because of Ms. Reed's failure to
personally attend the hearing.
6 On July 2, 2014, Direct Auto filed this action for
declaratory judgment (the coverage action), seeking a
declaration that it had no duty to provide coverage because
Ms. Reed breached the cooperation clause of her policy with
Direct Auto, which states:
"6. Assistance and Cooperation of the Insured. The
insured shall cooperate with the Company and, upon the
Company's request or through attorneys selected by the
Company, provide recorded statement(s); an examination under
oath; attend hearings and trials; assist 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 this
complaint, Direct Auto alleged that Ms. Reed was informed of,
but failed to attend, the arbitration in the underlying
litigation and, as a result, was debarred from rejecting the
award entered in her absence. Direct Auto further alleged
that it was prejudiced by Ms. Reed's actions because it
"was not able to present any defense of [Ms. Reed] at
arbitration, nor was [it] able to reject the arbitration
7 A default judgment was ultimately entered against Ms. Reed
in the coverage action for her failure to file an amended
answer to replace her initial pro se answer. The
case was then scheduled for trial with the remaining
defendants (claimants), and a bench trial began on June 28,
2016. Direct Auto presented the testimony of two witnesses:
claims manager Michael Torello and insurance defense attorney
8 According to a bystander's report of the proceedings,
Mr. Torello testified that he had been working as a claims
manager for Direct Auto for eight years. He stated that Ms.
Reed and her husband were insured drivers under a Direct Auto
policy requiring their cooperation in the event of an
accident or claim, which included their assistance in the
defense of a lawsuit. Mr. Torello understood that Ms. Reed
had cooperated in the defense of the underlying litigation
prior to the arbitration hearing by answering written
discovery and by sitting for a deposition. However, Ms. Reed
did not attend the arbitration, and judgment was entered
against her on the arbitration award.
9 Mr. Torello testified that the attorney assigned to defend
Ms. Reed in the underlying litigation filed a notice of
rejection of the arbitration award that was met by a motion
to debar rejection. Ms. Reed's response to the motion to
debar rejection included affidavits by her and her husband,
stating that they had spoken with an employee of Direct Auto
named Shirley who told them that Ms. Reed did not need to
attend the arbitration. Mr. Torello testified that, although
Direct Auto employed an individual named Shirley in its
underwriting department, Shirley "would not have contact
with insureds regarding lawsuits" and "would not
have told [Reed and her husband] that because she d[id] not
know." According to Mr. Torello, once matters are
assigned to defense counsel, Direct Auto does not communicate
directly with its insureds.
10 Mr. Torello acknowledged that he did not attend the
arbitration hearing, did not know name of the attorney who
represented Ms. Reed at the hearing.
11 Direct Auto also introduced the evidence deposition of
Shawn Swope, the insurance defense attorney it retained to
defend Ms. Reed in the underlying litigation. Although he
acknowledged that he was not the lawyer who represented her
at the arbitration, Mr. Swope identified himself as the
person at his office most knowledgeable about the file for
Ms. Reed's defense in the underlying litigation. His
recollection of the case, upon being shown several documents
filed in the underlying litigation, was that it involved
"[o]ne driver allegedly making a left turn failing to
yield" and "[t]he other driver speeding, driving
erratically, [and] failing to yield." He stated that
there was "definitely" a liability defense for Ms.
Reed to assert in the underlying litigation. Although Mr.
Swope stated that his understanding of the case was
consistent with information that Ms. Reed provided his
office, he could not recall whether that information was
considered before an answer was filed on Ms. Reed's
behalf that included affirmative defenses and counterclaims
for contributory negligence:
"Q. *** [Y]ou testified earlier that your office
prepared an answer to the complaint; is that correct?
A. I haven't seen it, but I'm sure, yeah.
Q. And Miss Reed would have assisted you in preparing that