Justice Cates' husband files class action over insurance premiums

By Steve Korris | Sep 25, 2013


BELLEVILLE – While Judy Cates sits as appellate court judge, her husband and her son have launched a class action against a global insurer and a wing of state government.

Husband Darrell Cates sued Allianz Global Risks US and Illinois Mine Subsidence Fund on Sept. 9 in St. Clair County, claiming he paid worthless premiums.

Son Dave Cates and Ryan Mahoney, of Cates Mahoney in Swansea, filed the suit.

Unlike a typical homeowner suit, it does not list both spouses as parties.

Darrell seeks to recover premiums he paid after Fireman’s Fund, an Allianz subsidiary, paid him a $350,000 policy limit.

“The maximum amount was paid because the value of the Cates residence, prior to the damage caused by mine subsidence, was far in excess of the $350,000 loss," Mahoney wrote. “Cates was unaware that he could avoid paying the mine subsidence insurance premiums until he heard about a similar lawsuit involving mine subsidence insurance premiums and began to investigate his rights through the IMSIF.”

He wrote that Darrell resides in a home on Keswick Court in Swansea.

Darrell Cates is a St. Clair County engineer.

“As of the date of filing of this complaint, the Cates dwelling continues to suffer from mine subsidence, as the ground upon which the dwelling is situated continues to move slightly,” he wrote, noting that the Illinois State Geological Survey estimated that as many as 330,000 homes may be undermined.

He wrote that inevitable subsidence caused by aging underground mines caused homes and commercial structures to crack or sink. He said typical homeowner insurance didn’t cover the damage, and homeowners had no recourse against mining companies that no longer existed.

In the complaint, Mahoney wrote that legislators passed an act creating the Mine Subsidence Fund and requiring insurers to offer coverage through the fund in 34 counties.

He said the fund reinsures primary carriers of subsidence coverage and that 11 directors run the fund, with six from the insurance industry, four from the public, and an Illinois producer.

“Thus, the insurance industry representatives control the day to day management and operations of the IMSIF, including the establishment of rates, premiums, deductibles, and retentions," he wrote. “Under the Act, the only way for a property owner to reject mine subsidence insurance is to sign a written waiver.

“Further, the IMSIF sets the amount of premiums to be charged by insurance companies offering mine subsidence insurance.”

Under all Illinois policies, Mahoney said the amount of a recoverable loss is determined at the time the damage first becomes reasonably observable.

“Moreover, all damage caused by a single mine subsidence event or several continuous subsidence events occurring over a period of many years or even decades is treated as one occurrence," he wrote. “Only once the mine subsidence has completely stopped is there insurance again available to the property owner.

“For an insurance company to collect premiums and the IMSIF to continue to receive premiums during the mine subsidence occurrence period, where the insured cannot receive any additional benefits payable under the mine subsidence insurance policy unjustly enriches the IMSIF and unjustly adds increased profits for which there should be disgorgement.”

Mahoney said that in 2006, Darrell entered into a homeowner policy with Associated Indemnity, a Fireman’s Fund subsidiary. He wrote that Darrell made a mine subsidence claim on Jan. 17, 2007, and Fireman’s Fund paid $350,000 on Dec. 18 of that year.

“Cates is not eligible for any further insurance coverage benefits because his claim is fixed in time by the occurrence date of January 17, 2007, when the mine subsidence was first noticed," he wrote. “However, since resolution of his mine subsidence claim in 2007, Fireman’s Fund has continued to collect premiums from Cates for mine subsidence coverage, even though Cates cannot collect any additional benefits under the terms of the Act.

“None of the agents or employees of Fireman’s Fund have ever informed Cates that he need not pay the mine subsidence insurance premiums.

“In fact, every year since 2007, the Fireman’s Fund defendants have automatically sent Cates a renewal policy that contains coverage for mine subsidence.”

Mahoney alleged breach of duty of good faith and fair dealing, consumer fraud, common law fraud, unjust enrichment, and civil conspiracy. He asked for certification of a class action, with Darrell as class representative and the Cates Mahoney firm as class counsel.

He also seeks monetary and punitive damages, attorney fees, costs, and interest at the maximum rate allowable at law. He asked for an injunction against collection of worthless premiums and an injunction requiring defendants to issue waiver forms to the class.

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