Illinois Federal District Court Determines Policy Intent Trumps Policy Language

In an interesting decision handed down late last year, an Illinois federal district court in Ohio Security Insurance Company v. Truck Tire Sales, Inc. determined coverage was not available after carefully considering the policy intent and application for insurance. The district court held that irrespective of broad policy language, “the policy reflects that it was sought for the purpose of insuring [the insured’s] activities related only to [one part of its business].”

The dispute arose when an employee of the named insured, Truck Tire Sales, …

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Illinois: Latest State to Declare Malicious Prosecution Claims Only Trigger Coverage in Effect During Arrest

In this era of sophisticated DNA testing, exonerations of incarcerated individuals have become increasingly commonplace. The ensuing malicious prosecution lawsuits have justifiably resulted in high verdicts and settlements. The key issue for many municipalities is whether coverage is triggered for these malicious prosecution claims, and under which policies of insurance. On November 21, 2019, the Supreme Court of Illinois, in Sanders v. Illinois Union Insurance Company, 2019 IL 124565, definitively determined that claims of malicious prosecution trigger coverage only under policies of insurance in …

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Illinois Federal Court Refuses to Extend NY Insurance Law 3420 to Policy Not Issued or Delivered in New York

An Illinois federal district court in Frankenmuth Mutual Insurance Company v. The Hockey Cup, LLC held that an insurer was excused from its defense obligations due to late notice, since the court found that New York Insurance Law Section 3420(a)(5)’s requirement that insurers show prejudice to deny coverage based on late notice did not apply because the policy was not issued or delivered in New York. 

The underlying lawsuit, in which the National Hockey League was one of the plaintiffs, alleged the insureds, A&R Collectibles, …

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Illinois Appellate Court Reverses Course on Trigger for Malicious Prosecution Claims

An Illinois Appellate Court established a new rule for when malicious prosecution occurs and triggers coverage under a liability policy. In Sanders v. Illinois Union Insurance Company, the court determined that the triggering event for malicious prosecution coverage is the claimant’s exoneration, rather than the initiation of the alleged malicious prosecution. The rule established in Sanders is in direct contrast with a number of Illinois decisions, including several in the past few years that had held that the commencement of the malicious prosecution was …

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Vicarious Liability and Additional Insured Coverage: Illinois Appellate Court Clarifies Factual Allegations Sufficient to Trigger Defense Duty

The Appellate Court of Illinois recently considered whether an underlying complaint against an a general contractor (additional insured), filed by the estate of an independent contractor/subcontractor’s employee who was killed in a job site accident, triggered the defense of the general contractor under the subcontractor’s liability policy. The subcontract at issue contained the standard additional insurance requirements. The court first decided that the liability policy’s additional insured endorsement did not protect an additional insured for its own negligence; and the issue was whether a duty …

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Illinois Appellate Court Reaffirms Trigger Date for Malicious Prosecution Offense Under Coverage B

In First Mercury Insurance Company v. Ciolino, the Illinois Appellate Court, First District waded into the sea-change concerning the trigger of coverage for malicious prosecution offenses under a liability policy. The First District joined the other districts to consider the issue, departed from the Seventh Circuit’s Erie prediction, and reasoned that the trigger date for malicious prosecution coverage will be similar under law enforcement liability and commercial general liability policies.

The facts giving rise to the coverage dispute stem from a lawsuit filed by …

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Illinois Supreme Court Puts the Brakes on Named Driver Exclusion

The Illinois Supreme Court held in Thounsavath v. State Farm Mutual Automobile Insurance Co., 2018 IL 122558, that an insurer cannot rely on a named driver exclusion to deny underinsured motorist coverage to its insured because the exclusion is unenforceable under Illinois’ mandatory automobile insurance statutory scheme and the state’s public policy.

State Farm provided automobile liability and uninsured motorist (UM)/underinsured motorist (UIM)coverage to Thounsavath, which contained a named driver exclusion stating no liability shall attach “while any motor vehicle is operated by …

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Calling all Policies! N.J. Special Master Allocating Costs under Owens-Illinois Implicates Excess Before Primary Exhausts

In The Travelers Indemnity Company v. Thomas & Betts Corporation, No. 13-6187, 2017 WL 3187217 (D.N.J. July 26, 2017), New Jersey’s federal court offers a meaningful example of how trial courts can use a special master to help resolve the tricky issue of allocating defense and indemnity costs involving multiple policies, layers, and years.

In Owens-Illinois, Inc. v. United Ins. Co., the Supreme Court of New Jersey urged trial courts to use a special master with “a substantial measure of discretion” to develop …

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Illinois Coverage Litigations Beware! Attorney’s Failure to Properly Investigate Results in Severe Sanctions

In American Access Casually Co. v. Alcauter, 2017 IL App (1st) 160775, the Illinois Appellate Court, First District, affirmed the district court’s imposition of sanctions against the plaintiffs, American Access Casually Company (AACC) and its coverage counsel, James Newman, pursuant to Illinois Supreme Court Rule 137. Specifically, the Appellate Court held that there were sufficient grounds to uphold the sanctions because of the plaintiffs’ failure to properly investigate the continuing validity of their lawsuit, their failure to turn over pertinent information, and their proceeding …

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What’s Yours is Mine and What’s Mine Isn’t Covered: Illinois Federal Court Rejects Coverage for Suit Seeking Restitution

In Westport Insurance Corp. v. M.L. Sullivan Insurance Agency, Inc., No. 15 C 7294, 2017 U.S. Dist. LEXIS 1527 (N.D. Ill. Jan. 5, 2017), an Illinois federal district court underscored the importance of a policy’s damages requirement when it granted judgment on the pleadings in favor of Westport Insurance Corporation and against its insured M.L. Sullivan Insurance Agency.

In the underlying suit, American Inter-Fidelity Exchange (AIFE) alleged Sullivan and one of its employees provided false information about insurance premiums due and requested damages representing …

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